SRI SATYA SAI UNIVERSITY

SCHOOL OF BUSINESS MANAGEMENT

ACCOUNTING AND FINANCE

MARKETING
STRATEGY
ASSIGNMENT NO.3, MGT-306
RANJAN SHARMA
IIND MBA
07471

22/09/08
IKEA
Vision: The ikea vision is to create a better everyday life for the many people. They make this
possible by offering a wide range of well designed, functional home furnishings products at
prices so low that as many people as possible will be able to afford them.

Ikea concept: The IKEA Concept is based on offering a wide range of well designed, functional
home furnishing products at prices so low that as many people as possible will be able to afford
them. Rather than selling expensive home furnishings that only a few can buy, the IKEA Concept
makes it possible to serve the many by providing low-priced products that contribute to helping
more people live a better life at home. The IKEA Concept guides the way IKEA products are
designed, manufactured, transported, sold and assembled. All of these factors contribute to
transforming the IKEA Concept into a reality.

Ikea range: Fundamental activities such as eating, sleeping, storing items, socializing and so on
create a demand for furniture and practical products that solve essential human needs.
Furthermore, the vast majority of people have limited budgets and limited space in their homes.
The IKEA product range meets these needs by offering a wide range of well-designed, functional
home furnishing products at prices so low that as many people as possible will be able to afford
them. The IKEA range includes products for every part of the home. IKEA products have the
label "Design and Quality, IKEA of Sweden" and are sold in IKEA stores.

Ikea store: The IKEA store is where the IKEA range is sold. It is also where the range comes to
life. Visitors are encouraged to take their time and get comfortable with IKEA home furnishing
solutions and products in realistic room settings and real-life homes. To sit, lie down, open and
close drawers. To compare styles. Compare prices. And imagine the possibilities!IKEA
customers are actively involved in the shopping experience. The IKEA Concept relies on
customers to choose, collect, transport and assemble IKEA products themselves. All products in
the store are supported by price and product information that is clearly marked on large, easy-to-
read tags. This makes it easy for visitors to serve themselves. There are, of course,
knowledgeable co-workers available to customers when needed. Customer involvement
contributes to IKEA low prices. That is the idea behind: "You do your part. We do our part.
Together we save money."

Ikea catalogue: The ikea catalogue is a daily invitation to the ikea store. It offers solutions,
inspiration and low priced products. Prices in the catalogue are valid for a 12 month period. The
IKEA catalogue shows how the IKEA product range helps to create a better everyday life for the
many people. Although the IKEA catalogue is extensive, it shows just a part of the range that the
IKEA store offers, and the price of each product. There are thousands of more products to choose
from in the IKEA store. And many new products are continuously introduced in the IKEA store
all year long. The IKEA catalogue serves as a permanent invitation to the IKEA store. It provides
constant inspiration, and serves as an invaluable source of product information throughout the
year. It also contains details on how to get to the nearest IKEA store and its opening hours.

Ikea franchisee: To qualify as an IKEA Franchisee, applicants should have thorough retail
experience combined with extensive local market knowledge. Potential IKEA Franchisees shall
also be able to clearly document that they have an outstanding understanding of and commitment
to the IKEA Concept, the financial strength and potential as well as have identified well located
sites for the retail activity. Opening an IKEA operation requires considerable investments which
are entirely at the expense of the IKEA Franchisee.

Facts and figures:

Turn over:

Catalogue:
Visitors:

Stores:

Swot analysis (in brief):

Strengths:

 Dominant in Europe where 76% of sales are generated

 Identifiable concept with clear strategy of cost leadership.

 Target consumers: “young people of all ages”, well educated, liberals, white collar and
those unconcerned with status symbol
  Stores are similar worldwide and stock a huge range of home furnishings within the same
area.

Weaknesses:

 Limited manufacturing capabilities mean that IKEA has to depend on subcontracted

manufacturers

 May be difficult to coordinate and maintain quality standards in some regions

 Subcontractors may manufacture their own line of products and compete with IKEA

 Need to learn diversity of other markets as with the American and Japanese experiences

Opportunities:

 IKEA concept of selling a lifestyle based on good design and value for money is a major
selling point.

 Focus on differentiated products for the Asian markets which have the fastest growth
with an affluent middle class.

 IKEA commands only 5 to 10% of the retail furnishing market in each of the country it
has outlets in so huge potential to increase market share especially in a large market such
as the North American region.

Threats:

 Difficult to sustain good design quality products at low cost when the number of
competitors keep increasing e.g. In the US, Kmart, Target Corp, Fly in France and Japan
Nitori Co in Japan.

 North American market poses a huge challenge because of major differences in size,
colours and lifestyle.

 Major challenge to keep the core values alive especially when the company becomes
larger and more diverse and the founder retires from the business.

Possible competitive spaces:

• The approach of ikea is regional and that’s why they are losing out the local market. This
can be a leverage point.

• It depends on subcontractors to do their manufacturing. A new company can have its own
line of manufacturing.
 • Similar kind of stores all over the world. Need to diversify according to the needs of the
region.

• Wooden furniture is their core competency. They can focus on other materials too.

My strategy

Vision: To offer customize home solutions at affordable prices with the designs, functionality
and style which captivate the masses and move the classes.

My company will be dealing with furniture business mainly but apart from the core competency
of Furniture, Company will be focusing more on the wholesome picture of a liveable home. I
would like to customize my offerings according to the customer needs and wants. For this i
propose to have my salesmen located at different places in the city/towns. My initial strategy will
be marketing through billboards, magazines, newspapers and commercial TV advertisements. In
each of these communication channel there will be a toll free hotline number marked on the
media vehicle. The number is to make sure that we care for the customers and address their
requirements as soon as we can. The salesman can visit the customer’s home and have an overall
look. The salesman will be given commensurate training so that he can act a role of an interior
decorator. For example if there is a new couple who has recently migrated to the city, we offer a
complete home solutions plan. Colour of the wall, space in the house, curtain colours, bed sheets,
bathroom tiles and so on. I have a manufacturing facility which makes furniture from wood
(exclusive), but company has other lines too like light metal (aluminium, steel, plastic) furniture
for the price conscious customer. Other things like fabric and tiles will be supplied from local
suppliers under company’s brand name, but comes with the package. The salesman can offer the
complete home solution plan and then it is up to the customer to customize his/her needs. We
will add another dimension to our services, for example if the present customer has experienced
our services in the city where he was before but now he has migrated to a new city, we keep
track of his preferences and provide the same kind of comfort which he had earlier. Our sales
representatives keep track of their customers and pay timely visit for repairs, exchanges,
maintenance etc.

Segmentation:

Affluent class (pleasure seekers): includes businessmen, politicians, CEO’S, MD, etc.

Characteristics: rich, status conscious, big houses, more than one home, want plush furniture and
interiors.

My offering: Wooden furniture (exclusive), light and stylish, carvings done on demand, giving an
antique look, sandalwood furniture at extra premium, can be a packaged offering too.
Upper middle class(achievers): middle level executives, managers, entrepreneurs, small
business owners.

Characteristics: well to do, handsome salaries, own flat or apartment.

My offering: wooden furniture, durable and rugged, metal furniture (if interested), packaged
offering.

Middle class (aspirers): salespersons, clerks, class 3 government employees, migrating

frequently.

Characteristics: average salary, rented apartment or house, sharing a flat.

My offering: metal furniture (steel, aluminium, plastic), easy handling and packaging, rugged and
durable, packaged offering.

Company will begin with the tier 1 city and then penetrate in to tier 2, tier 3 cities. Apart from
the above mentioned segments company would also concentrate on students who migrate to
cities for higher studies, for them temporarily light metal furniture, easily adjustable, durable,
easy to carry (includes study table, racks for books etc.). Then there is another segment which
comprises of married couple who have kids of about 5-10 years of age, house furniture is more
vulnerable to kids rather than anything, so for them “KIDSPROOF” furniture. Waterproof
carpets, easily cleanable and washable, durable and strong line of tables, chairs, TV holder etc.

My approach will be “glocal”, catering to local as well as global markets. I would jel my stores
looks, design, and overall ambience with the culture of that region so that people feel that our
company is one of them and understand their needs/wants well. I will also contact local furniture
makers like the ones who make use of jute and bamboo. Give them a good margin, shelf their
products in the showroom.

Critical factors for success:

• Having a state of the art manufacturing line.

• Having good relationships with the vendors and suppliers.

• Striking a chord with the people of the region. Make them feel at home and ease.

• Having a good marketing campaign. Use of IMC.

• Selectively develop a niche market in regions where the purchasing power is likely to rise
even further.
• Regional executives must share their market knowledge with each other to learn from
their experiences so as to build knowledge capability within the company.

• Adjusting to the local conditions.