IKEA - Case Study PDF

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Warning: TT: undefined function: 32 Hebron UniversityMBA ProgramMarketing Management.To-Prof: Samir Abuznaid.From: Shireen Al-Qawasmeh.Subject-IKEA Case StudyChapter 4Concluding Marketing Research & Forecasting Demand.2nd 2019- 2020.subject Page NO History IKEA Highlights Vision The IKEA bus...

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Hebron University MBA Program Marketing Management. To-Prof: Samir Abuznaid. From: Shireen Al-Qawasmeh. SubjectIKEA Case Study Chapter 4 Concluding Marketing Research & Forecasting Demand.

2020

subject History

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IKEA Highlights 2019

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Vision

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The IKEA business idea

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The 8 IKEA Key Values

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IKEA Value Chain

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IKEA SWOT Analysis

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PESTLE Analysis

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Porter’s Five Forces Analysis

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IKEA Culture

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Questions

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References

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History

A better home creates a better everyday life ~ IKEA was founded on 1943 by a 17-year-old Swedish boy named Ingvar Kamprad. Initially he was selling Christmas greeting cards, seeds, and pens from Kamprad’s family farm. From his childhood he was have the ability of entrepreneur, as his identification of people’s need, he attempted to satisfy them by selling low price products which ultimately gave growth to Kamprad retail store from farm place to a global home furnishings cultural, to what BusinessWeek called a “one stop sanctuary for coolness” and “quintessential cult brand.” IKEA was providing their service to about 1.1 million customers per day. Its fame can be judge from its debut in London in 2005, before opening door 6,000 people arrived. It has achieved this success by offering unique value proposition to consumers which is leading-edge Scandinavian design at bargain prices. Because IKEA inherited unique design from Sweden and lower bargain price advantage they get by making compact product which are come in boxed and require complete assembly at home which, of course, reduce shelf space, easier to transport, and seldom to delivery. IKEA followed its founder’s mission statement that “People have very thin wallets. We should take care of their interests.” And they made their policy to achieve this statement, IKEA annually reduce 2% to 3% on every product and half statement describe the focus of consumers’ desires means their interest for what they come to IKEA. IKEA learning capability also helps it to flourish in furnishing market. They appreciate local taste and make their product according to consumers’ needs. As they have change their small glasses into big glasses for U.S. market. Same as they have done in Hispanic market, IKEA find out the Hispanics behavior towards shopping and understand their attitudes, then make their store according to Hispanics’ requirement such as add seating and dining space, brighten the color palettes, and hang more picture frame on the walls. IKEA have 264 stores around the world the still many growth 3

opportunities are remain untouched which they are planning to avail them . Todays, IKEA Changing lives together with social entrepreneurs To include and support marginalized and vulnerable groups, IKEA works with social entrepreneurs. for example IKEA working to provide Brazilian families with adequate housing. IKEA wants to create a better everyday life for as many people as possible – including the millions who are vulnerable and marginalized. Improving lives means enabling a more inclusive society, where people have the opportunities to provide for themselves and their families. IKEA Social Entrepreneurship is one way of making this a reality. In addition, the biggest IKEA franchisee the INGKA Group, is aiming for zero emissions from home deliveries by 2025. As of January 2019, INGKA has already achieved zero emissions target for Shanghai, a year ahead of schedule. Currently, 60% of the materials IKEA uses are renewable and 10% are recycled. The ambition is to reach a combined total of 100% by 2030. a new innovative technology developed in collaboration with partners such as the H&M group: it’s based on cellulose from wood that they call Tree To Textile. Textile developments using cellulose are thought to have great potential to replace or complement both cotton and oil-based fabrics like nylon or polyester. The project is still in its research phase, but IKEA are now taking the first steps to industrializing the technology.”

IKEA Highlights 2019 Many companies, organizations and people – together – shape the IKEA brand. Each and every person, idea and solution helps IKEA become more accessible, affordable and sustainable. Here is a selection of facts and figures about IKEA Financial year Sep 2018 - Aug 2019 (FY19).

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IKEA sales grew 6.5% in FY19, reaching total retail sales of EUR 41.3 billion.

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The number of IKEA co-workers grew from 194 000 in FY17 to more than 211 000 in FY19. Sustainable cotton used by the IKEA business includes 80,5% cotton grown to the Better Cotton Initiative Standard, 14,6% recycled cotton, and 4,9% Towards Better Cotton, or other more sustainable cotton such as the e3 Cotton Program in the USA. Towards Better Cotton – on its way to becoming Better Cotton .Each year, IKEA use around 1% of the world’s cotton supply. Despite being a relatively small number, it’s enough to drive change.

vision is “to create a better everyday life for the many people.”

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The IKEA business idea While the IKEA vision expresses why we exist, the IKEA business idea says how they realize the vision. they want “to offer a wide range of welldesigned, functional home furnishing products at prices so low that as many people as possible will be able to afford them”. IKEA love these words because they capture the very essence of the IKEA brand. To live up to them, IKEA applies five dimensions: low price, function, form, quality and sustainability. Together, these dimensions make up what IKEA call Democratic Design. Democratic Design helps them create products they can stand behind and realize their business idea. IKEA Sustainability Healthy and sustainable living. A world without waste. Becoming climate positive. Responsible sourcing. Fair and equal. Learning as we go - the challenges of entering a new market Whenever IKEA enter a new market, the decision is backed up by research and careful analysis, as well as gut feeling. When IKEA enter in new markets the managers share their experiences and describe the lessons learnt along the way.

The 8 IKEA Key Values 1. Togetherness Togetherness is at the heart of the IKEA culture. they are strongest when they trust each other, pull in the same direction and have fun together. 2. Caring for people and planet IKEA want to be a force for positive change. they have the possibility to make a significant and lasting impact — today and for the generations to come. 3. Cost-consciousness As many people as possible should be able to afford a beautiful and functional home. IKEA constantly challenge theirselves and others to make more from less without compromising on quality. 7

4. Simplicity IKEA is informal, and see bureaucracy as a biggest enemy. 5. Renew and improve IKEA are constantly looking for new and better ways forward. Whatever they are doing today, they can do better tomorrow. Finding solutions to almost impossible challenges is part of our success and a source of inspiration to move on to the next challenge. 6. Different with a meaning IKEA like to question existing solutions, think in unconventional ways, experiment and dare to make mistakes - always for a good reason. 7. Give and take responsibility Giving and taking responsibility are ways to grow and develop as individuals. Trusting each other, being positive and forward-looking inspires everyone to contribute to development. 8. Lead by example IKEA team see leadership as an action, not a position.

IKEA Value Chain 1. What does “climate positive” mean? IKEA are committed to becoming climate positive. That means IKEA will strive to eliminate greenhouse gas emissions wherever possible across their entire value chain: sourcing and extracting raw materials, manufacturing and transporting products, stores, customer travel to stores, product use in customers’ homes and product end-of-life. IKEA will reduce emissions in absolute terms, while continuing to grow the its business. they will store carbon in land, plants and IKEA products and not rely on carbon offsetting. By taking a scientific approach and working together with their partners, suppliers and customers around the world, they will make this happen by 2030.

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2. IKEA value chain starts and ends with learning from their customers and co-workers. The circle is formed by people who work together to listen and learn; design and create; manufacture and improve; package and distribute; inspire and sell. 3. Reducing GHG emissions by at least 15% across the whole IKEA value chain, in absolute terms, by 2030 (compared to 2016). Accounting for their estimated growth over the same period, this is equivalent to cutting the average climate footprint per product by 70%. 4. Striving towards 100% renewable energy throughout the entire IKEA value chain. 5. Becoming truly circular and designing products from the very beginning to be repurposed, repaired, reused, resold and recycled. This will reduce the need to extract and process materials – the biggest contributor to our footprint. 6. Developing and improving practices to store carbon through carbon sequestration within the IKEA value chain, for example through even better forest management. 7. IKEA is one of the most recognizable and well-known furniture brands worldwide. The brand has more than 600 million customers annually. And you can currently shop for IKEA products in more than 38 countries. Combine the brand recognition with the low-cost furniture options, and it’s no wonder IKEA is as popular or as wellknown as it is.

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IKEA Value Chain TABLE 1 Raw materials 36,4%

Food ingredients 3,9% Production 11,9% Product transport 3,9%

Designing products to enable repurpose, repair, reuse, recycle Using renewable and recycled materials Storing carbon through forest management Sourcing food ingredients sustainably Introducing more plant based food options Cutting food waste Generating and using renewable energy Increasing energy efficiency

Retail & other own operations 2,7%

Reducing shipments Replacing fossil fuels Using new low-emission transport options Improving energy efficiency Using and generating renewable energy

Customer travel & home deliveries 15,5%

Enabling low-carbon customer travel and home deliveries

Product use at home 22,2%

Designing our products to be as energyefficient as possible

Product end-of-life 3,5%

Designing our products to be as energyefficient as possible

The IKEA FY18 Sustainability report (PDF, 9.5 MB)

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IKEA SWOT Analysis TABLE 2 Opportunities

Threat

1. 2. 3. 4. 5.

Developing for Sustainability. The refreshing scent of ideation for students. The search for local pattern and colors. using Geometric and a simple shapes for furniture the biggest IKEA franchisee the INGKA Group, is aiming for zero emissions from home deliveries by 2025. 6. Ensuring supplier safety and compliance 7. increasing awareness among co-workers, consumers and partners.

1. 2. 3. 4.

challenges of unsustainable consumption climate change growing inequality. a challenge to convince the talented craftsmen that the bamboo waste as something authentic and beautiful. 5. exposure to potentially harmful chemicals is vital. 6. finding enough clean recycled materials. 7. Fast competition 8. the world’s cotton supply , e3 Cotton Program in the USA. Towards Better Cotton. 9. Social inclination such as the hold ups in first time purchasers entering the housing market. IKEA has made it as a core marketing section for its products. 10. Market forces Household and Furnishing market is becoming a challenging place as new competitors are entering with the low prices products. If IKEA want to compete with them then it has to use its unique qualities to get into the competition and retain the major shares of the market. 11. Economic factors Economic factors are also playing good role these days. Because of the recession spending power of the customer is badly affected. Customer has slowed down expenses and disposable income has reduced.

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Strength

1. brand recognition IKEA is delivering the same quality of the products throughout the world. IKEA has the good brand name throughout the world and it draws the major end user groups. 2. An organization’s marketing expertise and its location can be the main strengths. Strengths are the key qualities or main features of the organization’s business that can add some more values to the organization’s artifact/services. IKEA has the following strengths: 3. IKEA’s vision of making daily life better for various people. 4. IKEA’s perception of offering a broad collection of well designed, efficient products at low prices is very strong. 5. the way to designing all of the products to be 100% circular from the beginning, using only renewable or recycled materials. And as always, making more from less. 6. IKEA Towards using only renewable and recycled materials 7. Currently, 60% of the materials IKEA uses are renewable and 10% are recycled 8. Using a fabric made from wood pulp. Wood is an important raw material , as it’s renewable and an excellent environmental choice, provided that it comes from responsibly managed forests. 9. Using the mattress also uses springs that are partly made of recycled steel, and renewable materials such as natural latex and coconut fiber. The natural fibers regulate body temperature, making it really comfy to sleep on. 10. Made a great product like the children’s lamp TROLLBO, which has a lampshade and other elements made from recycled PET bottles. 11. turning rice straw residue into a new packaging material 12. January 2019, INGKA has already achieved zero emissions target for Shanghai, a year ahead of schedule. 13. Turning plastic waste into beautiful textiles. 14. Increasing information on the chemical content of products. 15. to become a fully circular business.

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Weakness

1. IKEA has had a few run-ins with bad press. Employees have complained about poor treatment. The brand has faced ridicule for advertising techniques in non-western countries. And the worst offense: children being hurt or killed in relation to IKEA furniture. IKEA has also had to recall dangerous products because they’ve led to injuries. 2. Law quality 3. Needs for countless design 4. Needs for Maintaining that same level of costeffectiveness 5. The big scale and great geographical size of business can causes some concerns about the quality of the IKEA products and the standards being used during the development process of these products

PESTLE Analysis 1. Political If we consider the national and global development of the industry, IKEA is a really good example of the organizations those are flourishing in both local and international business. A furniture retailer from the Sweden has combined both the furniture of Scandinavian style with the furniture of “do-it-yourself” style (flat packaging style) to get the popularity throughout the world and to set a worldwide trendy brand. 2. Economic Keeping in view the need of the customer’s demands and brand loyalty, IKEA has been adopting special kind of plans, due to the costeffective changes and developments. IKEA has transferred its ownership to the Stitching Ingka, and this has given it more strength in financial terms. This switch has forced the IKEA to take up other style of furniture as well, such as lightings, dinnerware and even rugs. Although, IKEA has taken all these steps but the recession has affected the IKEA badly and its progress has been slowed down due to the lacking in planning. If IKEA wants to make its performance high, it has to re think and re consider its business strategy accordingly.

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3. Social IKEA’s contribution towards charity is worth noting and they are also contributing a lot about the environment friendly products. It has also been providing a lot of opportunities to the people and its employees are also entitled for various benefits such as cover and retirement funds. Furthermore, IKEA is trying to produce the furniture that is a mixture of their typical style and new trends at a very low price. 4. Technological The IKEA has been using their technology and other quality systems to encourage the shorter wait in line, appropriate arrangement, tracking and deal models and recruitment. IKEA’s objective is to give preference to its employees and to become more productive. This system has enabled IKEA to manage the right number of staff in a proper place at the right time and to fulfill its unique trading models at each stores of IKEA. IKEA is trying to optimize the supply chain process and also to supervise the personnel in order to generate an efficient and successful store atmosphere to keep customers pleased. 5. Legal The legal conformity of IKEA is firmly applied with the appropriate and pertinent rules and regulations that relate to the atmosphere, community and working circumstances. The organization also planned the most challenging necessities to be precise in preserving the list of rules and regulations and according to the proper procedures. 6. Environmental As far as the environmental factors (such as the air, noise, and water) are considered, assessments are put into operation to ensure the organization offers counteractive measures within the specific time frame. The environmental assessment is the part of the legal documents and ecological establishments as the industry functions are on-goings and preserves the competence.

Porter’s Five Forces Analysis Porter’s Five Model 1. Power of the Buyers This is categorized as a little power, since the open low-price choices. The alternatives for the furniture and other small items are available and customers have inadequate alternative options that give the individuality to the IKEA as compared its competitors. Besides this, 14

the organization is responding to the buyer’s need by keeping the product prices low. 2. Power of Supplier IKEA has its thousands of contractors that set values in distributing the materials. Sometimes IKEA used to bid with different contractors for the same product to get the best possible product. Majority of the suppliers is working with IKEA and their competitors have very little bargaining power. As IKEA is operating on the low pricing strategy, IKEA’s profit margin is affecting the cost of raw material, but not the labor. 3. Rivalry The competitors of the IKEA’s furniture are offering diverse fashions and functionality. Cronin aims for the new lower cost in furniture line; Cartel & Barrel offering the furniture boxes in the higher price range; Ethan Allen targeting the extra expensive market; Wal-Mart is dealing with the general items mainly and don’t have the style. IKEA has been proved as the most successful organization to deliver the full package of furniture as compared to its rivals. 4. Substitutes To keep them in style, IKEA is keeping its pace higher to adjust with the latest. The other key advantage for IKEA is that they have got the leading technology and by using their best cutting, it has become relatively easy for IKEA to copy anything new from the market. And by using the one of the best transporting infra structure they can supply the product very quickly into their stores. 5. New Entrants IKEA is covering the major cities; it is not covering the small towns and midsize cities properly. So if new entrants want to get into the business they need to focus on the small town and midsize cities with small store and having the lesser selection of the products. It is really difficult for them to compete with IKEA in the big cities on the basis of the price, the methodology mostly used by the new entra...