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International Marketing

International Marketing of IKEA

Nina Latzel FS 180009 Laura Nöh FS 170040

Seminar paper

University of Liechtenstein

Programme: Bachelor's degree programme in Business Administration 2012 Module: International Marketing Course: International Marketing – Übung

Assessor: Dr. Ferdinand Thies

Working period: 13.12.2019 to 20.12.2019 Date of submission: 21.12.2019

Marketingstrategie IKEA

Table of contents Abstract................................................................................................................................................. 3 1

Introduction of the Company......................................................................................................1

2

SWOT-Analysis of IKEA.............................................................................................................1

3

2.1

Strengths.................................................................................................................................1

2.2

Weaknesses.............................................................................................................................2

2.3

Opportunities..........................................................................................................................2

2.4

Threats....................................................................................................................................2

Porter’s Five Forces of IKEA......................................................................................................2 3.1

Market Entry...........................................................................................................................2

3.2

Supplier Power.......................................................................................................................2

3.3

Competitive Rivalry...............................................................................................................2

3.4

Power of Buyers.....................................................................................................................3

3.5

Threats of substitutes..............................................................................................................3

4

PESTLE Analysis.........................................................................................................................3

5

Global Marketing Strategy..........................................................................................................5 5.1

IKEA in Sweden.....................................................................................................................5

5.2

IKEA in Japan........................................................................................................................5

6

Marketing Research.....................................................................................................................6

7

IKEA’s Marketing Research........................................................................................................6

8

Recommendations and Implications...........................................................................................6

List of references..................................................................................................................................7 Declaration of authorship....................................................................................................................8

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Marketingstrategie IKEA

Abstract In this paper we are going to present a quick overview about the IKEA Group, some data and its story of success. Then we will go into detail about IKEA’s marketing strategy by making the SWOT-Analy sis and describing its strengths, weaknesses, opportunities and threats. Furthermore, we are going to analyse the five forces after Porter and doing a PESTLE-Analysis. After that, we present the international and global marketing strategy of IKEA, where we compare the strategy in Sweden and Japan. In addition, marketing research gets explained, what was the theoretical framework of our topic in the case LEGO-Friends. Afterwards, we compare IKEA with our findings in academic literature. Finally, we demonstrate some implications and recommendations for the IKEA Group.

Keywords: IKEA, International Marketing, Marketing Strategy, Marketing Research

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Marketingstrategie IKEA

1

Introduction of the Company

The IKEA Group is owned by the Stichting Ingka Foundation, based in the Netherlands. It has 355 stores in 29 different countries and employs 149.000 workers worldwide. IKEA generates sales of 1.8 million € only with IKEA food, including restaurants, bistros, Swedish shops and staff restaurants. It attaches great importance on equal opportunities for men and women, therefore IKEA has 49,2 % female executives. Today, more than half of their employees, and 49% of their managers are women. Success story: Ingvar Kamprad founded his company IKEA in 1943 at the age of 17. He first sold household items such as pens, wallets and picture frames. He grew up in Småland, a small province in Sweden. Back then many of the inhabitants had less money, so the Smålanders are regarded as economical, innovative, very straightforward and as people who tackle daily problems directly. This heritage explains the IKEA way of working and its success. The name of the company was created as follows. IKEA was named after the initials of its founder Ingvar Kamprad, after Elmtaryd, the farm where he grew up, and after Agunnaryd, the nearby village. The city where IKEA was founded is located in a remote area of Sweden, it was difficult to reach potential customers in the larger cities. This is why the IKEA cata logue was developed in 1951. The prices in the first IKEA catalogue were so low that people initially had doubts about the quality of the products. So Ingvar decided to make a furniture exhibition, where people could see and try the products and assure themselves before they ordered the items. Shipping the furniture was difficult and expensive and the products often arrived damaged. Therefore, in 1956, the idea was born to dismantle the legs of the tables. This led to the concept of self-assembly and the flat packages (IKEA, 2019).

2

SWOT-Analysis of IKEA

The SWOT-Analysis is an Instrument of strategic planning, to determine the position of an organization and to develop the strategy of companies and other organizations (Stiller, 2017).

2.1

Strengths

IKEA is a strong and worldwide known brand, that attracts a lot of consumers, like students or young couples or parents, who have a low budget and need their furniture immediately. The company IKEA also represents a clear vision, like their slogan “to create a better everyday life for many people” de scribes. Another slogan of IKEA was “Are you still living or are you alive” with this, they wanted to explain, that a home is much more than just an apartment. It’s a place where the whole family can feel comfortable, to meet friends and to play – just living (Tapken, 2002). For a lot of people, the apartment has become a place of retreat from the hectic world outside and an individual expression of their personality. Moreover, IKEA offers a wide choice of nice, modern and simple furniture that everyone can afford. But they also offer services where customers can create their own furniture according to their own wishes. Furthermore, IKEA is one of the only furniture shops where you can pick up your furniture immediately without any time of delivery. Therefore, it is ideal for people who need furniture instantly. On the whole this company has a perfect balance between function, quality, design and price (UK Essays, 2018).

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Marketing Strategie IKEA

2.2

Weaknesses

As IKEA is a large and global company, the quality control of the pieces of furniture is very difficult. Often customers complain about missing pieces. Next IKEA offers furniture at low price but the consumers still want good products, so the price performance ratio must be justified. In addition, because of the cultural differences IKEA has to offer other products in different countries like Japan, China and USA (UK Essays, 2018).

2.3

Opportunities

There is an increased demand for inexpensive merchandises, as a result of the development of the cur rent situation of the global economy, consumers often decide to buy cheaper products instead of shopping in expensive stores. Especially in Asian countries, the middle-class population is growing and there is a chance for IKEA to enter the market of affordable modern furniture to fit a particular lifestyle. What is more, IKEA has the opportunity to enhance their online sales by improving their online website in order to reach and gain more customers (UK Essays, 2018).

2.4

Threats

Young adults, are less likely to move out of their parental home, in comparison to the past. Therefore, the amount of first time buyers coming to the housing market is decelerating. Additionally, more and more competitors are entering the low price household and furnishing markets. Above all, within growing competitive retail, other competitors are simulating the concept of IKEA (UK Essays, 2018).

3 3.1

Porter’s Five Forces of IKEA Market Entry

IKEA has a unique concept and a name, that everyone knows. So it will be difficult to copy the IKEA way. However, another furniture enterprise can enter the furniture industry with a low cost strategy. Furthermore, this competitor could focus on home delivery, because IKEA is still a freshman concern ing home delivery (UK Essays, 2018).

3.2

Supplier Power

Most of the suppliers of this company operate in the IKEA group and compete with other suppliers, thus they have a low bargaining power. Anyway, IKEA wants to have good relationships with its sup pliers, because IKEA benefits from the contract, while suppliers benefit from the mutual agreement (UK Essays, 2018).

3.3

Competitive Rivalry

Although IKEA operates in an extremely competitive industry it tries to maintain its competitive edge among their rivals (UK Essays, 2018).

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Marketingstrategie IKEA

3.4

Power of Buyers

IKEA ensures that their customers will be satisfied with the quality of service and the supply. Particularly it has focused their marketing approach on the demands and needs of the buyer for household furniture, but also food service that pleased them, and heavily positioned their products in this segment (UK Essays, 2018).

3.5

Threats of substitutes

As already mentioned IKEA on the one hand has a unique concept, but on the other hand also a lot of competitors. Therefore, it has to keep up with the latest trends and developments so that their furniture does not go out of fashion and become irrelevant. Wal-Mart and other competitors are indirect competitors because they offer low-priced furniture, but also sell other stuff (UK Essays, 2018).

4

PESTLE Analysis

Political Factors Due to the fact that IKEA stores are open in more than 41 countries, the company need to accept each country’s regulations and restrictions. Sometimes it is easy to see similarities within IKEA-countries but in other cases it is not. All of the countries, in which IKEA offers, are politically stable. This a re quirement to profit from economic stability. A difficult government could influence the import and the export processes of foreign products nega tively. For IKEA it is very important to remain those relationships stake otherwise the company could get problems with their revenue. IKEA could use for example India’s and China’s relatively new openness for international brands. IKEA should profit of this possibility and expand into the Asian markets. It seemed to be a big chance for the company (Dudovskiy, 2019).

Economic Influences As already mentioned IKEA needs to follow international laws. In Addition to that, the world’s economy is also affected by IKEA. Even today a lot of the world’s biggest companies and brands are suffering of the great recession in 2007. As generally known, so many people got unemployed at this time. Because of the recession in 2007, IKEA recognized that many consumers want to make buying decisions which should be reasoned very well. The consumers started to focus more on their needs, than on luxury things. Even if people really needed new furniture, it was too difficult to invest into new furniture because the people haven’t had enough money. IKEA absolutely knew that the money has been tight at this time. Therefore, they started to offer their products with very low prices. Nowadays, if you are, for example, a student who intends to move into a new city and you don’t earn much money, IKEA is the perfect brand to buy new furniture because of those relatively low prices. You are able to find everything you need for your home at IKEA and fur thermore you can save a lot of money. This image of IKEA exists for a long time now (Dudovskiy, 2019).

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Marketing Strategie IKEA

. Of course IKEA is also influenced by the value of the dollar. Luckily, the economy got stronger again. Today more jobs are given again and sales are increasing again.

Social – International controversies and complaints As an international company you need to know the local culture before you let in your customers. Ev ery business should follow this rule before opening its doors. This could be helpful and necessary to respect the country’s social values and furthermore to tailor the product to the buyers. IKEA follows this rule in every marketing decision they do. In some cases, IKEAS efforts aren’t that popular. In a Russian IKEA magazine, for example, IKEA needed to remove photos of a homo sexual couple. Homosexuality is still not officially accepted in Russia. Due to this IKEA adapted the title page of the catalogue on the general Russian thinking. In another case, IKEA deleted a female person from the Saudi Arabian magazine. IKEA absolutely knows its customers. They always try to adapt their magazines, stores and marketing strategies to the local traditions and cultures. If they would sell in every country the same catalogue, they definitely would gain much more negative comments and reactions from their customers. Furthermore, IKEA’s revenue would suffer from this situation. IKEA is a profit-oriented company. Unfortunately, they got a lot of negative reviews and complaints. There are a lot of customers which never re ceive their products after they ordered it on IKEA’s online-shop. And there is often the case that the products arrive too late (Dudovskiy, 2019).

Technological IKEA still does offer paper catalogues. But since the internet is as well-known as today, people are able to buy and choose things in IKEAS online-shop. Offering an own online shop seems to be nearly usual for every sale business nowadays. Everyone is able to find recent offers of furniture or other inspirations at IKEA’S online-shop. Furthermore, the website allows to find out where the closest store is located. Placing your order online is also possible. IKEA tries to provide a very realistic online experience to its customers. This is great, especially for those customers which aren’t able to go into a real store. On IKEAS website, you can search product by product. In addition to that IKEA makes it also possible to search room by room on its website. The company is profit-oriented and want to raise up the customer satisfaction. IKEA tries to archive brand loyalty. As mentioned before IKEA put a lot of effort into knowing its customers. It follows, that it is nothing new that they also put a lot of effort into their digital channels (Dudovskiy, 2019).

Legal As already mentioned before, every big company needs to accept the legal rules of each country the company operates in.

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Marketingstrategie IKEA

In some cases, about IKEA was written in the news because of bad quality. IKEA needs to make sure that the products, they sell are save and any accident can happen (Dudovskiy, 2019).

Environmental IKEA has invested more than $1 billion into renewable energy in very poor regions. They want to be completely renewable. IKEA tries to get a sustainable company by investing in solar and wind panels. Finally, they want to improve the materials they use for their products too. IKEA only wants to use sustainable cotton and wood, which means that those materials will come from sustainable sources (Dudovskiy, 2019).

5

Global Marketing Strategy

As already mentioned IKEA exists in a lot of different countries. But how does IKEA adapt its marketing strategies to the various cultures and traditions of the different countries. Some examples will be explained in the following lines.

5.1

IKEA in Sweden

Some characteristics of the cultural image of Sweden are: Simple, honest, responsible, peaceful and liberal. Ingwar Kamprad explained that “Maintaining a strong IKEA culture is one of the most crucial factors behind the continued success of the IKEA concept.” Important for example is that the colours of IKEA are the same colours like on the Swedish flag. The people in Sweden love the nature and they also love being in their own beautiful home. The Swedish live style can be described, as a nature full of light and fresh air. The Swedish people enjoy the healthy way of live. Mostly the furniture is inconspicuous and simple. You can find all those typical characteristics when you take a look at IKEA’s furniture (IKEA, 2019).

5.2

IKEA in Japan

Between Japan in Sweden also exist a very big cultural distance. IKEA always tries to adapt the coun tries’ personality. IKEA focuses for example on space-saving products because of the typically small flats in Japan. They build up furniture which fit to Japanese homes. In Japan IKEAS focus is more on the product than on the pricing. Furthermore, in Japan there are a lot of other furniture competitors. To conclude, for a company it is important to adapt the national culture. This seems to be necessary to success in business. What needs to be said here is, that IKEA although shows in every single country that the company is from Sweden. The Swedish colours are still existing on the web pages etc. In conclusion, IKEA has designed their offerings adapted to their target market like for example students or young families. In addition to that the company decided to expand globally, especially into countries which profit of a high GDP growth. In some cases, they chose countries which have niches within the furniture industry like the US or Japan (Chaletanone & Cheancharadpong, 2008).

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Marketing Strategie IKEA

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Marketing Research

Businesses that want to compete these days, have to develop strategies quickly, so they can react to the constant changes and developments of the global markets. Therefore, there is more need for transnationals research to identify regional or global market segments. Moreover, it is important to recognize market changes quickly and develop a response strategy...