Open Case Analysis - Ikea PDF

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Assignment for open case analysis, topic is Ikea...

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Open Case Analysis – Ikea Business and Competition Ikea is the world’s largest furniture retailer with more than 400 stores worldwide. Ikea is known for combining high functionality with quality and design within its products, while keeping prices as low as possible. Ikea operates in a saturated market with many competitors such as Walmart, Target, and Amazon. To stay competitive, Ikea has a cost leadership strategy that has a cyclical relationship between its customers and product manufacturers. By attracting customers using modern designs at affordable prices, IKEA is able to place large orders which are used to secure discounts from its manufacturers. These savings are then passed down to customers in the form of low prices. Internationalization Process To operate around the world, Ikea makes many regional adjustments to their marketing campaign and uses the product catalogue to blend global and local characteristics. For example, in the USA catalogue, the kitchens look larger to appeal to the idea of the American dream. In the Chinese catalogue, the same kitchen looks smaller as many Chinese households are more conservative. By recognizing that every country has its own cultural norms, Ikea is able to overcome a liability of foreignness. Low prices are at the heart of the Ikea brand, but when expanding globally it becomes harder to maintain low prices without compromising quality. As profits in North America and Europe have slowed down, Ikea has invested in emerging economies. In India, the majority of consumers buy their furniture from traditional ‘mom and pop’ shops where prices can be negotiated, and products are often tailored to the customers’ needs. To compete, Ikea needs to appeal to Indian consumers with lower prices that offset the hurdle of assembling the products at home, without compromising the quality of their products. Motivations and Advantages Ikea’s globalization efforts are rooted in its vision “to create a better everyday life for the many people.” To reach the many people, Ikea decided to expand their brand globally by using a global standardization strategy. With this strategy Ikea offers standardized products at low prices, while minimizing local responsiveness. Ikea uses different marketing strategies to appeal to cultural demographics, but the same products are sold in every location. This could be seen as false advertising which, could negatively impact Ikea’s caring brand image. A potential advantage for Ikea is its commitment to green products and sustainability which will help differentiate them from their competitors, and could help to sway consumers that were on the fence. SWOT Analysis –Strengths: Strong brand image, wide range of products, and use of renewable materials. Weaknesses: Hard to control standards globally, supply chains are not local, and cost vs quality paradox. Opportunities: demand for green products and corporate responsibility through the Ikea Foundation. Threats: Competitors with similar pricing and economic downturn. VRIO Analysis: Valuable: yes, differentiates itself through innovation. Rare: yes, combination of low prices and quality is rare and offers “family experience.” Inimitable: no, competitors can imitate Ikea’s value chain if they have the money and resources. Organization: Ikea has a strong brand image that is easy to recognize, and they are able to adapt the value chain to many cultures.

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