Detailed Analysis of IKEA's International Business Model and Strategy

This report provides a comprehensive analysis of IKEA's international business model. It begins with an overview of the company's history, market situation, and key aspects such as suppliers, competitors, and target clients. A SWOT analysis and Bowman’s strategic clock analysis are presented to evaluate IKEA's strategic position. The report then delves into the Business Canvas Model, detailing key partners, activities, value propositions, customer relationships, customer segments, resources, channels, and cost structure. Furthermore, the report examines the improving business proposition, including quantitative and qualitative objectives, strategies for business development, and methods for evaluating the marketing program. The analysis provides insights into IKEA's core competencies, competitive advantages, and overall business strategy, offering a detailed understanding of the company's operations and market dynamics.

IKEA INTERNATIONAL BUSINESS MODEL
ANALYSIS
STUDENT:
PROFESOR:

1. About the company and market situation 2
1.1 Suppliers
1.2 Competitors
1.3 Clients
1.4 SWOT analysis
1.5 Bowman’s strategic clock analysis 4
2. Business canvas model and Improving Business Proposition
2.1 Business Canvas Model Ikea
2.2 Improving business proposition
2.2.1 Quantitative and qualitative objectives 0
2.2.2 Strategies used for business development 0
2.2.3 Methods and tools for evaluating the marketing program 0
2.3 Conclusion
Bibliography

1. About the company and market situation
It all began in 1943 when Ingvar Kamprad, a 17-year-old boy from Almhult, Sweden,
tried to help his parents pay their money with the money they earned from the sale of matches
they bought from Stockholm and then sold it to their neighbors. In time, and because he was
doing well enough, he grew his business from matches to pens and jewelry. So IKEA was not
really related to what we know today. The line of products offered did not include furniture at
all. Using a simple catalog, Ingvar set up a mail order system using the local milk truck to
honor the comets. In 1951, Ingvar Kamprad expanded his business by selling furniture made
in local workshops using furniture catalogs he himself edited. Today, these catalogs are
printed in millions of copies, in 35 languages, and the range includes over 10,000 items. Also,
the design of the manufactured furniture belongs entirely to the company. The first IKEA
store was small and opened in 1953 in Almhut, where the company was founded.
Currently, the chain has 338 stores in 43 countries, most of them in Europe, and the
rest in the United States, Canada, Asia and Australia. Currently, the only IKEA store in
Romania is in Bucharest in the Baneasa shopping area. It was inaugurated on March 21,
2007, being the 253rd opened in the 35th country. The IKEA Group has 118,000 employees
in 40 countries, with 441 employees in Romania and a restaurant with 470 seats. The store
covers an area of 26,000 mand has 1,500 parking spaces.

The Ikea store in Romania corresponds to the concept of joining everything under one
roof. The range of products includes complete solutions for all areas of the house, both
furniture and accessories and decorations. There are over 7000 items in the store, from living
room furniture, kitchens, bedroom, child's room, bathroom, office furniture, to home textiles,
curtains, carpets, bedding, bathroom, lighting, kitchenware, articles for the organization of
the house and finally decorations. Ikea products respond to diverse needs and tastes while
retaining the functionality and accessibility feature.
1.1 Suppliers
Ikea's suppliers are carefully analyzed, especially in terms of the technology used in
the manufacture of furniture products. Ikea representatives claim that around 10% of the
products sold come from local suppliers, with the rest of the products coming from foreign
suppliers. Currently, Ikea has 50 Romanian suppliers producing 550 different items and a
total of 80 suppliers in the Balkan area. About 5% of the 7,000 products in the Ikea store are
produced in Romania. Ikea suppliers in Romania works either in the wood or ceramics field,
but there are also upholstery manufacturers.
Some examples of Romanian suppliers:
PLIMOB:(Sighetu Marmaţiei). It produces simple and upholstered classic chairs as well as
folding chairs and is an Ikea supplier for more than 10 years, delivering about 90% of its
production.
NIKMOB: (Buzau). Ikea provider for more than six years.
IPEC:(Alba Iulia). Ikea's largest ceramic supplier in the Balkans.
ECOLOR:(Cluj). Producer of exclusive furniture for the Ikea Swedish concern
SORTILEMN:(Gherla). It is one of the main furniture manufacturers in the local market.

CESIRO:(Sighisoara). It is the second largest ceramic supplier of the Swedish group.
Core Competencies of IKEA
The core competencies of IKEA are as follows:
1. The unique selling proposition of the company is its cost effective business model that
enables the company to sell its products at the minimum price and optimum quality.
2. The partnership with the local distributors enables the company to acquire products at
the lowest price so that it can be delivered to the customers.
3. Most of the stores are located in the sub urban areas so that the stores can occupy
maximum space and provide home like ambience where
4. Unique design of the furniture enabled for easy assembly.
5. Development of a promotion robust brand equity through effective and unique
advertising campaigns.
6. Development of a distinctive organizational culture destined to promote good lifestyle
for the employees and the people.
7. Self-delivery and assembly system to reduce the total price.
8. IKEA also focuses on its Corporate Social Responsibilities towards the protection of
the environment, labor and its ethical business practice.

Activity Map of IKEA
Figure 1.1: IKEA Activity System
Explanation: The main functional areas according to the identified core competencies of
the company are:
a) Complete line of furniture with accessories to furnish home,
b) Low cost of manufacturing and acquiring,
c) Modular scalable furniture design
d) Self-assembly by the customers.
These four competencies of the company are interconnected by a series of functions
as seen in the above diagram. The interconnection between them enables them to function
properly.

Competitors
The furniture market of about one billion euros, estimated in recent years, is steadily
increasing by up to 10%, supported by the boom in construction. Growth is supported by both
imports and reorientation of Romanian producers on the domestic market. As a result of the
growth of the construction sector, several manufacturers announce their entry to the
Romanian market.
Both direct and indirect Ikea competitors can be identified:
Indirect competition
1. MOBEXPERT -It ranks among the top twelve European furniture companies and has five
hypermarkets in Romania and one in Bulgaria.
2. ELVILA -Founded in 1990, Elvila is currently one of the leading companies in the field of
furniture production and marketing in Romania. He's 50 but for a few years it has begun to
invest in medium to large areas (over 5,000 sqm)
Direct Competition
The main concern of Romanian furniture producers is related to the level of
production costs, which has grown significantly since 2010. Both wood for furniture and raw
materials will be more expensive, at least 7%, according to the latest estimates - utility tariffs
will be higher. In addition, the pressure to raise wages will be rising, increasing even more
the need for spending on furniture production. It would be natural to increase proportionally
the final prices for furniture produced in Romania, but IKEA's competition will cause local
suppliers to think once before going for a price.

1. KIKA -For the next five years, the company has planned to develop a network of eight
stores in Romania. He is one of Ikea's largest competitors in Romania.
2. NEOSET -In Romania it entered the market in 1991 with its first store, and the first
Neoset factory in Romania opened in 1999. Now Neoset Romania distributes through the
franchise system products in over 15 shops spread throughout the country.
In our opinion, IKEA distinguishes itself from other competing companies through
the quality assurance offered, as well as being renowned for its original and innovative
products offered at the highest quality. The company also creates its own products through
designers who are aware of the tastes of their people and their budget, resulting in the most
original and innovative pieces of furniture and decorations offered at an affordable price.
Another element of differentiation would be the shop design, which is designed to lead the
customer and give him a view of all existing products. Thus, using product label information,
customers take the products they want to purchase from shelves in the store's self-service
area, carry their furniture at home or are delivered through the distribution system and
assemble it.
Clients
The target audience of IKEA products is young consumers who are open to accepting
the idea of changing furniture at relatively small intervals and urban, middle-income, family-
friendly, child-centered adults looking for quality and comfort.
SWOT analysis
Strength Weakness
- Recognized brand with a large assortment of products;
- occupies a major global position in the furniture market;
- serving and delivering furniture in packages easy to
- home delivery and assembly service,
available on request, against payment;

transport;
- the company offers products at attractive prices and high
quality;
- innovative promotion systems;
- the specialized workforce;
- good organization in distribution;
- accessible and easy to assemble products;
- families with children benefit from parking spaces near the
entrance (1,500 parking spaces) and a supervised playground
where children can leave;
- within the Ikea range of products there is a special area for
children of all ages, the Patrull range of products specifically
designed to provide child protection such as: socket
protection systems, anti-skid scraper systems, furniture for
sharp corners, etc;
- flexible return policy that allows customers to return a
product within 90 days of purchase;
- all Ikea products have a warranty period ranging from 1 to
25 years, depending on the category they belong to;
- Before starting a tour through the shop, each customer
receives a bag, a pencil and presentation leaflets at the
entrance, the recommendations in the brochures being
accompanied by a special entry called Notes, where they
note their order and the product presentation section, so that
then be able to pick them up from the self-service area.
- the impossibility of on-line orders;
- lack of investors
- a single point of sale in Romania

Opportunity Threat
- receiving government benefits to expand into new areas thus
offering new jobs;
- investing in the training of its 500 employees through
training organized both in the country and abroad;
- consumer profile (the young population is easily open to
accepting the idea of changing furniture at less than 3-5
years);
- about 5.6% of the products marketed at Ikea's location come
from local suppliers;
- negotiating suppliers and distributors to lead to more
attractive prices;
- this to qualified force in new outlets
- competition (Mobexpert, Elvila, KIKA);
- rising raw material prices;
- competitive prices from competition;
- restrictive legislation.

Bowman’s strategic clock analysis: IKEA
Bowman’s Strategic clock analysis helps the examiners to understand the position of
the products mapped on a clock that are systematically measured on vertical and horizontal
axis. In this case we have taken the help of a diagram to establish a relationship with the
product characteristics of IKEA.
Figure 2: Bowman’s Strategic Clock
Explanation: The above diagram represents the Bowman’s Strategic Clock with the product
characteristics of IKEA. The vertical axis measures the perceived values of the products and the
horizontal axis represents the price of the products. It can clearly be understood that the strength of
the company is its low price of the products. The market for its products are Low price and low
perceived value. The hybrid products having high perceived value but low price is the cash cow of
the company. For the future markets it is focusing on focused differentiation which are furniture’s
made as per the requirements of the customer. These have higher perceived value and high price.

Business canvas model and Improving Business Proposition
Business Canvas Model Ikea
Key Partners
 Suppliers
 Providers
 Vendors
 Design and advertising
agencies
 UNICEF and save the
children
 Solarcentury (renewable
energy products)
Key Activities
 Development of new markets
 Continuous product
development
 Marketing & branding
 Managing logistics of suppliers
 Distribution & logistics
Value Propositions
 Stylish furniture at affordable
prices
 “to create a better everyday life
for many people”
 “To offer 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 store opens daily
before the rest of the store and
serves an inexpensive breakfast
Customer Relati
 Loyalty card, m
product discoun
 Ideas and inspira
 Delivery& assem
 Or self-service s
 Ikea catalogue
 Alternative desi
 Online assistanc
 Kids play area
 Planning tool
 Virtual Reality e
 Eco-friendly
Key Resources
 Efficient supply chain
management concept
 Ikea brand
 Facilities stores, depos and
factory
 Practical and modern design
Channels
 Website/online
 Retail shopping
 Interior planner
 Ikea catalog
 Family card & g
 Ikea store shopp