Comprehensive Marketing Report: IKEA's Strategies and Market Analysis

This report provides a comprehensive marketing analysis of IKEA, the world's largest furniture retailer. It begins with an executive summary and an introduction to IKEA's global presence and product range. The core of the report involves a thorough internal and external analysis, including a ...Read More

IKEA

Table of Contents
EXECUTIVE SUMMARY.....................................................................................................................3
INTRODUCTION................................................................................................................................4
INTERNAL AND EXTERNAL ANALYSIS OF IKEA.................................................................................5
SWOT ANALYSIS OF IKEA.............................................................................................................5
PESTEL ANALYSIS OF IKEA............................................................................................................7
PORTER’S FIVE FORCES ANALYSIS..............................................................................................11
PRESENT MARKETING STRATEGY OF IKEA.....................................................................................12
OBJECTIVES OF IKEA......................................................................................................................13
SEGMENTATION, TARGETING AND POSITIONING.........................................................................14
MARKETING PROGRAMMES..........................................................................................................17
NEW MARKET OFFERINGS BY IKEA................................................................................................20
IKEA Family Card........................................................................................................................20
IKEA Place app...........................................................................................................................20
CONCLUSION.................................................................................................................................22
REFERENCES...................................................................................................................................23
2

EXECUTIVE SUMMARY
Marketing is a process of promoting the products and services of a company so that the
company can attract the potential customers and as a result increase its sale. The current
assignment focuses on the marketing strategies followed by IKEA which is the largest
manufacturing company in the world and carries its operations in a number of countries.The
assignment discusses the stakeholders of the organisation who make an impact on the market
strategies of IKEA (Khan, 2014).These stakeholders include the factors such as employees,
owners and managers and the factors which are external to the organisation such as customers,
suppliers, competitors in the business, society and government. The assignment also highlights
the present marketplace of the IKEA and the strength and weakness of the company in
comparison with the major competitors in the retail furniture market (Kotabe and Helsen,
2014).
3

INTRODUCTION
IKEA has maintained its position as the world’s largest furniture retailer for many years. The
company has expanded its operations in 50 countries and has over 400 stores located in various
countries of the world. The company showcases 12,000 products on its website, which shows
the broad product range of the company (Kotler, 2015). The product range of the company
comprises of furniture items such as bed, sofa, wardrobes, dining table and chairs. Smart home
appliances such as smart lighting, automated fans and furniture with wireless charging
facilities.The company got two initial letters ‘I' and ‘K' from the name of the founder of IKEA
groups, Ingvar Kamprad and other two letters are associated with his hometown from where he
started the company in the year 1943.
Figure 1: IKEA
[Source: http://knowledge.wharton.upenn.edu/article/will-ikea-find-home-india/]
4

INTERNAL AND EXTERNAL ANALYSIS OF IKEA
IKEA is the most successful brand in the retail furniture market the main selling point of the
company is the excellent quality and low cost of its products, and company’s efforts to reduce
the carbon footprint and lower down the energy consumption in its stores (Bohari, et al. 2017).
The company has committed to reduce the packaging requirements and promote green
transportation plan across all its branches. The micro and macro factors which make an impact
on the strategies of the company are discussed below:
SWOT ANALYSIS OF IKEA
Strengths
 Use of renewable materials for making furniture and active participation in the forest
conservation projects.
 Lower prices due to economies of scale: The company purchases the furniture from
suppliers in large scale and these items are sold all over the world and company
 Good relationships with the suppliers: IKEA has around 1800 suppliers in many countries
and has strong supply chain management systems (Reihanian, et al. 2012).
 Innovative products: The Company always bring new and innovative products to the
market to attract new customers. One such example is the ‘flat pack furniture’; this
furniture gives the customer convenience in logistics.
 The company has a wide range of products from furniture to home appliances which
provide the customer convenience of getting a large number of home care products at a
single place.
 A large number of brick and mortar branches: There is a perception in the customers
that online market is a place for cheap and lower quality products; to break this
perception the company has established a large number of stores in various countries so
that the wide range of products of IKEA can be displayed effectively.
 IKEA has started many big advertising campaigns in the USA and European countries
which has helped the company increase its brand awareness
5

Opportunities
 Since starting, the company has the policy to create such products which have minimum
Impact on the environment; this can be an opportunity for the company highlighting
these features in the marketing campaign and take benefit of the increased demand of
sustainable products.
 Emerging economies and the ever-growing middle class in countries like India and China
have huge opportunities for the company.
 The Online selling market has many opportunities for the furniture market due to the
increasing trend of purchasing products online.
Weaknesses
 IKEA does not manufacture any product by itself and all the products are purchased
directly from the suppliers in bulk. This has increased country’s dependence on the
suppliers.
 The company has standard patterns of furniture which are mainly based on the
European style of furniture making, due to which the company is not able to satisfy the
demands of customers who are in search of some exclusive designs; this reduces the
market share of the company (Srdjevic, et al. 2012).
Threats
 The challenge of maintaining the quality of the products while following the company’s
policy of keeping the prices of products as low as possible.
 Reduction in disposable income due to recession in many European countries and
BREXIT effect.
 Many new companies are entering the low-cost furniture market and it has increased
the competition in the market.
6

 The customer’s preferences keep on changing due to new trends in the market, which
make many designs of the company out of the market.
 People generally have this perception that the products lower in prices are inferior in
quality the company has to increase its brand awareness to break this perception
The SWOT analysis of IKEA has described the strength of the company which is lower prices of
the products and the commitment of the company for greener practices in the business. The
company has many opportunities in the emerging Asian economies. The company has some
weaknesses in the supply chain management systems which should be addressed by purchasing
the products from different suppliers and not depending on a single supplier. In addition to this,
the company should also make changes in its product designs and design the products
according to the demand of a particular market. The company should also focus on increasing
its marketing efforts to brand itself as, ‘Cheap, but offering excellent quality’ product.
PESTEL ANALYSIS OF IKEA
Political Factors
IKEA should be aware of the political situations where it has its operations because these
political situations have a direct impact on the policies of the company. For instance, the
Russian government is not very supportive to IKEA and causing delays in the administrative
permission for its new stores. On the other hand, governments in Asian countries like China and
Malaysia are providing every facility to the company to expand their operations. These facilities
include faster approval of projects, availability of basic infrastructure like electricity and water
and reduction in taxes (Minefield, 2012).
Economic Factors
The economic turbulence in the country makes a strong impact on the functions and the
profitability of the company. The increase in prices of the raw materials can increase the overall
7

cost of the product. Recession in the economy affects the purchasing capacity of the customer
and this reduces the sales of the company. The change in the foreign exchange rates can cause
profits or losses to the company and the company should carefully analyse these situations to
avoid any shocks in the economy due to sudden fluctuations.
Social Factors
The social and cultural values of a particular nation are related to the sentiments of the local
population and a company should always respect these values. IKEA was widely criticized in an
incident in Saudi Arabia where company removed the image of a female model from its
catalogue. The company should always ensure that in IKEA’s ad campaigns and other marketing
activities, the sentiments of the local people are taken into consideration.
Social factors like demographics, education, cultural taboos, economic classes, saving habits,
provide valuable inputs to the company for deciding its marketing activities and deciding a
target market in a particular region. For example, analysing the saving habits in a particular
country can help the company to decide the pricing of the products.
Technological Factors
The major technical change in the retail furniture industry is the growing trend of e-commerce.
To fight this change the company has made many changes in its marketing style. The company
has developed facilities to make the products available through a digital medium. IKEA keeps
updating its website with new products launched. At present, the company displays more than
12,000 furniture and home decoration products on its website. The customer can purchase
these products online by using his debit or credit card. The company has also made a dedicated
app for the smartphone users (Mkude, et al. 2015).
Environmental Factors
IKEA participates proactively in the environment saving projects. 50 % of the raw materials that
IKEA uses in the products are recyclable. The company has also given financial assistance in
many forest saving projects in the UK. The company has set a target, that by 2020 the company
8

will produce all the energy required for its store on its own. For this purpose, the company has
planned to install solar power panels in all the stores worldwide. The company has also
invested in the UN project of providing financial and technical assistance to cope with climate
change.
Legal Factors
IKEA has to face many legal issues when entering a new market. For instance, when starting its
operation in the US, the company had to face many trade barriers due to the 1979 Sale of
Goods Act which puts some restrictions on the bulk selling of goods by a foreign company. A
company has to face legal issues if it is not following the labour and equality laws of a particular
country and it can also attract penalties and fines which increase the expenses of the company
(Zalengera, et al. 2015).
9

Figure 2: New IKEA stores
[Source: https://highlights.ikea.com/2017/facts-and-figures/]
10

PORTER’S FIVE FORCES ANALYSIS
Industry rivalry
The major rivals of IKEA are Home Depot, Wal-Mart and Argos. These companies give a tough
competition to IKEA with their low-cost products, strong supply chain management and broad
market presence. If these companies provide cheap products with better customer services
they can grab the market share of IKEA. The company should focus on its marketing activities in
different markets to make a stronger brand awareness and customer loyalty. The company
should also focus on the customer services. To counter lower price the company should
purchase in bulk from the suppliers (Yunna and Yisheng, 2014).
Threat of new entrants
The threat of new entrant is low due to the requirement of expertise in the furniture market.
The company has an experience of 75 years in the retail furniture market and this experience
has helped the company to gain a brilliant expertise in the packaging and supply chain
management. In addition, the furniture business requires a large amount of capital to establish
a company as big as IKEA. So the threat of new entrant is quite low for IKEA, but established
companies who have large capital base can enter into the business and affect the market share.
The company should focus on developing new products to increase the customer base and
increase the marketing activities through newer methods of advertising like social media
platforms and blogs.
Threat of substitutes
The local producers of furniture selling similar products at cheap prices can produce a threat of
substitution. These local traders have a good understanding of the customer choices and they
can also make the furniture according to the specifications by the customers. The lower cost of
switching provides an option to the customer to switch to these cheaper products. To gain a
competitive advantage over the local traders the company should focus on marketing the
11

unique features of its products and services like flat-pack furniture, which has the convenience
of assembling or disassembling easily and can be transported with ease (Cheng, 2013).
Power of customers
The bargaining power of customers is high because there are many big companies in the retail
furniture business and the local furniture producers also give a tough competition to IKEA. If the
competitor is providing products with little or even no differentiation and at lower prices, then
the bargaining power of the buyer increases and he can switch to these products. IKEA should
counter this situation by being innovative and launching new products with better features. The
company must also focus on increasing the brand awareness.
Power of suppliers
The suppliers are the primary stakeholders of the IKEA business because the company has no
manufacturing establishments of its own. IKEA purchases products directly from these suppliers
and sells them in different markets of the world. The company also purchases raw materials like
wood, cotton, plastic and glass from different suppliers. Company’s dependence on these
suppliers for its various requirements increases the bargaining power of the suppliers and they
can demand an increase in the prices of raw materials. The company should increase the
number of suppliers and should not depend on a single supplier in a particular market.
PRESENT MARKETING STRATEGY OF IKEA
The IKEA has always adopted the most brilliant and innovative ideas to market its products. The
company offers opportunities to customers, expert bloggers and its talented employees to
create content for its online marketing activities. The USP of IKEA is the eco- friendly simplicity
in the design and the company aims to extensively highlight these features of the company in
its advertising campaigns (Ferrell and Hartline, 2012).
IKEA catalogue is the unique aspect of company's marketing activities. IKEA is publishing this
catalogue for 67 Years which is in the form of a 250-plus page-book and it is printed in 30
12

languages in 43 countries. The company spends 70 % of its marketing budget on the printing of
these catalogues. The catalogues are printed annually and in the year 2013 more than 200
million copies were printed, which was double the number of copies of the Bible that were
printed that year.
OBJECTIVES OF IKEA
 To explain the full IKEA offer through various channels. This offer is about delivering
environmentally sustainable products at cheapest prices.
 To adopt a management style according to a specific country and diversify the product
range based on the customer requirements.
 To reach many people and explain the IKEA offer keeping in mind the customer needs.
 To focus the marketing activities in the target market areas such as the local market of a
region (Hultén, 2012).
 To offer a wide range of products with excellent design, finishing and durability at low
prices so that maximum people can be able to afford these products.
13

SEGMENTATION, TARGETING AND POSITIONING
SEGMENTATION
The geographic segmentation of IKEA can be done mainly in the three regions of the world. The
largest target market for IKEA is the European region in which around 80% of IKEA’s business is
concentrated. Second is the North American region which accounts around 15% of the sales
and the rest sales are from the Asian region. By looking at these figures it can be said that the
major part of company’s business is concentrated in the European region.
The demographic segmentation of the company has concluded that the people from age group
30-45 visited the IKEA stores most. This age group is dominated by the females of age group
around 38. The segmentation figures indicate that the company is not able to attract young
population, especially the young married couples with medium income group (Riefle, et al.
2012).
In psychographic segmentation, customers behaviour and preferences are studied and based
on these results the target market can be decided. The European customers basically like
furniture with simple and natural design, on the other hand, the Asian customer like the
furniture with elegant designs. While purchasing bulky furniture they choose luxurious styles in
the articles.
14

Figure 3: STP Process
[Source: http://prezentr.com/product/stp-marketing-powerpoint-template/]
TARGETING
Based on the geographic, demographic and physiographic segmentation of the customers it can
be concluded that the company’s target market should be the middle and high-income group
people with age group of around 28- 45 years. The company should also focus on the newly
married couples who are just starting their family and are shifting into new apartments. In
addition to this, the company should also focus on the booming Asian market and increase the
number of stores in the countries like China, Malaysia and India to take benefit of the fast-
growing markets (Venter, et al. 2015).
One other target market for IKEA is the older age group customers, these customers want
articles which are not bulky and light in weight so that it is convenient to move it from one
place to another. Basically, the older customers want furniture which is simple in design and
gives comfort and security.
POSITIONING
After deciding the target market the company should make strategies to attract these
customers towards the product range of IKEA. The basic aim of the company is to make such
products which are made from recyclable materials such as bamboo. The benefit of using such
15

products is that these products are biodegradable that means they do not cause any harm to
the environment. The second benefit is, these products are cheap, which lowers the overall
cost of the finished products. The company is marketing these unique features of the company
in various markets, especially in the European markets where people are more inclined towards
the products which create minimum impact on the environment
Looking at the STP of IKEA it can be said that the company needs to increase its presence in the
Asian market. The Asian economies are continuously expanding and the middle class
experiences an increase in the purchasing power. The company should focus on marketing the
unique features of their product like biodegradable raw materials and cheaper prices. The
company should also make strategies to attract young couples who are shifting into new homes
and are in need of affordable furniture which is easy to use and transport.
16

MARKETING PROGRAMMES
Product
IKEA offers over 2000 different products related to home furnishing, lighting, smart home and
kitchens at its different stores. The company aims at offering products which are superior in
quality and at the same time lower in prices so that customers of different income groups can
afford these products. To deliver a unique design and quality to the consumers the company
has its in-house designers which are from different countries and cultures so that the products
can be developed on the basis of local customer preferences and choices. The company also
offers innovative products for children rooms; these products include foldable beds, changing
tables and side tables
Price
Keeping the prices low is one of the basic ideologies of IKEA. The company always uses such
raw materials which are lower in prices, so that the price of the final product can be reduced.
The company purchases these raw materials in bulk from the raw material suppliers to reduce
the overall prices of the products. IKEA uses low-cost brown cardboard which is easy to
transport and can be recycled, these cardboards are cheaper in prices as compared to other
packaging materials like wooden boxes and help in reducing spending. The company also offers
a price guarantee on the printed prices in the IKEA Catalogue, this means that the prices will
not be reduced from the printed prices on the catalogue for the duration of one year from the
printing date of the catalogue (Hultman, et al. 2012).
Place
The company has 403 stores in 50 countries of the world. The company has its stores located in
Europe, Asia, North America, Middle East and Australia. Europe is the largest market for the
company where it has 275 stores, 56 store in North America, 47 stores in Asia, 14 in the Middle
East and 10 stores in Australia. IKEA has launched 14 new stores in 2017. The company has a
large number of suppliers in these countries that help the company operate its worldwide
17

operations efficiently. The company is known for its warehouse size stores, these stores are
managed by a team of managers who make sure the maintenance of sufficient stock, packing
and supplying of all the products to all the departments and careful handling of articles to avoid
any damage.
Promotion
IKEA has adopted many innovative ideas for promoting its products. For example, the IKEA
place app through which the customer can place the virtual image of a furniture right in his
living room. IKEA also introduces IKEA Family card through which customers can get many free
goodies and discount offers on purchases. The company also offers a variety of routine
promotional offers like buying one get one and discounts on purchase above a certain amount.
The IKEA catalogue is the most preferred marketing tool for IKEA. This catalogue is published in
various languages in 30 countries of the world. The catalogue contains various blogs and tips on
better home furniture management; it also contains detailed information of various products
with information about its specifications and prices. The catalogue also contains full-page
pictures of furniture on glossy paper (Jonsson,et al. 2013).
People
The company has a policy of keeping no barriers between the management and co-workers.
The store attendants are trained extensively to provide best services to the customers in a
polite manner To reduce the impact of business on people IKEA has launched many energy
saving options like LED bulbs. IKEA has also introduced energy saving products like water saving
taps in its kitchen range.
Process
All the processes at IKEA are managed by the team of experts in supply chain management.
These managers ensure sufficient supply of items in the inventory. IKEA managers take special
18

care to assemble the products in a safe way so that no damage happens to the furniture. The
company also offers home delivery to the customers and also manages the assembling of
products at customer’s place (Mochon, et al. 2012).
Physical evidence
IKEA has opened 14 new stores in the current financial year at various locations in the world.
These stores have a simple and yet modern look and ample space at the stores so that
customers can have a good look at the product from every angle. IKEA prints millions of
catalogue every year to provide information about its latest products to the customers. The
store managers ensure that customers are treated in a pleasant way in the stores and for this
purpose, special training is provided to the employees.
19

NEW MARKET OFFERINGS BY IKEA
IKEA Family Card
The new offering by the company is the IKEA family card. This is a customer loyalty program
which is free to join and open for everyone. The members of this card can avail discount offers
and special prizes.The Company also provides free coffee for the cardholders anytime (Hrelja,
et al. 2012).
The added benefit is the insurance facility which is provided free of cost for the members. The
free insurance provides insurance against accidental damage during transportation and
assembling of the products at home. The company offers free replacements for any such
damages. On swiping these cards on IKEA stores the customers can get surprise gifts like free
meals. The Family card holder gets the exclusive facility of getting ideas and tips from the
professionals who visit customer’s home to give their expert advice regarding transforming the
home, organising wardrobe and smart kitchen ideas.
IKEA Place app
This app is an augmented reality app which lets the customers virtually place the product at the
desired place in their living rooms before taking a decision to buy it.
The app displays items according to popular categories such as ‘Baby and children’ or Office
chairs’. The app contains more than 2000 items which can be searched easily under various
categories.
20

Figure 4: IKEA Place app
[Source: https://mashable.com/2017/09/24/download-this-ikea-place-ar-kit-app/
#jSA5XB8yqiqz
This app is unique in its features as it displays the accurate three-dimensional location of the
furniture and this digital furniture can be placed anywhere in the room with the help of digital
camera of a smartphone (Norton, et al. 2012).
21

CONCLUSION
IKEA is the largest retail furniture seller in the world and has maintained a brilliant quality in its
products and services over a large span of 75 years. The company started from a small town in
the year 1943 and at present, the company has its stores located in 50 countries the world. The
current assignment focused on the marketing strategies of IKEA. A discussion is made on the
segmenting and targeting strategies of the company. IKEA’s segmentation is based on the
various income, age groups and customer preferences. Based on these inputs, IKEA sets the
target market for its marketing activities. The assignment also highlighted the new offerings by
the company like IKEA place app. This app places the three-dimensional image of the furniture
into the living room of the user in real time by using Smartphone of the customer.
22

REFERENCES
1. Bohari, A.M., Hin, C.W. and Fuad, N., 2017. The competitiveness of halal food industry in
Malaysia: A SWOT-ICT analysis. Geografia-Malaysian Journal of Society and Space, 9(1).
2. Cheng, D.S., 2013. Analyze the hotel industry in porter five competitive forces. Journal of
Global Business Management, 9(3), p.52.
3. Ferrell, O.C. and Hartline, M., 2012. Marketing strategy, text and cases. Nelson
Education.
4. Hrelja, R., Isaksson, K. and Richardson, T., 2012. IKEA and small city development in
Sweden: planning myths, realities, and unsustainable mobilities. International Planning
Studies, 17(2), pp.125-145.
5. Hultén, B., 2012. Sensory cues and shoppers' touching behaviour: the case of IKEA.
International Journal of Retail & Distribution Management, 40(4), pp.273-289.
6. Hultman, J., Johnsen, T., Johnsen, R. and Hertz, S., 2012. An interaction approach to
global sourcing: A case study of IKEA. Journal of purchasing and supply management,
18(1), pp.9-21.
7. Jonsson, P., Rudberg, M. and Holmberg, S., 2013. Centralised supply chain planning at
IKEA. Supply Chain Management: An International Journal, 18(3), pp.337-350.
8. Khan, M.T., 2014. The concept of'marketing mix'and its elements (a conceptual review
paper). International journal of information, business and management, 6(2), p.95.
9. Kotabe, M. and Helsen, K., 2014. Global marketing management
10. Kotler, P., 2015. Framework for marketing management. Pearson Education India
11. Minefield, M., 2012. Pestel Analysis. Retrieved September, 29, p.2012.
12. Mkude, C.G. and Wimmer, M.A., 2015, May. Studying Interdependencies of E-
government Challenges in Tanzania along a Pestel Analysis. In ECIS.
13. Mochon, D., Norton, M.I. and Ariely, D., 2012. Bolstering and restoring feelings of
competence via the IKEA effect. International Journal of Research in Marketing, 29(4),
pp.363-369.
23

14. Norton, M.I., Mochon, D. and Ariely, D., 2012. The IKEA effect: When labor leads to love.
Journal of consumer psychology, 22(3), pp.453-460.
15. Reihanian, A., Mahmood, N.Z.B., Kahrom, E. and Hin, T.W., 2012. Sustainable tourism
development strategy by SWOT analysis: Boujagh National Park, Iran. Tourism
Management Perspectives, 4, pp.223-228.
16. Riefler, P., Diamantopoulos, A. and Siguaw, J.A., 2012. Cosmopolitan consumers as a
target group for segmentation. Journal of International Business Studies, 43(3), pp.285-
305.
17. Srdjevic, Z., Bajcetic, R. and Srdjevic, B., 2012. Identifying the criteria set for multicriteria
decision making based on SWOT/PESTLE analysis: a case study of reconstructing a water
intake structure. Water resources management, 26(12), pp.3379-3393.
18. Venter, P., Wright, A. and Dibb, S., 2015. Performing market segmentation: a
performative perspective. Journal of Marketing Management, 31(1-2), pp.62-83.
19. Yunna, W. and Yisheng, Y., 2014. The competition situation analysis of shale gas industry
in China: Applying Porter’s five forces and scenario model. Renewable and Sustainable
Energy Reviews, 40, pp.798-805.
20. Zalengera, C., Blanchard, R.E., Eames, P.C., Juma, A.M., Chitawo, M.L. and Gondwe, K.T.,
2014. Overview of the Malawi energy situation and A PESTLE analysis for sustainable
development of renewable energy. Renewable and Sustainable Energy Reviews, 38,
pp.335-347.
24