IKEA Business Report: Innovation and a Smart Furniture Business Case

This business report proposes a solution to IKEA's challenge of keeping up with the demand for smart furniture in smart homes and offices. The report identifies the problem of declining customer retention due to the lack of smart furniture offerings, provides an insight into the financial impact and organizational culture barriers, and generates a solution centered around developing an IKEA app to control smart furniture. The report assesses the feasibility and viability of the plan, considering financial aspects, technical requirements, and environmental sustainability. It recommends an agile approach for initial investment, emphasizes customer desirability, and highlights the alignment of the plan with IKEA's organizational strategy. The report concludes with recommendations for stakeholder roles in ensuring the success of the smart furniture initiative through the creation of the IKEA app, enhancing customer engagement, and addressing the growing demand for technology-enabled furniture.

Running head: IKEA BUSINESS REPORT 1
BUSINESS REPORT
Name
Institution

IKEA BUSINESS REPORT 2
BUSINESS REPORT
Executive summary
IKEA is one of the best enterprises in the world. According to statistics, it has an overall
300 retail stores across 35 countries that were by the year 2013. The retails have since grown to
become bigger and better. It holds a record of about 583 million customers who have visited in
the past year, a world record. However, in recent times, the company has been faced with
customer rage over not sufficiently making smart furniture. This report has been developed to
determine ways in which the company can invest in smart furniture. Smart furniture is one that
can be controlled by apps or remote control to be used in smart houses and smart offices. The
business report proposal begins by identifying the gap in the company and providing evidence
for the same. The paper develops the problem through providing an insight. The insight is
followed by a proposal that develops app manager that can be used for this specific purpose. The
company's financial plan and revenues is then assessed in trying to develop and see if the plan is
feasible and viable within the context of the IKEA group company. After feasibility is assessed
the plan is assessed for value. The report explains how the app adds value to the organization.
Organizational performance is assessed clinically before a profound result is given on how the
plan conforms to the organizational strategy in terms of environment and affordability. At the tail
end a perfect recommendation is proposed on what the role of different stakeholder would be in
ensuring the plan is a success. This report, therefore, compounds a solution to the problem of
smart furniture introduction through the creation of the IKEA app. The IKEA app will have the
ability to control a client's furniture while also providing a communication portal of the company
to the same client. The app will provide a solution to the customer problem of apps and the
desire for smart furniture

IKEA BUSINESS REPORT 3
.
1. The Problem to Be Solved
In recent times most of the family furniture is home automated. According to the Pew
research center report (Larsson, 2016)36.6% of households preferred to use automated furniture
that is remote control enabled. When the un-automated furniture wasn't around, the homeowners
preferred to use rented furniture, which is technology enabled. Technology enabled furniture is
the main thing nowadays and has led to the IKEA furniture company to lose customers. The
evidence that IKEA is losing can be seen from last half year customer service where their major
rival wall mart which administered new 123000 customers (Matanga, 2018). The IKEA
Company made the assumption that the customers who deserted them had to seek rental services
from wall mart. Customers are looking for affordable and comfortable options. The use of
automated furniture makes it more comfortable for customers, and it is precisely what the clients
need. The shift of customer needs explains why there has been seen a growth in revenues of the
companies rental services (McNamara & Descubes, 2016). The IKEA company main problem is
to develop a way in which they should keep up with smart furniture for smart homes and smart
offices. The current procedure used by the IKEA company is to employ technology in the design
and marketing of the products that they have. However, this has not proved important enough in
retaining the customers as seen in the data of the company in comparison to Walmart. The
company is struggling to retain and attract the new generation of customer and clients that prefer
using smart furniture, which by the way is the major trend in the market. The introduction of
smart furniture has evidently changed the course of the customer. This is evidently seen from the

IKEA BUSINESS REPORT 4
beginning of August 2013. The retailers have since upgraded to a net architect in place that
provides for them an e-commerce platform. Evidence is also seen on the rate at which site
application selected which integrates the seamlessly into smart space platform. The platform has
gained over 42 million platforms. The company has to find a way to create smart furniture. Smart
furniture that uses technology in homes and houses as a way of reaching a new target and
reducing the furniture was renting rates while increase furniture sales.
2. The Problem Insight
The research upon writing this report determined that failing to introduce technological
change into the IKEA organization through adopting smart furniture has led to a different set of
challenges to the company and the management (Marazzi, 2015).
There has been a reduction in clients buying furniture from the company. In the past six
months, the company has recorded a drop in profit margins of about 6% in direct customer sales
(Marazzi, 2015). The main reason for these financial drops has been realized as the failure of the
company to adopt smart furniture products (Garnier, M., & Poncin, 2019). The company has
good offers to its customers. The aspect of free delivery that saves on costs and transit time has
since seen the attraction of many customers; however, the company is losing new customer and
client generation that largely depend on technology.
The company's core competency is based on innovation; their current innovation is based
on product design which hasn't happened in terms of adapting smart technology products
(Tronvoll et.al 2019). The company has remained innovative in designing the furniture according
to customers demand and also according to styles that remain attractive to customers. However,

IKEA BUSINESS REPORT 5
the chief company strategists realize that there is a rather blank opportunity that exists since
smart products are not being produced in the way that they should. The company has realized
that it will soon drop its best sales and client to competitors who have integrated making
furniture with technology so that they make smart furniture.
IKEA's democratic design and 9500 style of furniture are unable to satisfy customer
demand due to the kind of generation that is currently taking over. The generation X is largely
unsatisfied with design mainly focuses on applications that make work easier for them. The
smart furniture which uses remote control and app is one of the best options for the young
generation rendering democratic design and 9500 style of furniture quite irrelevant in such
perspective. IKEA is not able to introduce smart furniture due to the rigid culture of the
organization. Organizational culture recommends that the smart innovations have to be launched
through protocol which makes it quite difficult for them to be completed (Garnier & Poncin,
2019). A second reason is the IKEA product for many locations. Australia for example is
served with a lot of products at the same time the way it is a huge region.
3. Generated Solution to the Idea
Future business potential
- The company should begin thinking on making furniture that is technology
enabled from big beds to small furniture office accessories. The mobile app and laptop app is
growing faster than a bean stalk. The app industry is huge and there is no end to its sight. The
mobile developer population is growing by the day. The report is therefore recommending that
the development of smart furniture that uses app and remote control will have a great current and
the future considering the potential revenue that it can accrue. Most studies including one by
Forbes magazine report showed that the use of mobile and laptop apps will be the next key driver

IKEA BUSINESS REPORT 6
of the industrial and economic growth in the next year. It gives a clear suggestion that the app is
positively feasible to the future.
Initial investment requirement
The report recommends the agile approach as the initial investment requirement towards
the development of the smart furniture IKEA app. It will involve taking the quick and structured
format where very little time is taken on the pre test while a lot of investment is put on the
customer piloting. It will involve the company hiring a freelancer to develop a quick app that
will be tested in less than a week before full implementation.
Customer desirability
From the initial test carried out by the report. The app will be customer desirable in the
sense that the next generation is considered to invest heavily in smart tools. Smart tools that
include; phones, appliances and furniture have received a huge backing and, therefore, making
the plan choice customer desirable. Desirability is also proven through attribute. Previous UX
attribute has enabled brands to charge well for their products since they receive a good number
of customers. It is therefore, logical to go ahead and claim that development of the IKEA app for
smart furniture product is customer desirable.
Technical feasibility
IKEA has an IT expert with 69% success rate in their operations. This success rate
establishes how the project is feasible considering that there would be less integration with other
technological firms. Mobile project for this organization will therefore, as recommended by this
report be technically feasible. A further boost for technicality is the existing company IT
infrastructure. The company IT infrastructure is undoubtedly the best considering the 69%
success rate that has been recorded by the IT team so far.

IKEA BUSINESS REPORT 7
Financial feasibility
The app might cost the company approximately $750000 which the company can afford
in relation to the potential profit the organization makes every financial year. According to
information from their site IKEA this financial year alone has generated global revenue which
has exceeded 35 billion Euros. Extracting 750 thousand dollars from 35 million Euros is quite
feasible. The plan is therefore financially feasible.
Sustainability and environment friendly
Mobile applications and smart furniture do not affect the environment in any way and are
a perfect solution to sustainability. Additionally, smart furniture is renewable and therefore will
not create any garbage to the environment. The garbage is collected by the company for renewal
once they ware out from the customers.
Skill set required for development and implementation
The company might only be required as found out by the report a freelance app
developer. A freelance app developer will help provide the advice needed to the existing
technological team. All the necessary skills for maintenance and implementation are in existence.
Fit to the organization like IKEA
The plan is fit for the organization with the following reasons: IKEA is known for having
durable house hold materials, the plan is to use this advantage to market technological furniture
in the same way. The technological products combined with the company known market for
durability will be a perfect solution towards ensuring that the customer are attracted once again.
The IKEA Company can also develop partnership with companies or an IT expert that
can be the head of project of installing technology enabled devices into the furniture so that they
become smart. The partnership might cost a lot of money but it will be worthwhile considering

IKEA BUSINESS REPORT 8
that the company will gain from the recent demand of smart furniture that can be remote
controlled or app controlled.
4. Solution Selection Analysis
4.1. Effectiveness Analysis
4.2. Design benefits
Effectiveness analysis involves finding out from the solution the one whose performance
criteria towards solving the problem will play both primary and secondary functions and enable
the system to resume as normal. To determine a perfect pattern, the following are normally
analyzed; safety, security, reliability, usability, and maintainability. Out of the solutions assessed
the most effective analyzed using this criterion is the adaption of smart furniture through app
installation using the assistance of an IT expert or a partnership program with an app company
(Jin-Yuan, Miao & Xiao-Ming, 2016).
Implementation
In terms of safeties, the strategy is safer compared to the rest. The installation of the app
that can control furniture provides the furniture owner with authority to operate their furniture
both in the office and at home. In terms of reliability and maintainability, the app system can be
reviewed by the company's technical team and by the owner of the furniture, making it quite
maintainable to the company's standards. The development of the app system is also the best
since, unlike the rest of the solutions it can be upgraded. With the use of an app, it is easier to
upgrade particular systems and engines so that failing systems can be made even better (Sung &
Samuel, 2014).
Future analysis

IKEA BUSINESS REPORT 9
It is expected that going into the future, the use of an app is very relevant to the company
since it can be used to develop a bond between the clients and the company. A developed app
can enable communication between the company and the owner of smart furniture. Frequent
communication can help the two create a strong partnership. A controller app can also help in
collecting numerical data the company in knowing what customers and clients need and what
they don't really like about the products.
5. 2. Business Model Description
Customer segment

IKEA BUSINESS REPORT
10
It will be effective to use the advertising and sponsorship app business model out of three
potential ones. The fermium app and the addictive models do not exactly fit into the system as
the advertising and sponsorship do. The business plan is to involve all the customers through
installing the IKEA Company that controls all the smart furniture made by the company.
Important to note is that all the app will be installed in the clients phone making them the key
stakeholders (McNamara & Descubes, 2016).
Key activities
The main plan as illustrated by the report is that the app is supposed to be installed to the
customer's phone and any other device for free. The app is to be done in a way that it can also be
used to control the smart furniture. The app can also be used to advertise the products of IKEA,
which is a way of marketing to new customers. To reduce the effects of advertisement alienating
the user, the app should be developed in a way that it provides a removable option of the adverts
(Ito et al. 2015).
Partners
The app will involve the following plan personnel during the same time: research
analytics and wire framing for the first stage are the partners who will be involved. The second
stage involves designers, stylist, brandishing, and installation partners into the different smart
furniture products. During its development, there is the existence of back and front end
development. After the app is fully developed and well known to the clients and customers, the
last business plan is to provide quality assurance to the clients on how it works exceptionally
well. All these processes are to be tested from the beginning to the end (Miller, 2015). Quality
assurance will be given by the government of the different nations. The government is, therefore,
one of the key partners in the new business plan involving app installation.

IKEA BUSINESS REPORT
11
Cost and revenue structure
In terms of the cost and revenue structure the report endorsed the freemium model of
revenue. Freemium is a revenue model where the IKEA app is offered to the clients and
customers with no pay. However, they are limited to what they can access. When they need
further access to the tool they have to pay for they access. This form of revenue is collected from
the app each and every time the client updates the features of the app. The startup financial cost
of the company, however, costs the company revenue of about 750 thousand dollars as
mentioned in the earlier stages of the report (Tronvoll, Edvardsson, Möllerskov-Jonzon &
Innlande, 2019).
6. Value proposition development and delivery
6.1. Value of the app of smart furniture to the IKEA organization

IKEA BUSINESS REPORT
12
6.2. The rise in brand value
An app would be the best way to impress any customers (Larsson & Gadde, 2016).
Through the use of leveraging internet technology while making smart furniture and delivering
to different customers, the brand value will increase. The app can also be used for marketing
through advertising. When advertising is done through the mobile app, it will be a pivotal growth
to the furniture business. Making the app idea of smart furniture is quite valuable to the IKEA
Company.
5. 2. Easy and quick update
Using the app is easy to follow the latest market designs of smart furniture that have since
developed. Some of these designs might have been proposed by the customers. The app might
also enable the company to update their office and home clients on the latest smart furniture
designs that are available for the market. The app, therefore, creates a perfect media for regular
communication.
6.3. The app can also offer e-commerce and facility integration
The app adds value to sale through ensuring that the sale is increased. The app can be
used as a site of not only controlling smart furniture but also ordering for new ones. A feature in
the app can be enabled so that the customers can quote what they want in the manner that they
wish to before it is delivered by the company to them. The app solution indirectly contributes to
an increase in the sale of the goods and the extent to which it delivers is undoubtedly perfect
(Noe, Hollenbeck, Gerhart & Wright, 2017).
Value to the customers of the IKEA organization

IKEA BUSINESS REPORT
13
The app creates a platform where the customers can communicate directly to the
managers of the different teams in the country. There is no better way to build customer
relationship than one-to-one interaction. The one to one interaction method is created by the app
that also directs smart furniture.
Use of an app to direct smart furniture also provides the clients with the opportunity to
control their furniture from wherever they are. Control in this context means monitoring,
evaluating and recording any miss faults that might be happening within the smart furniture
developed by the IKEA Company.
Financial value analysis
The benefit of the smart furniture business has financially shown. This is seen through
the application of smart rental furniture business and negative rental growth of non smart
furniture. The 2.5% increase and 8.0% drop is evidence enough that the permanent development
of smart furniture will lead to perfect furniture development. The introduction of the IKEA
online mobile app will potentially generate 50 000 thousand dollars (Tronvoll, Edvardsson,
Möllerskov-Jonzon, & i Innlandet, 2019).
The cost of the new idea is approximately $750 000. $120000 of the finance is used as
operational dollars that cater for legal, accounting and comparable fees. In the opening first 12
months $35000 will be used every month to build the standard team size of the app. Standard
team time means a standard time where the app is improved each time to cater for increased
customer and client access (Tronvoll, Edvardsson, Möllerskov-Jonzon & Innlandet, 2019).
If the app is to be improved to other places of IKEA that have potential of accessing
clients but with reduced possibilities of accessing, it would out rightly mean that an expansion

IKEA BUSINESS REPORT
14
has to be done. The expansion is not within the objective of the report but might be needed in
due time, if there will be need to expand.
The company currently spends costs for manufacturing, logistics and delivering. All these
costs put together costs the company about 450 thousand dollars. However, with the new
business plan the company might reduce the cost to half. The company revenue might be reduced
to half considering that most of the logistics and delivery cost shall have been made smart and
therefore reduced.
7. Strategic Fit
This solution fits to IKEA strategy to a large extent. In terms of quantification almost
100% fit. Every individual including those both at home and in the offices are able to get smart
furniture like they have ever wanted. The price is also affordable to all these individuals since the
app is awarded to all the clients and customers freely at the time they acquire any furniture from
IKEA (Larsson, 2016). Smart furniture is then provided for all with all the designs they would
wish for.
The app can be used to address climate change and environmental issues. Inside the app
and the smart furniture there is a segment developed to pop-up advertisements and notices that
educate the clients about keeping the environment clean and making the earth a better place to
stay. The process of climate change shall have been catered for once the environmental
information educates the client and the customers about climate. This is enough proof that the
app and the smart furniture is strategic fit.
Recommendation for deliverability
The first recommendation is to hire a free lancer app developer to help in the piloting of
connecting a mobile app to the smart furniture that can be used in smart homes and smart offices.

IKEA BUSINESS REPORT
15
The second recommendation is to engage partnership with appstore and play store which
will play host to the IKEA smart furniture app. The same app can also be used for advertisement
for other products making it open for further business ideas.
Implementation
It is recommended that the development of the app is done in faces. The faces should be
in order of the urgency. Probably develop the implementation plan of smart offices before smart
homes. This should be developed prior to management.
Management
App management can be done by the very able IT of the organization. With their 69%
success rate there in nothing more that can deter them from providing proper management of the
app system.
Schedule
The IKEA app for smart furniture should commence as soon as will be passed by the
board of director and first piloting process should be done within the first six months.

IKEA BUSINESS REPORT
16
References
Garnier, M., & Poncin, I. (2019). Do enriched digital catalogues offer compelling experiences,
beyond websites? A comparative analysis through the IKEA case. Journal of Retailing
and Consumer Services, 47, 361-369.
Giunta, V. (2016). IKEA in China: A “Glocal” Marketing Strategy. In Market Entry in
China (pp. 73-93). Springer, Cham.
Ito, H., Alelweet, N., Harrison, R., Mitchell, A., & Parker, E. (2015). Should IKEA Expand into
Brazil: A Study of Brazilian Consumer Behaviours. International Journal of Economics
and Financial Issues, 5(1), 69-74.
Jin-Yuan, Y. U. A. N., Miao, W. A. N. G., & Xiao-Ming, Y. U. A. N. (2016). Analysis for Cost
Leadership Strategy and Core Competitiveness Points of IKEA CO. DEStech
Transactions on Economics, Business and Management, (iceme-ebm).
Larsson, J., & Gadde, J. (2016). Modularity and its Effects on Operations and Logistics-A Case
Study at IKEA Industry.
Larsson, R. G. (2016). Ikea's Almost Fabless Global Supply Chain—A Rightsourcing Strategy
for Profit, Planet, and People. In Lean Management Of Global Supply Chain (pp. 65-82).
Marazzi, C. (2015). Money and financial capital. Theory, Culture & Society, 32(7-8), 39-50.
Matanga, J. M. M. (2018). The Main Key Success Factors of the Multinational Corporations’
Successful International Business in Spite of Their Exposure to Many Forms and Sources
of Risk (The Case of Wall-Mart). Open Access Library Journal, 5(05), 1.
McNamara, T., & Descubes, I. (2016). Can IKEA adapt its service experience to
India?. Emerald Emerging Markets Case Studies, 6(1), 1-14.

IKEA BUSINESS REPORT
17
Mendibil, K., Rudberg, M., Baines, T., & Errasti, A. (2016). Operations Strategy and
Deployment. Global Production Networks: Operations Design and Management, 61.
Miller, M. (2015). The internet of things: How smart TVs, smart cars, smart homes, and smart
cities are changing the world. Pearson Education..
Ngai, S. B. C., & Falkheimer, J. (2017). How IKEA turned a crisis into an opportunity. Public
Relations Review, 43(1), 246-248.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education
(pp. 53-57).
Sung, K., & Samuel, A. (2014, June). Mobile application development classes for the mobile era.
In Proceedings of the 2014 conference on Innovation & technology in computer science
education (pp. 141-146). ACM.
Tronvoll, B., Edvardsson, B., Möllerskov-Jonzon, M., & i Innlandet, H. (2019). From Customer
Feedback to Innovation: The IKEA Innovation Journey from Screws to Click. Service
Innovation For Sustainable Business: Stimulating, Realizing And Capturing The Value
From Service Innovation, 75.