Ikea Case Essay

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MKTG 605 winter 2015
Dr. Seitz,
Xiang guo
003871828
Ikea Case Analysis
Identification of the Problem IKEA, a Swedish furniture manufacturer and retailer, is well known all over the world for its knockdown furniture. It attracts numerous customers who are looking for modern designs at good value. Once IKEA was able to standardize the key competitive advantages of their offerings it achieved a high-level of success in the global market. However, the globalization of IKEA was not all smooth sailing. It encountered barriers in many countries, for example, Germany, Canada, and the United States which was a particularly difficult one. In a words, the problem of Ikea is should the company continue to modify their traditional business model to expand in the United States or explore other markets? SWOT Matrix
Strengths
Leadership position in the global marketplace.
Brand recognition.
A global sourcing supply chain network with more than 2,300 suppliers in 67 countries.
Competitive pricing up to 30% less than direct competitors through economies of scale.
Unique in-store experience inside showrooms.
Weaknesses
The lot land size required for a store limits store locations.
Heavily rely on European customers, 90% stores are based in Europe.
Need to build a unique supply chain whenever IKEA entering a new market.
The design style of the furniture does not match all of customers’ need due to its great cultural diversity of the U.S.
IKEA retail facilities are located in suburban due to its requirements of large showroom and warehouse.

Opportunities
E-commerce capability to serve customers outside the reach of a store.
Low labor costs by manufacturing in third-world countries such as China and India.
More and more people want to design their homes by themselves and they enjoy the assembling.
Growing demand for affordable products.
Rising demand of green products and environment protection.
Threats
More competitors are entering the low price furnishing markets
Growth of average consumer income and growth need for high-end furniture.
High investment cost to enter a new market.
Rising commodity and shipping prices

Strategic Issues
1. Product re-development in attempt to address the needs and wants of American consumers.
2. The IKEA stores located far away from the center of the city. Many customers didn’t know about the store locations. Customers prefer to go to the near furniture store rather than IKEA.
3. High cultural diversified market in the U.S. decreases word-of-mouth effectiveness.

Strategic Alternatives
A. Continue expanding in the United States by using the traditional business model
IKEA has a strong economy of scale and is able to pass down the costs savings to their customers. Keeping their traditional business model allows IKEA to keep their homogenous furniture design across the different markets.
Advantage
Focus exclusively on market analysis.
Price leadership is kept with their high economy of scale power.
Enhance brand recognition. Disadvantage,
Locations limitation due to the size of stores and the land for parking.
The flat management style is not always effective or suitable in United States culture.

B. Continue adapting business model to fit U.S. customer’s demand.
IKEA has been making modifications in their business model to fit U.S. customer demand. Consequently, the retailer has been accepted by American customers and is experiencing high sales volume in its strategically placed locations. In order to keep customers satisfied, IKEA should continue to improve and modify in order to meet the needs of customers in the United States.
Advantage
Increase market share.
Improve customer satisfaction.
Gain competitive edge in the United States.
New model adaptation will make infrastructure location easier to find.
Introduce new customized shopping experience for its shoppers. Disadvantage
High investment in manufacturing.
Lose economy of scale.
Will lose homogeneity across its worldwide retail stores.
High
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