Masud Moxammad Daud
BUS210: Principle of Management
Professor: Hyun Lee
November 30, 2017
Table of Contents:
Background & Introduction
Michael Porter’s Five Forces
Summary & Conclusion
IKEA, home furnishings retailer that was the world’s largest seller of furniture in the early 21st century, operating more than 300 stores around the world. IKEA specializes in low-priced goods, sold whenever possible in compact “flat-pack” form for in-home assembly by the customer. IKEA was founded (1943) in Sweden and still flaunts its origins—store exteriors are decorated in the colors of the Swedish flag (blue and yellow), in-store restaurants serve Swedish food, and the company’s products carry Swedish names—but its headquarters are now in the Netherlands. In this paper I am going to talk about IKEA’s background, Marketing strategy, achievements, SWOT analysis and Michael Porter’s Five Forces.
Keywords: IKEA, Marketing Strategy, SWOT Analysis and Michael Porter’s Five Forces
Background & Introduction
IKEA might have been established to 1943 by a Swedish national Ingvar Kamprad when he off A nearby inventory organization. Then afterward offering fundamental family unit appliances for four years, Kamprad at last started offering home decorations. On 1953, he off for as much Initially furniture showroom. At he began offering as much sensibly priced furniture, as much adversaries attempted should run him down by banning the nearby suppliers from giving work to crude material also furniture with IKEA. Additionally, Ikea might have been not allowed on showcase its furniture for industry exhibitions. Thereabouts Kamprad went dependent upon with a inventive benefits of the business model. Ikea learnt how should outline its identity or furniture, bought crude material starting with clean suppliers, also made its identity or exhibitions. Done 1965, Ikea off them to start with lead store done Stockholm. With more than 300 saves worldwide, IKEA will be those world’s biggest furniture retail network today.
IKEA got to be a universal retailer at the initial store clinched alongside Norway opened on 1963. The organization stretched past the Nordic nations on 1973, the point when t store might have been secured to Switzerland. Thereafter, saves opened clinched alongside Numerous countries, including Germany (1974), Australia (1975), France (1981), the united states (1985), the United Kingdom (1987), china (1998), Also Russia (2000). The average IKEA store may be greatly large, by and large coating a territory from claiming 186,000 square feet (17,280 square meters). IKEA may be not claimed by shareholders. Instead, it may be controlled through a number for working companies, considering companies, also not-for-profit establishments.
Michael Porter’s Five Forces
Porter’s Five Forces is a business analysis model that helps to explain why different industries are able to sustain different levels of profitability. The model was originally published in Michael Porter’s book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980. The model is widely used to analyze the industry structure of a company as well as its corporate strategy. Porter identified five undeniable forces that play a part in shaping every market and industry in the world. The forces are frequently used to measure competition intensity, attractiveness and profitability of an industry or market. These forces are:
1. Competition in the industry;
2. Potential of new entrants into the industry;
3. Power of suppliers;
4. Power of customers;
5. Threat of substitute products.
IKEA – Porter’s Five Forces analysis can be facilitated in the following manner:
Rivalry among existing firms is intense in the global market of discount furniture and the major players in the industry include Euromarkets Designs Inc, Galiform plc, Wal-Mart Stores Inc, Argos and others. However, currently IKEA is the undisputed market leader in the industry of discounted furniture in the global scale.
The threat of new entrants into the industry is low, and the chances of emergence of new competition for IKEA is insubstantial as the current market is saturated and significant amount of financial investments and expertise are required to become a discounted furniture retailer in a global scale.
The bargaining power of IKEA customers is strong, as the competition is intense and the customers have a wide choice of alternative options offered by global furniture retailers, as well as, local furniture producers.
However, the threat of substitute products and services is low as there are no too many products and services available that can substitute the demand for furniture, home appliances and a range of other products offered by IKEA.
IKEA suppliers do not possess substantial bargaining power as there are numerous factories around the globe with the capabilities and resources to form partnership with IKEA. At the same time, IKEA pursues the strategy of forming strategic long-term relationships with its suppliers.
IKEA Corporate Social Responsibility
IKEA Corporate Social Responsibility (CSR) efforts are led by Chief Sustainability Officer, Steve Howard. The home improvement and furnishing chain started to research CSR reports under the title People & Planet Positive starting from 2012. IKEA CSR efforts and activities comprise supporting local communities, educating and empowering workers and addressing the issues of gender equality and Minorities within the company. Moreover, the global furniture retailer works to reduce it energy consumption and derive energy from alternative sources. Sustainable sourcing represents an additional CSR issue that IKEA aims to address within the scope of its operations.
IKEA supports in local communities like it operates 340 stores in 28 markets around the world and the packing event organized by it in stores in Sweden involved customers and representatives from Save the Children to prepare more than 37,000 welcome backpacks filled with toys and other products for children
It helps in educating and empowering workers – it has introduced a new hourly wage structure that concentrates on the needs of its employees, rather than market standards.
Gender Equality and Minorities -The majority of IKEA employees are women. Moreover, 48 per cent of IKEA managers and 33 per cent of Group Management team are women. Women also represent 54 per cent of all IKEA employees.2
It enforces Supplier Code of Conduct that prohibits the use of child labour, the use of forced or bonded labour and discrimination at work. The Code of Conduct also requires the freedom of association for employees and the provision of a safe and healthy environment.
Its catalogue is the largest print production ever to be printed on 100 per cent Forest Stewardship Council certified paper.
The IKEA aggregation meets expectations to four fundamental areas: extend methodology & result development, production, supply furthermore retail. Low costs are a standout amongst the cornerstones of the IKEA idea and help with make clients need to purchase starting with IKEA. This low system is coupled with an extensive variety of great designed, practical results. IKEA’s results cook starting with each lifestyle Also existence phase for its customers, who hail starting with every last bit period Assemblies Furthermore sorts for families. This need ended up those indispensable characteristics the point when those retail division may be depressed, concerning illustration it increments IKEA’s possibility showcase.
To describe IKEA’s marketing strategy, it may be essential on begin for its benefits of the business idea Concerning illustration figured Previously, IKEA’s mission (IKEA 12 Jan 2009). IKEA offers an extensive variety of great designed, practical home furnishing results toward costs in this way low that as numerous individuals as workable might manage. The magic expressions in the benefits of the business mission, deliver a few advertising parts and the showcasing method camwood a chance to be seen should radiate starting with it. Particular case vital topic will be those affirmed institutionalized approach of IKEA: IKEA’s controlling guideline may be with partake energizes those same possibility to get to each nation inside which it works.
SWOT analysis is an acronym for strengths, weaknesses, opportunities, and threats and is a structured planning method that evaluates those four elements of an organization, project or business venture. SWOT Analysis is a useful technique for understanding our Strengths and Weaknesses, and for identifying both the Opportunities open to us and the Threats we face.
For IKEA also we do the SWOT Analysis and we found: –
Wide range of product and styles
Cheap and affordable
One stop shop
Easy Shipping and Handling
Eco Friendly and recycling of products
Functional design of products
Appealing shopping experience
Untapped markets like middle east and Asian countries
Demand for greener and environment friendly products
Assembly of furniture
Yet to invade upcoming global markets
Products don’t last long
Product dimensions unsuitable for global markets
Advertisements in the form of catalogues mostly
Organized sectors like Masko and Mobesko Furniture
Unorganized sectors like local manufacturers and carpentry stores
Competitors opting for similar designs with a contemporary twist to cater to upper class
IKEA takes its responsibilities genuinely. Furthermore, organizes its operations so as on have a certain impact upon nature’s domain.
• It plans that every last one of results What’s more materials it takes starting with those essential segments don’t damage nature.
• Its products are manufactured in a responsible way.
When consumers go to a retailer like IKEA, they will a chance to be taking a gander at the distinctive ranges from claiming items what’s more entryway they need aid introduced. However, in making low costs IKEA will be not eager to present its standards. ‘Low price but not at any price’ is what IKEA says. This implies it needs its benefits of the business on make manageable. IKEA supplies products What’s more benefits will people as it were that need a generally gainful impact once people and the nature’s domain. Clients throughout the world need responded positively to IKEA’s approach.
With hundreds of stores across the world IKEA is a well-known global brand. It must charge its external and competitive environment in order to improve performance. By this it can reveal the key opportunities and the threats it can deal with. IKEA’s passion combines design, economical use of resources, low prices and responsibility for people and the environment. IKEA tries to go ahead of profitability and reputation. It develops a sustainable business. This will make an enhanced daily life for its customers. IKEA has exposed a business truth- being sustainable and accountable is not just good for customers and the planet; it is also excellent for business. A steady development of the IKEA retail business appears to be the focus for the company in the near future, with strategies unlikely to include aggressive expansion into new areas, but rather building and developing in old. However, development of e-commerce some changes may be seen. As IKEA is already assured that its products are of good quality and craftsmanship, the consumers may prefer to but its products through Internet. IKEA has also adopted an insistent expansion-based strategy more than the last few years, although the flaw of the external consumer market means that sales growth in excess of the next few years should remain relatively reserved.
1 B. (n.d.). Ikea Report Assignment – INTRODUCTION IKEA was founded in… Retrieved November 30, 2017, from https://www.coursehero.com/file/8632369/Ikea-Report-Assignment/
2 Lewis, R. (2016, December 02). IKEA. Retrieved November 30, 2017, from https://www.britannica.com/topic/IKEA
3 Vikas Sonwane, Product Manager at HDFC Bank in the Emerging Corporates Group Follow. (2014, August 09). IKEA Marketing Strategy Presentaion. Retrieved November 30, 2017, from https://www.slideshare.net/vikassonwane/ikea-marketing-strategy-presentaion