Ikea Case Study

Abstract

In the words of Ingvar Kamprad “IKEA offers a wide range of home furnishing items of good design and function at prices so low that the majority of people can afford to buy them.” (Ingvar Kamprad and IKEA, 1996). IKEA caters to the market niche and their stores are structured to introduce ‘IKEA’ in every aspect of people’s lives. IKEA operates under a fairly unique premise: value-conscious buyer will perform some of the tasks that other retailers normally perform for them, such as transporting, installing and assembling. These functions are transferred onto the customer, which drive IKEAs low cost thus giving the customers a lower priced product. IKEA’s global growth came with challenges despite customer similarities, IKEA failed to analyze difference in lifestyle structures. IKEA plans to grow exponentially in the US by 2013, this paper outlines key areas of improvement and provides feasible strategies that the company can apply to enhance their brand in the US.

IKEA’s Strengths and Weaknesses

IKEA, made its way into the US market in the 1980s and they focused on a much younger segment of the market that enjoyed modern styles. The furniture market was highly fragmented and the cost to the customer was too high or too low. IKEA success is obvious from its years of experience in the retail industry, where it practices both product differentiation and cost leadership. IKEA’s low end competitors are strong retailers such as Wal-Mart, Costco, Office Depot, etc who provide low quality products with low rate pricing strategies, and low service quality. Specialty stores such as Ethan Allen and Thomasville dominate the US high end market with good products and great services are also IKEA’s competitors. Both are on two extremes of the market continuum, which gives IKEA room to fill the niche and provide high quality modern products at a lower price. IKEA represented the best of both situations while staying true to their Scandinavian roots. IKEA attracted their younger clientele by focusing on their ability to design, manufacture and sell stylish, good value and low cost furniture. As we know IKEA’s strong hold lies in their more contemporary design lines, marketing catalogues, do it yourself approach, their warehouse set up, in house cafes, child care and other in house amenities. These all add to their competitive position as these amenities best serve the needs of their targeted customers.

IKEA’s success in the US was not easy as initially there was too much of a Scandinavian influence in their products. "It's so easy to forget the reality of how people live," says Ikeas U.S. interior design director, Mats Nilsson (Business Week, 2005).Socioculturally it was hard for IKEA to integrate itself in the American market. IKEA had a European standardized product strategy that had to be adapted