Ikea Case

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IKEA’s Global Strategy: Furnishing the World
Individual Case Study I

Executive Summary

IKEA is a privately held, international home products company that designs and sells ready-to-assemble furniture such as beds and desks, appliances and home accessories, and is the world's largest furniture retailer. The IKEA website contains about 12,000 products and is the closest representation of the entire IKEA range. IKEA’s sales totaled about 12.2 billion USD in 2003, with a net profit margin around 6-7 percent. Of this, Europe accounted for 80% of revenue, with Asia accounting for 3% and North America 15%. INGKA Holding is owned by the nonprofit INGKA Foundation, thus none of this profit is taxed. By conducting TOWS and situation analysis, many internal and external issues have been identified, most importantly the high cost of living and appreciation of Euro, consumers perception, supply and distribution system, import regulations in foreign countries and increasing competition. Other problems include the company’s mediocre marketing techniques, reliance on saturated regions for revenue, brand image and product design influences.

After studying the problems and aligning them with the strengths and opportunities, this report has suggested few strategic alternatives to help IKEA become a truly globalized brand. The alternatives are Improvement in supply chain, market expansion, market penetration, market development and incorporation of global values to strengthen its position and help the company become a dominating global force.

Table of Content

Environment:5
Economic Conditions and Trends5
Cultural and Social Values and Trends6
1. Social value:6
2. Emotional value:6
3. Circumstantial value:6
4. Novelty value:7
Political and Legal Issues7
Industry7
Analysis of Existing Competitors8
Direct competitors:8
Indirect Competitors:9
Analysis of Potential New Entrants and Substitutes11
Analysis of Suppliers:11
Analysis of Buyers:12
Organization13
IKEA Stores:14
Objectives and Constraints:14
Financial Condition:14
Management Philosophy and Corporate Culture:15
Organizational Structure:16
Marketing Strategy:17
Objectives and Constraints:17
Analysis of Sales, Profit and Market Share:17
Analysis of Target Market17
Analysis of Marketing Mix Variables18
1. Price: 18 2. Product:18 3. Position/Place:19
4. Promotion:19
TOWS Analysis19
Threats19
Opportunities20
Weaknesses21
Strengths23
Problems Identified in Situation Analysis and TOWS Analysis23 Strategic Alternatives and Suggestions24
Improvement in Supply-Chain Systems:24
Market Expansion:25
Market Penetration:25
Market Development:26
Incorporation of Global Values:27
Conclusion28
Sources:29

Environment:
Economic Conditions and Trends
The globalization is changing the structure of labor intensive industries such as the furniture industry. Increased imports at lower prices force the manufacturers to look for competitive edges and if necessary to restructure their operations. Some looked at their business model, other at the product, the production, productivity or the relation with the final consumer or a combination of some or all of these different aspects Between 2003 and 2004 the worldwide furniture production has grown from 221,496 million Euros to 271,860 million Euros which means a growth of 22.7% in that period. This variation is more marked if the values are expressed inn US dollars (+35.2%).The developed countries have contributed to this growth, increasing the furniture production by 14.4% (+26% in US$). On the other hand, in the emerging countries the furniture production’s growth achieved 57.4% in the same period between 2003 and 2004 (+73.4% in...
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