IKEA Case analysis
IKEA Case Analysis
MGT 589 Strategic Management
4/17/2014
MGT 589 Strategic Management
Swapna Rajagopal
Executive Summary
IKEA is the world’s largest furniture retailer, offering affordable furniture catering to primarily young customers. After expanding by almost exponentially in the local Swedish market in the 1960’s, IKEA decided to pursue a strategy of internationalization to grow. Their goal was to achieve a turnover of SKr 19 billion by 1990 and possibly SKr 57 billion by 2000. The issues facing the company were:
Rapid expansion – Could they possibly be overextending themselves?
Retaining their core culture – Would it be possible to maintain this while still expanding and operating in cultures around the world.
IKEA has a unique business model in an industry targeting a key demographic. In order to achieve their goals, they would need to focus on larger markets, such as the developing nations, especially in Asia, the BRIC nations and nations of the Eastern Bloc, where the young population is growing, and have larger discretionary income than the generation before them. The company currently uses catalogs as a means to draw customers to the stores. This is a perfect precursor to online sales. They could grow their online presence and attract more sales to achieve their target numbers.
Industry Analysis
Since Porter’s Five Forces is really the de facto standard for performing industry anlaysis for almost any industry, I will be using that as my framework for performing industry analysis for the furniture retailing industry that IKEA falls under. (Exhibit 1)
Threat of New Entrants – Medium to high: Impact to profitability - Low
IKEA caters to a market that can be loosely termed as a niche market. Furniture retailers are traditionally large showrooms, displaying their goods and carrying little to no inventory. The furniture at IKEA is relatively low priced, but reasonably high quality for the price. With its model of
MGT 589 Strategic Management
4/17/2014
MGT 589 Strategic Management
Swapna Rajagopal
Executive Summary
IKEA is the world’s largest furniture retailer, offering affordable furniture catering to primarily young customers. After expanding by almost exponentially in the local Swedish market in the 1960’s, IKEA decided to pursue a strategy of internationalization to grow. Their goal was to achieve a turnover of SKr 19 billion by 1990 and possibly SKr 57 billion by 2000. The issues facing the company were:
Rapid expansion – Could they possibly be overextending themselves?
Retaining their core culture – Would it be possible to maintain this while still expanding and operating in cultures around the world.
IKEA has a unique business model in an industry targeting a key demographic. In order to achieve their goals, they would need to focus on larger markets, such as the developing nations, especially in Asia, the BRIC nations and nations of the Eastern Bloc, where the young population is growing, and have larger discretionary income than the generation before them. The company currently uses catalogs as a means to draw customers to the stores. This is a perfect precursor to online sales. They could grow their online presence and attract more sales to achieve their target numbers.
Industry Analysis
Since Porter’s Five Forces is really the de facto standard for performing industry anlaysis for almost any industry, I will be using that as my framework for performing industry analysis for the furniture retailing industry that IKEA falls under. (Exhibit 1)
Threat of New Entrants – Medium to high: Impact to profitability - Low
IKEA caters to a market that can be loosely termed as a niche market. Furniture retailers are traditionally large showrooms, displaying their goods and carrying little to no inventory. The furniture at IKEA is relatively low priced, but reasonably high quality for the price. With its model of
References: 1Ingvar Kamprad and IKEA (1996) from: https://cb.hbsp.harvard.edu/cbmp/content/26154200 (the case) 2http://www.youtube.com/watch?v=11AehTPD-Vg 3http://www.ikea.com/ms/en_US/pdf/yearly_summary/ikea-group-yearly-summary-fy13.pdf