Marketing Case Study of the IKEA Company
September 12, 2011
Embry-Riddle Aeronautical University- Worldwide
IKEA (2011) has found a wide market in the discount furniture industry. The mission is simple- provide furniture to help everyone decorate as they like (IKEA, 2011). The company always strives to lower costs and pass savings to consumers (IKEA, 2011). It provides exceptional products which enabled the company to increase sales through the recession (Manners, 2009). However, IKEA’s advertising is limited to regional store locations and personal recommendations (Peter & Donnelly, 2009). This level of advertising leaves consumers oblivious to IKEA’s brand. This analysis recommends that IKEA increase its advertising efforts to expand its target market.
The current economy is slowly recovering from a recession caused by widespread unemployment (Kavilanz, 2011). The latest statistics show that retail sales barely increased for school shopping this past July (Kavilanz, 2011). This shows that while consumers are not on shopping sprees, they are willing to purchase items they feel are needed (Kavilanz, 2011).
IKEA has established an advantage for slow economies; the company has only built stores outside of large, metropolitan cities (Peter & Donnelly, 2009). Because cities typically grow due to job availability and an influx of job-seekers, IKEA has positioned their stores among the majority of employed consumers. These locations are the primary foundation to IKEA’s past success (Peter & Donnelly, 2009), and should provide strength to outlast the current recession. Industry
IKEA is in the industry of consumer goods. Specifically, IKEA is a retailer of furniture (Peter & Donnelly, 2009). On a broad scale, IKEA’s competitors are all furniture retailers, but their direct competition comes from other discount furniture retailers. Ashley furniture is a discount manufacturer and retailer with prices comparable to IKEA (Abbas, n.d.; IKEA, 2011). Ashley showcases its furniture in large warehouse stores across the country, and supplies additional furniture stores with Ashley brand furniture (Abbas, n.d.). Additionally, consumers can order products from Ashley catalogs, found at the furniture stores (Abbas, n.d.). JC Penney, Walmart and Big Lots are more retailers which offer a variety of discount furniture brands in their stores and their respective websites (JC Penney, 2011; Walmart, 2011; Big Lots, 2011). These retailers also provide many other products for household use (JC Penney, 2011; Walmart, 2011; Big Lots, 2011). Finally, Overstock.com (2011) is an additional discount furniture competitor. This company offers furniture and other products exclusively online (Overstock.com, 2011). Solely operating online allows the company to offer discounted furnishings, but denies consumers the possibility of examining the furniture before purchase. This could be a major deterrent for such a large purchase. Substitutes.
Because of the nature of furniture needs there are not many substitutes. When one considers purchasing furniture the only other options are to not purchase new furniture or not purchase furniture at all. Thrift stores and online retailers such as Craig’s List and Ebay offer new and used furniture at steep discounts (Craig’s List, 2011; Ebay, 2011). These prices typically undercut those offered by IKEA (2011), but selection is limited due to varying suppliers (Craig’s List, 2011; Ebay, 2011). Also, there is not always a company to process returns, warranty issues, or other customer complaints (Craig’s List, 2011; Ebay, 2011).
There are options for those who cannot purchase furniture as well. Rather than forego furniture, consumers may find used pieces from acquaintances (hand-me-down furniture) or join groups such as Freecycle (2011). These options offer free furniture but selection is severely limited. Buyers.