IKEA is one of the world's top furniture retailers, and its International sells home furnishings and other housewares in about 270 stores in 35 countries. To cut transportation costs, IKEA uses flat packaging for most of its furniture; customers assemble the products at home. The company designs its own furniture, which is made by about 1,300 suppliers in more than 50 countries. IKEA's stores feature playrooms for children and value cuisine restaurants. It also sells by mail order and online. IKEA began operating in Sweden in 1943. It is owned by Kamprad's Netherlands-based charitable foundation, Stichting Ingka.
IKEA’s current strategy
(IKEA designs its own low-cost, modular, ready-to-assemble furniture to fit its positioning which is ?. The trade-off between low price and self-assembly is indeed a most effective strategy. However, this strategy might not be able to target other potential markets such as the group of retired people, for example.
There are six points that I think the most important to understand from a strategic perspective.
• Firstly, since manufacturing costs in foreign countries such as China and Thailand are much lower, seeking out global production sources would increase its profits.
• Secondly, selling the ready-to-assemble furniture significantly allows IKEA to charge a low price on its furniture.
• Thirdly, there are many competitors entering the market and they copy IKEA’s marketing strategies, This might be lowering the price of IKEA’s furniture in the longer term. Thus, IKEA should be proactive and innovative all the time when designing products.
• Fourth, it is optimistic to anticipate that the economic growth will persist within the next few years. It implies that the demand for housing units will increase. When selecting furniture, low price is the key variable that many people consider.
• Fifth, changes in policies that restrict the logging businesses might increase the cost of the raw materials to IKEA. Thus, IKEA might reconsider their strategy by also offering finished furniture in the store.
• Finally, labour wages increase due to economic growth in Canada. As a result, IKEA might look for new technology and alternative ways to produce its furniture.
B) IKEA products offer the following benefits
1) Low price
2) Convenience (consumers can buy all they want in IKEA)
3) Flattened packages (easy to carry)
4) Modern and fashionable designs
5) Products have multi-functions
6) A variety of product choices
Based on the above benefits, I developed comprehensive profiles of three viable market segments:
(1) Young families with children
(2) Students and fresh graduates and
I would choose the segment of young families with children over others because this group has the high purchasing power and they are willing to buy IKEA’s products. Compared to other groups, this group spends the most money while shopping time at IKEA. They are open-minded and like to try new products. As well, assembling the parts together is actually a good activity that bonds the family members together. Compared to the group of young families with children, students have less purchasing power because many of them have only part-time jobs. Their budgets constraints only allow them to buy limited products that they need the most. The students have less intensive buying behaviours than the young family with children. For the group of immigrants, although there is an increasing number of an immigrant in Canada, many of them would carefully allocate their budgets on the different expenditure. For example, I have one Chinese friend who wanted to save more money in order to invest in his children’s education. Thus, the segment of immigrants would spend their money more carefully. From all of the above reasons, I think IKEA should target the young...