Ikea Report

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Key Company Facts
Inter IKEA Systems BV|
Headquarters| Netherlands|
Regional Involvement| Asia Pacific, Australasia, Eastern Europe, Middle East and Africa, North America, Western Europe| Sector Involvement| Home and garden specialist retailers, home shopping, internet retailing| World retailing share (2007-2008)| 0.3% (2008)0.3% (2007)| Value sales growth (2007-2008)| 16.9% (2008)20.7% (2007)|

Increasing global share
Ikea generated revenue of EUR22.5 billion (US$35 billion) in the year ended August 2008. This makes it by far the largest player in the furniture and furnishings stores channel, with second-placed, Bed Bath & Beyond Inc registering revenue of just over US$7 billion in the year ended February 2009. Ikea’s broad geographic reach, rapid store network expansion and market positioning meant that its sales grew significantly faster than most of its main rivals. Bed Bath & Beyond’s reliance on the US led to revenue growth of only 2% in the year to February 2009. For tax avoidance reasons, privately-owned Ikea is controlled by INGKA Holding, itself owned by the non-profit INGKA Foundation, and a franchising relationship exists between INGKA Holding and Inter IKEA Systems BV. In the financial year to August 2004, the last year when it released results, INGKA Holding recorded profits of EUR1.4 billion, corresponding to a robust 11% margin.

Defying economic crisis
Despite the fact that the global downturn in discretionary consumer spending and declining house prices in several markets have had a marked negative impact on the performance of many home and garden specialist retailers, Ikea saw revenue grow by 9% in the year ended August 2008. The compatibility of Ikea’s value-orientated business model with prevailing market conditions enabled the company to increase its share of world furniture and furnishings stores value sales by 0.5 and 0.4 percentage points in 2007 and 2008 respectively.

* Strong brand image
Ikea has developed a strong brand image combining a distinctive style and affordability. Hence, it has a broad and loyal consumer base. * Broad geographic reach
Developed a wide-ranging geographic reach which enabling significant growth potential of emerging markets. Weaknesses
* Queuing systems
Customers often spend hours to pay at the checkouts. It is caused of insufficient stores available. * Cost
Delivery cost and time waiting to receive the items that have been purchased. Opportunities
* Dynamism in emerging markets
Planning to expand the markets to different countries by opening more stores and focusing on cheaper and beneficial prices. * E retailing
It could introduce internet buying which would offer service for those customers who prefer to shop online. Threats
* Difficult economic conditions
The business is still being threatened by low spending power, waning consumer confidence and poorly performing housing markets. * Increasing competition from non-specialists
The efforts of major grocery retailers to expand their furniture and furnishings offer are further enhanced by the development of internet retailing and also lower prices offered by the competitors.

Kotler P, Wong V, Saunders J and Armstrong G (2005) Principles of Marketing 4th edition, Harlow; Pearson Education Limited.

IKEA 2005 – home page (internet)

Key Strategic Objectives and Challenges
Competitive Pricing Low prices are central to Ikea’s strategy, enabling it to reach a very broad consumer base and to remain robust in the face of extremely challenging economic conditions, even attracting new consumers who may previously have been put off by its mass-market image. However, rising raw material and transport costs forced the company to raise prices in 2009, stating that this was the first price hike in five years. Moreover, the...
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