Ingvar Kamprad and IKEA
1. What do you think was the main reasons for IKEA’s success in Sweden and other Scandinav countries in the period up to 1973? To begin with we have to resituate the context; we are now in the post war boom era when a lot of industries on both sides, even in Germany, developed substantially and very rapidly. We are now in a wealthier and reborn Europe. As a result new needs started to appear; back in those days, it was for example customary to hand down custom-made furniture from generation to generation. For young people trying to furnish their apartments for the first time it was, for obvious reasons, an inconvenient situation. What is more, receiving custom-made furniture was not necessarily always in accordance with the young generation’s tastes in design. It might sound contradictory, but the classic furniture retailers helped IKEA by perfectly fitting IKEA’s business model. Indeed the competition kept the prices high and tended to close the market for new entrants. On top of that the segment targeted by those competitors was the generally wealthy section of the population with good assets and certainly not young workers who need to furnish their first apartment. What is more, differentiating itself from competition was something that seemed rather difficult, this field receiving only moderate changes overall. Ingvar Kamprad arrived with a completely different vision; his goal was to target precisely the people that were left over by the competition’s targeting by providing inexpensive, modern and simple designed furniture. And rather than going with regular promotion, they decided to advertise their products with catalogs to both give people a sample of what could be provided and allow them to get their products delivered by mailing an order. IKEA was the absolute leader of mail-order business in the 50’s. However, the competition did give IKEA a hard time, but IKEA’s persistency towards its competition and towards problems in general was a great defense. Turning problems into solutions has allowed IKEA to enter a market that was tricky to enter, it overcame law suits, price war and the lack of independent manufacturers and turned it all into great advantages.
2. What do you think are the main reason for IKEA’s remarkable success in other European countries (Switzerland, Germany, etc.) in the period from 1973 – 1988? Please analyze this period using strategic tools (more than two), such as PEST, Value chain, SWOT analysis, Blue ocean, PPM, Porter’s competitive theories, Kotlers’ marketing theory, STP, 4P, etc, covered in class. PEST analysis:
Politics * Different legislations due to the variety of market targeted * The after world war 2 that led to the confrontation between the two blocs
| Economics * 1973 oil crisis * Slowly growing and changing market * Weak currency in East Europe that had to be countered with material importation
| Technology * New, cheaper and with an acceptable quality were found more suitable for IKEA’s activities
| Society * German speaking countries represent the biggest market * A need for a cheap way of furnishing * Importation of materials from the East was not well perceived
Price * Inexpensive prices * Cash and carry
| Place * German speaking countries and Switzerland became priorities * Sold through their own stores * “Warehouse pick up” was introduced
| Promotion * No local service-incentive sales norms * Self-service * Cash and carry * Millions of catalog with humorous and off-beat ads represented half of IKEA’s ad campaign budget *
| Product * Simple contemporary Design * Knockdown kits accessible to all * Durable * Retailing service * Recreational time for families
Strengths * Cash and carry system * Strong ideology of CEO Ingvar Kamprad * Saving money at all level like the pamphlet “traveling for IKEA” suggests * Young, enthusiastic and dynamic workforce...
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