Marketing and Ikea Invades America

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IKEA Invades America

IKEA Invades America

February 7, 2012

IKEA Invades America
• ISSUES
IKEA is currently the world’s top furniture retailer, yet they remain far from being the leading furniture retailer in the United States. IKEA’s current niche position and targeting strategies are unable to sustain the growth that they are looking for. In order to expand aggressively and open 50 stores by 2013, IKEA needs to target to a larger market and find ways to appeal to a broader consumer base that may still be unfamiliar with Scandinavian design and IKEA’s self-service culture. This must be accomplished while allowing IKEA to retain their quintessential Scandinavian roots. As Anders Dahlvig, the Global Production Head, puts it, “We have to find a balance.”

• DECISION ALTERNATIVES
The following three decision alternatives target consumers segmented by existing shopping habits (See Appendix A for Segmentation Analysis) 1. Target consumers who shop at high-end retailes. Drastically change the marketing mix to position IKEA as a provider of traditionally designed furniture. 2. Target the entire USA market without changing IKEA’s core products. Aggresively advertise and promote IKEA and Scandinavian design to change existing consumer preferences. 3. Target all consumers who shop at low-end retailers while retaining IKEA’s current positioning. Tweak the product lineup to appeal to this new expanded target market.

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Our decision criteria include: Fit with company goals: IKEA’s number one concern is to be able to expand and appeal to a broader consumer base while retainining its Scandinavian roots and differentiating factors. Potential profitability: The potential for IKEA to increase market share, grow, and increase sales. Brand image: Ability to retain and strengthen its brand of self service, low price and good design. Customer satisfaction/customer lifetime value: Long-term customer satisfaction and brand loyalty Feasibility: The costs associated with implementing the solution.

IKEA Invades America
• Industry Analysis
The US furniture retail industry is a potentially very profitable market for IKEA, with over $67 billion in sales in 2002. With a highly fragmented market, the industry is competitive and consumers have high purchasing power: they can pick and choose from a large pool of retailers. As of result, companies need to strongly differentiate and advertise themselves in order to attract consumers, especially given the fact that furniture purchases tends to be infrequent due to their costs. However, this also presents an opportunity: with the right positioning and differentiation, a company can easily lure a customer away from established brands. The large difference between low-end and high-end retailers, where consumers have to trade off between price and quality, also provides an opportunity. IKEA is ideally positioned in the middle of the low-end and high-end retailers (See Appendix B for Perceptual Map). With only 14 stores in USA, IKEA also has many opportunities to expand into large cities such as New York City, Seattle, Detroit and more.

• Company Analysis
IKEA is currently the world’s top furniture retailer with an extremely well-known and strong brand. Their do-it-yourself culture that requires buyers to transport and assemble their own furniture is both a strength and a weakness. IKEA can cut costs and pass the savings on to the customer, yet most US consumers are used to a more traditional service experience, with sales consultants, free delivery and set up service. Further weaknesses include the furniture’s short life span, as many high-end retailers highlight the longevity of their products. However, IKEA fills the gap between low-end and high-end retailers by operating based on their strategy of “low price with meaning”. They compete very effectively by utilizing their global supply chain network to cheaply produce well-designed products that are marked 30% to 50 % below...
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