Table Of Content
TARGET MARKET ANALYSIS
Market development and expansion
Niche Strategy in USA
Global sourcing decision
Challenges & its effect on Ikea
When Ingvar Kamprad founded IKEA in Sweden in 1943, his vision was to “allow people with limited means to furnish their homes like rich people.” The core of the IKEA strategy is in offering a widerange of products that were simple, well-designed and priced to be accessible to the majority of people. Over time, IKEA’s “democratic design” principles made it one of the world’s most prominent furniture retailers, but in 1985, when IKEA opened its first store in the United States, replicating the model that had successfully captured consumers’ attentions in Europe, IKEA was met with mixed reviews: Customers found the products unappealing and out-of-touch with the interests of the typical American consumer, and consumers did not immediately grasp the do-it-yourself mentality.2 Despite these initial challenges, IKEA has become a staple in many American households. With roughly $35.1 billion in revenues, IKEA offers over 50,000 SKUs to over 40 countries and manages a global supply chain to rival Wal-Mart.3 IKEA came to dominate the US mass-market furniture industry by successful execution and by understanding and changing the broader ecosystem, By examining the successes and failures of IKEA’s global expansion, focusing primarily on the US market as a lens through which to view the company, this paper aims to understand how IKEA changed and came to dominate the mass-market furniture industry. We first look at an overview of the furniture market in the United States to examine trends and how IKEA’s value proposition addressed those consumer trends. We then outline the key players in the IKEA ecosystem to assess the co-innovation and adoption chain risks that IKEA overcame to expand successfully. Based on this ecosystem analysis, we expand on this discussion to examine how IKEA transformed the furniture value chain to suit its strategy and better serve its customers, specifically looking at the structure of the value chains as well as the levers of ecosystem configuration. Finally, we look at IKEA’s future and assess how its recent innovations in sustainability and expansion plans into hotel chains affect the ecosystem and fit into its overall portfolio strategy 2- TARGET MARKET ANALYSIS
With IKEA’s strategy of offering quality furniture at cheap prices, they really focus on a couple of different factors when segmenting their market. The basic market segmentation bases that IKEA uses are income level, age, family life cycle, lifestyles, and benefit seeking. Even though IKEA doesn’t have the best quality furniture, it has a great value because of its incredibly cheap prices. IKEA furniture at times is referred to as “start up furniture” meaning furniture one buys for their first home.viii This is why IKEA focuses on the demographics of age, income level, and family life cycle when they are segmenting their market. IKEA is basing their stores strategy around attracting young, lower income individuals. College students and young adults, who tend to be in the low-income category, are a big target market for IKEA because these are the individuals who are looking to buy furniture for the first time. They are not looking to spend a lot of money because they are still unsure about their futures. College students and young adults are just looking for good, cheap furniture that will work for the time being. IKEA is able to take advantage of this target market...
References: 1- "IKEA’s Global Marketing Strategy." 123HelpMe.com. 07 Dec 2014
2- Essays, UK. (November 2013). The Strategic Positioning Of Ikea Marketing Essay. Retrieved from http://www.ukessays.com/essays/marketing/the-strategic-positioning-of-ikea-marketing-essay.php?cref=1
3- Porter, Michael E (1979) How Competitive Forces Shape Strategy. Harvard Business Review, March/ April, Volume 57, Issue 2
4- Essays, UK. (November 2013). Analysis Of The Market Position Of Ikea Marketing Essay. Retrieved from http://www.ukessays.com/essays/marketing/analysis-of-the-market-position-of-ikea-marketing-essay.php?cref=1
5- Bartlett, C., Dessain, V. & Sjoman, A. (2006), IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (B). Harvard Business School Publishing.
6- Ikea. (2010), Multiple Pages [Online]. Available from www.ikea.com
7- Jonsson, P., Rudberg, M. & Holmberg, S. (2008), Global supply chain planning at IKEA. Working Paper.
8- Lief, C. (2008), IKEA: Past, Present and Future. IMD International.
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