Ikea Case Analysis
IKEA Case Analysis IKEA has a distinct market segment in the home furnishing arena. It has created a niche market with innovative designs, quality, and low price structure. IKEA has employed the cost leadership and product differentiation strategies through low price structure and innovative designs, respectively. Additionally, the uniqueness of the disposable furniture concept allowed IKEA to capitalize on the first mover advantage (Harrison & Enz, 2005).
Behavioral Customer Segmentation for IKEA The behavioral consumer segmentation data provided by Bartlett and Nanda (1996) indicates the demographic profile of IKEA customers and buyer behavior. IKEA’s strategy post World War II, was to target young couples and new families in the low to middle income range by providing inexpensive furniture with durable construction and contemporary lines. The demographic profile presented by Bartlett and Nanda (1996) suggests that the archetypal IKEA buyer is young; middle-class; married; either has no children or one child; and lives in a rental. This new target market’s primary determinants to purchase were based predominantly on price (44%); followed by large assortment (16%); and design (14%). Quality; design; and price were the three most important criteria for store choice. Similarly, price; distance; and design were the significant factors leading to consumer attitude toward IKEA. This target market based their decision purchases on information gathered from the IKEA catalog; visits to other stores; and prior visits to IKEA. Contrary to the traditional IKEA consumers’ determinants to purchase and buyer behavior, sustainability is now playing a larger role in consumer spending habits (Datamonitor, 2010). In a recent Customer Satisfaction Index (CSI) analysis IKEA was ranked ninth overall for customer satisfaction, which is largely due to IKEA’s commitment to sustainable initiatives. Of IKEA’s products, 71% are recyclable, made from recycled products, or both.
Behavioral Customer Segmentation for IKEA The behavioral consumer segmentation data provided by Bartlett and Nanda (1996) indicates the demographic profile of IKEA customers and buyer behavior. IKEA’s strategy post World War II, was to target young couples and new families in the low to middle income range by providing inexpensive furniture with durable construction and contemporary lines. The demographic profile presented by Bartlett and Nanda (1996) suggests that the archetypal IKEA buyer is young; middle-class; married; either has no children or one child; and lives in a rental. This new target market’s primary determinants to purchase were based predominantly on price (44%); followed by large assortment (16%); and design (14%). Quality; design; and price were the three most important criteria for store choice. Similarly, price; distance; and design were the significant factors leading to consumer attitude toward IKEA. This target market based their decision purchases on information gathered from the IKEA catalog; visits to other stores; and prior visits to IKEA. Contrary to the traditional IKEA consumers’ determinants to purchase and buyer behavior, sustainability is now playing a larger role in consumer spending habits (Datamonitor, 2010). In a recent Customer Satisfaction Index (CSI) analysis IKEA was ranked ninth overall for customer satisfaction, which is largely due to IKEA’s commitment to sustainable initiatives. Of IKEA’s products, 71% are recyclable, made from recycled products, or both.
References: Bartlett, C. & Nanda, A. (1996). Ingvar Kamprad and IKEA. Boston, MA: Harvard Business School Publishing. Capell, K. (2005). How The Swedish Retailer Became A Global Cult Brand, Business Week Retrieved from http://www.businessweek.com Chancellor MBA 6110 http://chancellor.angellearning.com Datamonitor, (2010) David, F. (2009). Strategic Management: Concepts and Cases, 12th Edition. Upper Saddle River, NJ: Pearson Education, Inc Harrison, J. S. & Enz, C.A. (2005). Hospitality Strategic Management: Concepts and Cases. Hoboken, NJ: John Wiley & Sons, Inc. Lee, L., (2005). Ikea’s Design for Growth Business Week. Retrieved from http://businessweek.com McGrath, R. & MacMillan, I. (2009). Discovery-driven growth: a breakthrough process to reduce risk and seize opportunity Moon, Y. (2004). IKEA Invades America. Boston, MA: Harvard Business School Publishing.