ikea ppt - final presented

OVERVIEWIKEA AT A GLANCE

World’s leading home furnishing Co.

• Swedish Company • Owned by a Foundation• 328 Stores in 28 countries• Offers well-designed products at

low prices• Mission: home furnishing that

many can afford• € 31.9 Billion Revenue• € 1.6 Billion in Food• € 1 Billion in Online Sales• 9,500 Products• 155,000 Employees• 978 suppliers in 50 Countries • 51% Production in Europe

SYNOPSIS• In 1985 Ikea opens its first store in the USA

• Struggles with low sales and acceptance of its Scandinavian essence

• The successful European formula needed to be revised

• The POD didn’t seem to appeal for Americans

• Issues with product, lack of service and shopping experience

• USA furniture retailing market very fragmented

• Difficult for Ikea to disrupt standardized market habits

• Ikea changes its strategy to reinforce its reverse positioning

• Strengthen economy of scale to achieve the goal of 50 stores by 2013

HISTORYI K E AINGVAR KAMPRAD ELMTARYD AGUNNARYD

Ambitious, focusedand patient sinceyoung boy

Didn’t spend moneyon toys

Not a good student

Received moneyas reward

During school yearswas looking for ways to makemoney

Moved from hishouse at 17

Opened his own company with money borrowedfrom father

Name of the farmHe grew up in

Spent childhood in Parent’s farm

Name of the village he lived nearby

Where he first stablished TradeOf Essentials – pen selling business

Lessons of advertisingand necessity of free food

1960in Älmhult IKEA opens the first restaurant 1965

The largest store opens in Stockholm (self-service system)

1980 - 1984stores were opened in Saudi Arabia, Kuwait and China

1970Opens more than 20 stores in the world, from Europe to Australia

1948The business expands into furniture

TIMELINE

1943IKEA is founded as a pen business

1953Furniture showroom opens in Älmhult, Sweden

1958The first Ikea Store opens in Stockholm

1951First IKEA catalogue is published

1956Designing furniture for flat packaging and self-assembly

1985Ikea opens the first store in the USA

FRAGMENTED

·$67 Billion sales in 2002

·Highly disjointed market

COMPETITIVE·Modest competition for Home furnishing ·Big for General retail · Main retailersresponsible for just 14.2% of market share

GAP BETWEEN HIGH END & LOW END·Customer service· Payment options · Trained salespeople· Huge inventories ·Super Centres·Small Shops

HIGH COSTS· Marketing costs to reach people· Land and construction· Staff costs, social security & turnover· Manufacturing industry weak - import

FURNITURE MARKET IN THE USA

HIGH END

GAP

o Ethan Alleno Thomasvilleo Jordan’s Furniture multiple-brand retailersWith sales consultants and interior design services

o Wal-Mart #1 furniture retailero Office Depot o Costcoo Small shops targeted college students

LOW END

COMPETITORS

POD: LOW PRICE WITH MEANING #1

Unique combination of form, function, and affordability

Design & Aesthetic

Low Priced furniture

Right Quality – perceived as not long lasting

Mission: Create a better everyday life

Saving in all directions and partnering with customers IKEA’S

POSITIONING

Store Layout, Childcare center and Restaurant

Stablish target retail price based in a product Matrix

Find a manufacturer to produce it: 978 suppliers

IKEA’s engineers determine the materials to be used in the product: surface X interior

Design process- internal and external professionals

Flat transportation, product in flat-packaged boxes, not assembled.

PRODUCT DEVELOPMENT 1

2345

MATRIX

SCANDINAVIAN MODERN COUNTRY YOUNG

HIGH

MEDIUM

LOWPRIC

E RA

NGE

STYLE

IKEA

IKEA

IKEA

IKEA

the company would set its own price point 30% to 50% lower that its rivals.

•Target Competition: finding gaps in the market•Intern gaps within their own portfolio•Identify gaps in the product lineup• Identify market opportunities by looking at the product

offering on the grid and looking of empty spaces

ETHAN ALLEN ETHAN ALLEN

WALMART

WALMARTTHOMASVILLE

THOMASVILLECOSTCO

COSTCO

EXPANSION STRATEGYThe USA invasion didn’t consider local

habits & cultureSpecific aspects of the market ignored

Copy & Paste of Ikea’s European Business Model

Lack of Market Research .

HGHHJKKJJL KJKJKJLL JNKLMLM NKNLM, KLMLML

Lack of appropriate assortment and level of service to match new consumer’s needs. Scandinavian design and DIY culture were unfamiliar for new target

BRAND POSITIONINGTrying to change customer behavior instead

of adapting its products and services to local demand

Target & Niche positioning that wouldn’t sustain the growth needed

KEY ISSUES

PRODUCT & SERVICE MGT

IKEA ENTERS USAEXPANSION STRATEGY

Market Test in Canada in 1976

Market strategy for medium-long term growth

Need of economy of scale

Strong Self Confidence from Europe Success

Ikea Struggled from beginning

1985 – 1990 Operating 5 stores

US Market Challenges

PRODUCT & SERVICE MGT

LIMITED STYLES

COMFORT

SELF SERVICE

DIMENSIONS

SIZE

DYI

LIFETIME FURNITURE PICK UP

PRODUCT

Align US range with overall Ikea

StrategyBedroom & Kitchen as engine of sales

growth

ACTION PLAN

PRICE

Align the price strategy with overall Ikea

StrategyAggressive sales price reduction

OPERATIONAL COSTS

Upgrade stores and open in better

locations

Reduce turnover of staff, stable working

environment and improve operations

GROW SALES

Add a substantial # of stores and

increase in existing ones – economy of

scale

SUPPLY CHAIN

Build local production

More stable profit to fight volatility of

exchange – margins fluctuating with dependency on

importing

MARKETING

Needed all this steps to make it possible to afford

investment in marketing

BRAND POSITIONING

• Campaign: New ad agency based in Miami – Budget $45 million (US)• Award Winning: Cannes | Direction of Spike Jonze (Being John Malcovich)• Target: Americans compulsion to keep outdated furniture• Key message: Commitment free approach to furniture• Furniture as fashion: Adoption of a disposable concept to meet lack of longevity• Results: Continued until 2005 and increased sales in 8% between 2002/2003

Unboring CampaignIkea Lamp, USA 2002 | first TV spot

FIRST RESULTS

19851 Store

$ 50 Million

1992

11 StoreBought a competitor

1999

12 Stores

16 in Market Share

1993 - 1998

No store opening

$ 600 Million

2002

14 Stores

14 in Market Share

2001

14 Stores$ 1.27 Billion

GOAL2013

50 Stores

STRENGTHS

SWOT

STRENGTHS

1. Global Brand Identity & Strong Brand Image

2. Strong and differentiated Area A as compared to competitors

3. Wide product range and styles

4. Hip, Swedish designs

5. Cheap and affordable products

6. Furniture easy to assemble and ship

7. One stop shop for home furniture

8. Friendly atmosphere/ store layout.

9. Facilities – Restaurant and day care center.

10.Strong global sourcing capabilities

WEAKNESSESSWOT

WEAKNESSES

1. Consumer perception of cost vs. quality

2. Locations not accessible or relatively few

3. Assembling furniture may be unappealing to certain groups of consumers

4. Store layout is a hassle if you want just one particular item

5. Swedish designs may not appeal to the North American consumers (USA)

6. Advertising and communications fail to attract the younger minds

7. Furniture are not built to last a lifetime

8. Shortage of inventories for the new market

9. Niche positioning not enough to bring revenues needed

10.Dependent on importing products - weak USA industry and no partnership

11. Currency and exchange rates: products coming from different places

THREATS

SWOT

THREATS

1. Economic slowdown, global economy crisis and recession have

decreased store traffic

2. Barriers to enter new profitable markets

3. Indirect threats from Walmart , Home depot etc.

OPPORTUNITIES

SWOT

OPPORTUNITIES

1. Shifting trend towards greener, sustainable products and lower priced

products

2. Increase ONLINE presence and sales and take advantage of the recent

boom in IT and internet (late 90’s)

3. Educate and attract younger consumers through better IMC tools.

4. Convert few, large stores to more, smaller stores

5. Minimalist trend - clean design, slim forms and plain surfaces - coming

from Europe to western cultures

OLITICAL

Constitutional System

Stability of Government

Business Freedom

Trade Freedom

Tax Policy

P CONOMICAL

Economic Growth

Exchange Rates

GDP Growth

Globalisation

Interest RatesInflation Rate (cost of capital)

Labour Costs

Unemployment Rate

Recession

E OCIAL

Population Growth RateAge

DistributionPerception of Safety & Quality

Educational Infrastructure

Employment Patterns

Cultural Taboos

Home Decor & life style trends

S ECHNOLOGICAL

Emerging Technologies

Impact of Internet

Reduced Communication Costs

IT Boom

Rate of Technological Change

R&D Activity (SEZs)

T

THREAT OF NEW ENTRANTS

BARGAINING POWER OF SUPPLIERS

THREAT OF SUBSTITUTE

RIVALRY AMONG EXISTING COMPETITORS

BARGAINING POWER OF BUYERS

PORTER 5 FORCES

NEW ENTRANTSMEDIUM

Competitive market but chances of new entrants in the cheap furniture business

is HIGH

POWER OF SUPPLIERSHIGH - EUA weak industry

LOW - EUROPE/ASIA too many alternatives

THREAT OF SUBSTITUTELOW

Furniture at home cannot be replaced by A substitute

COMPETITORSHIGH

Major players in discount furniture business

POWER OF BUYERSLOW

unique offer for a gap in the market (high x low end)

PORTER 5 FORCES

PROBLEM STATEMENT

“HOW CAN IKEA FIND THE BALANCE BETWEEN ITS SCANDINAVIAN ESSENCE AND THE LOCAL USA CULTURE IN ORDER TO EXPAND AND MEET ITS GROWTH GOALS BY APPEALING TO A BROADER PUBLIC WITHOUT LOSING ITS UNIQUENESS?”

SCENARIOS

1KEEP UP WITH THE CURRENT EUROPE’S BUSINESS MODEL, ENFORCING IT TO U.S PRICE CONSCIOUS CONSUMERS, BUT ALSO OPENING A PREMIUM BUSINESS IN ORDER TO ATTRACT A NICHE TARGET SEEKING FOR MORE CONVENIENCE.

CURRENT MODEL + PREMIUM STORES 2

INCREASE THE INVESTMENT IN ADVERTISING AND MARKETING IN ORDER TO REINFORCE IT’S REVERSE POSITIONING AND CHANGE CUSTOMER PERCEPTION WHILE POSITIONING STORES IN URBAN DOWNTOWN AREAS AND SUBURBS.

+ MARKETING& STORES TO REINFORCE POSITIONING 3

KEEP UP WITH CURRENT EUROPE’S BUSINESS MODELINTRODUCING EXCELLENT CUSTOMER SERVICE BY STRENGTHENING CUSTOMER RELATIONS AND PROVIDING MORE CONVENIENCE, ASSEMBLY AND DELIVERY OF PRODUCTS.

CURRENT MODEL + CHARGED SERVICES 4

INCREASE THE INVESTMENT IN ONLINE PRESENCE & CREATE SPECIAL COLLECTIONS IN PARTNERSHIP WITH LOCAL DESIGNERS AND LOCAL ENGINEERS FOR THAT PARTICULAR MARKET

INCREASE ONLINE + LOCAL COLLECTIONS

1KEEP UP WITH THE CURRENT EUROPE’S BUSINESS MODEL, ENFORCING IT TO U.S PRICE CONSCIOUS CONSUMERS, BUT ALSO OPENING A PREMIUM BUSINESS IN ORDER TO ATTRACT A NICHE TARGET SEEKING FOR MORE CONVENIENCE.

CURRENT MODEL + PREMIUM STORES

CONS

• High costs to implement • Lack of trust in quality• Big efforts to build brand positioning and awareness• Loss of cost efficiency & loss of mass production• Loss of core company values

PROS

• Positive brand association• New target and niche market, broadening the public

base• Test market• Trend social inclusion by premium purchase

CONS

• High cost for frequent advertising.• Consumers are not open to new products and

designs which are not local• Consumer perceptions of Ikea being a brand with

low quality products (difficult to change perception)• The real state prices in downtown areas are high -

increase fixed costs• Ikea’s theme park style is difficult to fit in downtown

area

PROS

• Reverse positioning increases product life cycle and help increase sales

• Improved brand identity, retention and awareness• Attract innovators and early adopters

promote Scandinavian design• Easy access to stores will increase store traffic

and may increase non-drivers visitors• Stimulate small item sales which is a big part of the

business

2INCREASE THE INVESTMENT IN ADVERTISING AND MARKETING IN ORDER TO REINFORCE IT’S REVERSE POSITIONING AND CHANGE CUSTOMER PERCEPTION WHILE POSITIONING STORES IN CRITICAL URBAN DOWNTOWN AREAS AND SUBURBS.

+ MARKETING& STORES TO REINFORCE POSITIONING

CONS

• Consumers won’t pay extra• Expensive to implement, train and manage the

operation · • Loss of cost efficiency and loss of profit margin

PROS

• Local acceptance – Customized for US• Faster results vs consumers changing their behavior• Attracting non-drivers and non-DIY consumers

3KEEP UP WITH CURRENT EUROPE’S BUSINESS MODELINTRODUCING EXCELLENT CUSTOMER SERVICE BY STRENGTHENING CUSTOMER RELATIONS AND PROVIDING MORE CONVENIENCE, ASSEMBLY AND DELIVERY OF PRODUCTS.

CURRENT MODEL + CHARGED SERVICES

CONS

• No assistance and specialized staff• People like to look and feel items• Expensive online shipping• Risks of delivery damage• Returns can be an issue• Products more expensive due to loss of mass

production & efficiency ·• Different styles might impact the whole operation• Loss of brand identity and Scandinavian style• Impact on their uniqueness & essence·

PROS

• Good supply chain to facilitate deliveries• More convenient for consumers• Worldwide presence with small investment• Bigger product portfolio• Reduction of staff costs• Direct appeal to local consumers• Customized offer & local strategy• Market test, can be expanded to other areas

4INCREASE THE INVESTMENT IN ONLINE PRESENCE & CREATE SPECIAL COLLECTIONS IN PARTNERSHIP WITH LOCAL DESIGNERS AND LOCAL ENGINEERS FOR THAT PARTICULAR MARKET

INCREASE ONLINE + LOCAL COLLECTIONS

RECOMMENDATION

+ MARKETING& STORES TO REINFORCE POSITIONING

CURRENT MODEL + CHARGED SERVICES2 3+

We strong believe in the potential of 4 alternatives presented, but being realistic, considering budget limitation Ikea would be facing after more than a decade struggling with low sales & profitability in the US operation we recommend the combination above.

• Ikea opened 15 new stores in 2015 – 2 in USA

• Total Ikea 2015 Revenue € 31 Billion – USA represents 14%

• USA is the 2nd top selling country after Germany

• America is the 2 biggest regional market, only after Europe

• 3% of total purchases are made in the USA

2015 | IKEA USA

USA 2015

LEARNINGS•Be consistent and true to the core values

•Put consumers in first place – pass cost savings instead of only improving profit margin•Think locally and adapt your offer instead of trying to change consumer behavior

•There’s no one size fits all in marketing and business strategy

• The control of the value chain can give more competitive advantage and consistency to everything the company does

ikea ppt - final presented

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