How Ikea Manages The Global Environment Essay

The well-known ‘build-it-yourself’ product design makes them progressive and makes them running ahead of the competition. IKEA is the only big brand in a category further not present in global markets, there are no real competitors operating in the same category. In 2013 775 million customers visited IKEA in 2013, and its website hosted 1.2 billion visits (4). Due to the ‘build-it-yourself’ product design IKEA is able to provide their customers with high quality and low cost products, even the customers with limited income and limited living space

* IKEA’s low cost structure has been the very core of its success. It’s low-cost and high-quality strategy fits with the current state of the economy. Offering convenience factors within IKEA’s stores would fit well with IKEA’s low cost structure. It maintains its low-cost business model by creating a different furniture shopping experience. IKEA supplies customers with all possible materials needed to complete their shopping when they enter the store (that are, measuring

The services and products offered by IKEA provide value to its customers in various ways. For one, the products and services are very affordable. The products and services are not priced highly and therefore, the average customer can enjoy them. At the same time, the products are of high quality. From IKEA’s slogan “low prices but not at any price”, it is clear that the company prices its products lowly but that does not mean that the quality is compromised. IKEA satisfying its customer’s needs through providing them value for their money as they provide quality products that will last for a long time, and at affordable costs. The fact that the company has set the minimum acceptable standards for its wood, implies that it is also keen on quality and on the environmental impact of its action of making furniture ( Edvardsson, Enquist & Hay, 2006).

In 1951, to reduce product returns, he opened a display store in nearby Älmhult village to allow customers to inspect products before buying. It was an immediate success, with customers traveling seven hours from the capital Stockholm by train to visit. Based on the store’s success, IKEA stopped accepting mail orders. Later Kamprad reflected, “The basis of the modern IKEA concept was created [at this time] and in principle it still applies. First and foremost, we use a catalog to tempt people to visit an exhibition, which today is our store. . . . Then, catalog in hand, customers can see simple interiors for themselves, touch the furniture they want to buy and then write out an order.”2 As Kamprad developed and refined his furniture retailing business model he became increasingly frustrated with the way a tightly knit cartel of furniture manufacturers controlled the Swedish industry to keep prices high. He began to view the situation not just as a business opportunity but also as an unacceptable social problem that he wanted to correct. Foreshadowing a vision for IKEA that would later be articulated as “creating a better life for the many people,” he wrote: “A disproportionately large part of all resources is used to satisfy a small part of the population. . . . IKEA’s aim is to change this situation. We shall offer a wide range of home furnishing items of good design and function at prices so low that the majority of

Corporate Social Responsibility is about how a corporate entity acts towards its corporate citizens. Demonstrating social responsibility can be delivered in different ways by the corporate entity. IKEA believes in creating everyday a better life for its people which includes IKEA co-workers, IKEA customers, its suppliers and community

IKEA is an international company which designs house products and sells them in the form of ready to assemble furniture. It is one of the world’s largest furniture companies. It is founded by17 years old Ingvar Kamprad in Sweden in 1943. The most important fact about the company is the attention to control the cost of the products, which allows them to lower the prices. Even today they are continuing to expand in the world by looking forward to new product developments. The number of stores of IKEA in the United States is 14 at the moment and they aim to have 50 stores by 2013.

The economy, the trade practices, and agreements are factors that help understand the purchasing power of customers, thus it deals with income, prices, savings, debts, and GDP. When a company has the intent of going for globalization, they have to carefully observe and study those factors, in order to have an appropriate marketing mix and in particular a price that is adapted to the country they are targeting. IKEA is present in industrializing and industrial economies where there is

Unfortunately, for IKEA, I am well-aware of its main weaknesses, which are; its limited product designs, and its DIY concept for customers that prefer items assembled. Essentially, this weakness provides Zappos with a unique opportunity to capitalize on the market of unsatisfied IKEA customers. For example, Ferrell & Hartline (2014) explains that, “some customers may not appreciate IKEA’s do-it-yourself approach. Moreover, IKEA targets young, cost-conscious customers who want stylish furniture. However, these same consumers also like convenience and usually have the money to pay for it. Consequently, for them, the time and effort involved in shopping for furniture, bringing it home, and assembling it may not be worth it. Furthermore, some customers enjoy having a conversation with a salesperson and getting individual ideas and advice from employees. Therefore, these customers may continue to buy furniture from traditional retailers” (p.498).

IKEA’s mission mainly focuses on sustainable long-term growth by capitalising in the future which bring advantages to the employees, customers and suppliers. IKEA invest majority of its profit back into product development, into the business,

IKEAs brand image is built on their long term strategic focus to produce products from sustainable materials in an aim to care for the environment and earth’s natural resources. This aligns with IKEAs vales to promote social, environmental and economic development. IKEAs concept of customers shopping for mass produced, standardised products in a ‘self-service’ environment allows for cost efficiency

The debate about standardization and adaptation for international markets has continuously attracted more attention from multinational companies for several years. The case of IKEA has however tried to help me in understanding the argument involving these two marketing strategies as applied in the international markets.

Known as one the largest global home-furnishing retailers, IKEA currently has over 139,000 employees located in 53 countries and generates roughly 39.3 billion US dollars in annual sales (IKEA, 2014). Ingvar Kamprad began selling different types of items and founded the company in Agunnaryd, Sweden in 1943. Kamprad found that his greatest entrepreneurial opportunity was in furniture. Many households at that time were changing from receiving furniture that was handed down to desiring new, inexpensive, and stylish furniture. Kamprad was able to find a business opportunity to change the current social situation since a lot of the furniture was priced high at the time. He wanted to be able to offer his customers a wide

IKEA’s transformation process is complex and varies according to the product. With a range of 12000 products that is under constant retail evolution, the most cost saving activity is production. IKEA looks for the value chain through economies of scale and the existing production capacity with the aim of running every production line at maximum efficiency. The BILLY bookcase undergoes a very technology intensive transformation process in comparison to their upholstered furniture like the EKTORP sofa.

IKEA’s strategy before the mishaps in America could be characterized as going against the norm charting their own path to success using low priced manufactures to secure lower selling prices aimed to target those who were of older age and of middle class standing. Their new strategy was to target those of a younger demographic, young married couples, college students, and 20-30 something singles. By reemphasizing design, promoting through hip quirky advertisements, and encouraging consumers to do away with their old furniture, IKEA revenues doubled in a four-year period. IKEA today has adapted somewhat of a local customization strategy where their store layouts will resemble that of many local household layouts as proven by their success in China where they failed to expand beforehand. They also keep their prices extremely low in some areas as China by sourcing a large percentage of products in the area of operation.

IKEA aims to develop inexpensive products doesn’t mean to sacrifice its promise to consumers – “A better everyday life”. Instead of low quality product IKEA tends to deliver its mission by better purchasing management. IKEA spread its Sweden designed furniture to manufacture in developing countries to keep the lowest production cost. With more than 1000 suppliers over 55 countries, approximately 62% of purchasing is from Europe and around 34% from Asia. (5)