IKEA’s Global Strategy: Furnishing the World
submitted by Brian Albanese
April 26, 2014
This author has provided an analysis of the IKEA case study found in the Marketing Management textbook. It analyzes the strategies used by IKEA to gain competitive advantage in markets outside of its original market. The report provides a background of the organization, recognizes IKEA’s main markets and examines corporate level strategies by identifying its target market and evaluating its pricing strategies. This case study will further analyze how culture, design, and price play significant roles in determining IKEA’s success. In addition, IKEA’s “global ...view middle of the document...
The financial recession of 2008 is clearly the greatest economic factor for IKEA. According to Bloomberg.com, “the first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated” (Willis, 2009, p. 1). In addition, IKEA’s management team understood the effect the recession would have on the currency exchange. As a result, the Swedish krona grew strong against the U.S. dollar, thus increasing the cost of raw materials from Sweden. As the United State slowly moves out of the recession, the cost of raw materials will slowly decrease simultaneously.
Cultural and social values and trends. The cultural differences between Europe and the United States plays a significant role in IKEA’s business strategy. While Scandinavian design became popular as the years went on, Americans became more interested in the functionality of the product. In addition, people worldwide tend to inherit furniture from previous generations. Sometimes, this furniture may last for generations to come. However, while this practice is more common in European countries, the American culture has changed dramatically.
Political and legal issues. There is currently no data about the political influence over the industry. This ensures there a healthy business environment politically speaking.
Technological factors. Some factors include research and development activity, automation, technology incentives, and rate of technological change. IKEA developed several unique features in the furniture industry that set itself apart from its competitors such as self-assembly. This feature enabled IKEA to ship its products in flat-packs which reduced the damage while transporting.
Summary of environmental opportunities and threats. Today, more and more customers are concerned about the environment. In response to this, IKEA must create products with vast customization that consume less water so the carbon footprint will be at a minimum. One of IKEA’s main objectives is to provide products at a cheaper rate than its competitors. Since this objective does not recognize the necessity of a constant development of design and quality, the organization could possibly lose a major portion of the market who wants these in their products. This customer trend should lead to IKEA to creating a good quality product at a low cost. Since 2007, the global economy has been suffering from a recession. This economic condition has strongly affected every business including IKEA. Since the purchasing power of buyers has gone down, they would be reluctant to purchase products that are not vital to them. This could decrease the sales revenue of IKEA worldwide dramatically, especially in the United States.
Classification and definition of industry. “IKEA is a furniture manufacturer and retailer, well known throughout the world for its knockdown furniture” (Peter & Donnelly, 2013, p. 410). The furniture industry in Europe is well developed with a number...