How IKEA Built a Global Empire

HowIKEA Built a Global Empire

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November14, 2015

HowIKEA Built a Global Empire

It is suggestedthat gone are the days when having a carpenter build everything inthe house, taking measures and buying expensive raw material formaking house utilities and utensil were the order of the day. Asimple visit to the mall and furnishing a newly rented house is suchan easy task. IKEA is a Sweden-based multinational company that dealsin the design of ready to assemble appliances, small motor vehicles,and general house utilities (Salzer,2004). Founded back in 1943 during the World War 2, bya younger man named Ingvar Kamprad who was named one of the richestperson’s worldwide in 2013. IKEA is acronym comprising mainly ofIngvar’s names Ingvar Kamprad Elmtaryd and Gunnar D. Elmtaryd is asmall farm where Ingvar grew up and Agunnaryd his hometown inSmaland, South Sweden (Salzer,2004). This unique company is known for its impressiblearchitectural designs in home based appliances, furniture, andeco-friendly interior design work. This paper`s primary focus will bea case study on the development and growth of IKEA into a globalempire.

Q1. What Ikeahas learned from its previous marketing failure in oversea marketsand how its later success related to its improved marketingstrategies?

IKEA’s mainfailure in the global expansion was that it enter a market with everystudying the people’s routine and way of doing things (Nortonet al., 2011). The group entered the American marketwithout adequate information about how the Americans went about theirday to day lives and suffered significant losses.

The board met andconsidered pulling out of the American market entirely, but somethingchanged, and they decided to do something that had not been attemptedin the history of the company(Håkanssonand Waluszewski 2002). They selected to study theAmerican market, and it gave them insights on how to produce and sellgoods customized to the American people. With this endeavor, thegroup expanded and opened up more store in Canada and North America.From that experience, research has always been at the heart of IKEA’sexpansion plans(Edvardssonet al., 2006).IKEA conducted a study on the morningroutines of different individuals from different continents. Theobserved that people in Shanghai were the fastest in morningpreparation taking an average of fifty-six minutes, and the slowestwas Mumbai taking averagely two and a half hours and fifty percentageof them hit their snooze button at least once every morning (Klingand Goteman, 2003). For New Yorkers mostly work fromtheir bathroom amidst the morning rush. Regardless the size of thecity, women in New York took much time of the mirror figuring out theattire suitable for the day.

Armed to theteeth with this information, IKEA group ingeniously came up with anorganized closet that had a mirror and a rack for hanging clothes anda drawer to keep jewelry (Edvardssonet al., 2006). This was called the Knapper, it helpedchoose an outfit the previous night and not get caught in the morningpanic. Another researched showed with more people migrating to citiesand having small living spaces, IKEA comes up with multifunctionalproducts like lamps with a wireless charging (Klingand Goteman, 2003). This made rooms more spacious andtook away some of the things that would make small rooms socongested. It also beautified the rooms by taking away ugly stuff(Kling andGoteman, 2003). With IKEA mission being improvingpeople’s living standards by selling more and more products to geta margin to drop the prices, is not by tweaking products to everymarket and culture(Håkanssonand Waluszewski 2002). The necessary changes areapplied if it ensures more sales to any given region. For example,IKEA research could set up cameras in people’s living rooms to seehow they used their sofas (Nortonet al., 2011). Moreover, most people did more than sitand watch T.V but were catch taking naps on them. With thisinformation, the sofas are made more comfortable for napping toincrease sales.

Q2. How is thesuccess of Ikea in the global market related to its productionstrategies? Support your arguments with specific facts andinformation.

IKEA have aneffective marketing and production strategies, where they firstestablish the market price for any and all products that are to besold (Torekull,1999). This provides for the competition benchmark(Salzer,2004). Knowing the market price helps range theproduction cost, which assists in selecting the best manufacturerofany particular product in production (Edvardssonet al., 2006). When selecting a manufacturer, IKEA alsoseeks long-term business relationships for the productive output ofgoods(Håkansson and Waluszewski 2002). Some goods requiremore than one manufacturer working on the same product, so havingmanufacturers that can work together is a further added advantage ofreducing production cost (Torekull,1999). Having selected the manufacturer, they decide onthe quality and sources of the raw materials and their productioncost. IKEA engineers who determine the quality of the wood andequipment being used. With all this set, the creative minds thatdesign the beautiful products start directing the production to thespecific design details and requirements.

IKEA is famousfor this attention to cost control to make goods available forcustomers, day to day operational details and continued productdevelopment(Håkanssonand Waluszewski, 2002). IKEA group has severalfoundations in the Netherlands, Luxembourg, and Liechtenstein withmakes for a complex corporate structure to run the entire enterprise.IKEA has opened up retail stores in forty-seven countries and has atotal of three hundred and three stores operating in this countries.IKEA is the world largest consumer of commercial product wood(Torekull,1999). The products made and sold by the IKEA groupmainly focuses on the growing middle-class present in any economyworldwide. The “middle class makes up the largest group” in anyeconomy, with a few rich people and many more finding employment andjoining the middle class (Edvardssonet al., 2006). There is the working part of a nation’seconomy, by paying taxes and working in both the public and privatesectors to earn money (Torekull,1999). Moreover, making goods ready available andaffordable to the middle class will see any start-up company growthrapidly. This will help the group achieve the goal of hitting fiftybillion sales worth in goods by 2020.

Q3. Identifythe main elements in Ikea’s company culture. What has Ikea done toachieve its company mission? Explain.

IKEA remarkablegrowth is by mastering one of retail hardest challenges, sellinglarge volumes of inventory at a consistently low price in differentplaces with distinctly different culture, languages, andmarketplaces(Håkanssonand Waluszewski 2002). IKEA model is producing the sameproducts at a low price from the suppliers which relates to lower andaffordable prices to the consumers (Klingand Goteman, 2003). With the expansion of IKEA storesto more countries means the sell large quantity of goods and withmore income, it gives the company a chance to drop the price of theirproducts (Torekull,1999). This is IKEA simple slogan to make goodsavailable for people with thin wallets. It is the culture carried bythe employees from every IKEA store, to make and improve people’severyday lives (Edvardssonet al., 2006).

IKEA also seeksto give the best customer care services by reassembling some of theproducts for exhibition to give the customer a feel of the productsthey are looking for as they shop. They provide playing space forkids to enjoy themselves as their parents shop inside the stores(Norton etal., 2011). The playing space has resembled moderntheme parks and restaurants where families can seat and enjoy ahearty meal prepared by IKEA chefs. As IKEA aims to enter the Indianmarkets, they are going to face a bunch of challenges (Klingand Goteman, 2003). First being is abundant supplier’spower, India has an abundant of raw material and works power. In thismarket, IKEA will be competing so a good manufacturer. The growth ofdomesticated retail sector will make it hard for IKEA to infiltratethe market and sell their products in India (Edvardssonet al., 2006). The domestic retail industry is at suchan advantage because of protection by the government as they enjoylow taxes and the residents will initially choose the goods they areused before they accept IKEA products.

IKEA haveembraced technology and are using it to their advantage withmarketing their products. Printing outa beautiful and appealingcatalog to be issued to customers will help advertise through word ofmouth and generate more trust for their products in a short period.Having T.V advertisements will help spread the quality of theirproducts to families’ right into the living room and create adesire for furniture upgrade to more comfortable ones (Nortonet al., 2011). With continued reduction in productprice and increasing their quality, IKEA will see more hungrycustomers knocking down their doors wanting a piece of the pie(Edvardssonet al., 2006). Most of IKEA products are easy toreassemble and creating YouTube tutorials and customer assist hotlineto help in setting up the products once they are taken home for use.IKEA earns a three percent franchise from any and all companies usingtheir cooperate strategies earning the company more capital.

Q 4. As Ikeais planning to open ten new stores in India over the decade, whatrecommendations would you suggest to Ikea about the India Market andwhy?

IKEA’spotential for expansion is timeless and with proper management, thecompany will have massive growth. All IKEA products not only improvetheir living standards, but they provide fora smooth process ofcarrying out daily tasks by ensuring house utilities are wellorganized and provide comfortability. Entering the Indian market isnot to be an easy task with competition for established domesticretail sector and heavy taxes on a foreign company and a highlycompetitive market are among the challenges IKEA will face as itseeks for open up stores in India.It is recommended that the companyadopt the best market entry strategy, which would be focusing on thelow prices of its products. The company should also be aware of thecompetitive nature of the Indian market and put in place measures tocounter this.

In conclusion,this paper presented a case discussion on the IKEA Company with focusplaced on the global growth as well as expansion into the worldmarkets. Among the measures that the paper highlighted as having beentaken by the company towards achieving this goal included embracingtechnology and using it to their advantage with the marketing theirproducts, giving the best customer care services by reassembling someof their products exhibition, and selling large volumes of inventoryat consistently low prices in different places.

References

Edvardsson,B., Enquist, B., &amp Hay, M. (2006). Values-based service brands:narratives from IKEA.&nbspManagingService Quality: An International Journal,16(3),230-246.

Håkansson,H., &ampWaluszewski, A. (2002). Managing Technological Development.IKEA, the environment, and technology.

Kling, K.,&ampGoteman, I. (2003). IKEA CEO Anders Dahlvig on internationalgrowth and IKEA`s unique corporate culture and brand identity.&nbspTheAcademy of Management Executive,&nbsp17(1),31-37.

Norton, M.I., Mochon, D., &ampAriely, D. (2011). The`IKEAEffect`: When LaborLeads to love.&nbspHarvardBusiness School Marketing Unit Working Paper,(11-091).

Salzer, M.(2004). Identity across borders: a study in the&quot IKEA-world&quot.

Torekull, B.(1999).&nbspLeadingby design: the IKEA story.HarperBusiness.