Ikea Strategic Analysis

IKEA’s main competitive advantage derives from low costs, which in part are achieved due to standardized products (JUREVICIUS, Ovidijus, 2013). IKEA has been setting up many new stores in different countries all over the world. While most purchases are still done in the European market (59%), the Asian market has expanded quickly (currently 35%) (IKEA, 2014). This expanded market, caused by growing wealth in Asia, created the option to lower costs even more due to economies of scale. The ability to keep selling standardized products however is decreasing quickly with this expansion of the company. IKEA has experienced first-hand that cultures differ too much to keep the old system of ‘one-size-fits-all’

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

Growth plans and opportunities. Presently, IKEA aims to open 10-20 new retail outlets annually, with forecast of double sales target in a timeframe of five years. These targets can be accomplished through strict control functions and monitoring of inventories to ensure keeping costs at the minimum (Kelly, 2010, p. 3). In fact, in spite of inflation rate and rising cost of raw materials and fuel, IKEA has managed to reduce its average costs by 0.8% in FY2012 (“IKEA Group,” cited in “Strategic Supply,” 2013, p. 4).

IKEA implements new product service design and development to offer their quality products at a cheaper price to suit people’s contemporary needs and circumstances. They focus on the price and quality, design and function, environment and health of their new product service design and development to minimize waste and

Established in Sweden in 1943, by a 17-year-old Ingvar Kamprad, IKEA is a multinational group of companies that focus on ready-to-assemble furniture, appliances, and home accessories. The very first IKEA store named Möbel-IKÉA, opened in Almhult, Smaland(Möbel means “furniture” in Swedish), to currently, September 2016, have 389 stores in 48 different countries. With the 389 stores, IKEA successfully creating over €30 billion and over €3.5 billion net profit with the continuous development and expansion.

IKEA is one of the most successful furniture retailer who dedicated to sell flat pack of furniture, accessories, and bathroom and kitchen items around the world. It is well-known as a global phenomenon and its famous statement that “Our vision is to create a better everyday life for the many people”. IKEA has a clear and consistent concept in providing low price, value for money furnishings with a full range of choice. Its philosophy in the core value of cost efficiency along with IKEA's competitive strategy, which influences the performance objectives of operations in company. IKEA shows an excellent performance in achieving cost competitive advantages

Ikea, originating from Sweden was started out by Ingvar Kamprad by first selling daily used items and home accessories in the 1940s, over the years it has now evolved to being an established home furnishing company that “designs and retails its own ready-to-assemble furniture, appliances and home accessories”.

IKEA has achieved success by offering customer value for functional designer products. The cost conscience attitude has worked in favor for IKEA amongst its target market.

The combination of creative approach and original designs along with the reasonable pricing policy contributed to the company’s competitive advantage and explains its success even through the crisis periods (IKEA, 2003)

IKEA is the largest furniture chain in the world, and in 2011 the Swedish company operated over 270 stores in 25 countries. In 2011 IKEA sales soared to over $35 billion, or over 20% of the global furniture market. Most of its stuffs believed IKEA will massive growth throughout the world in the coming decade because IKEA could provide what customer wanted: good design, and good made contemporary furniture with an affordable price. In one word, IKEA’s global approach focuses on simplicity, attention to detail, cost consciousness, and responsiveness in every aspect of its operations and behavior. (Jones, 2013)

IKEA is recognized as one of the reputed brands of Sweden, operating in the segment of ready-to-assembled furniture’s, fittings, appliances, and many others designed accessories and equipments. Although it entered in this segment in the year 1943 in Sweden but very quickly it expanded its operations in the markets of China as well. It is mainly due to its modern architectural stylish designs and eco-friendly nature. This helped Ikea to improve its brand image and profitability by almost 50 percent as compared to previous years. This proved extremely effective for Ikea to enhance its customer bases and reliability in the market among many other rival players (Inter IKEA

There are two hundred and fifty three of IKEA FAMILYs over the world and five hundred and sixty five millions of visitors. The sales volume grow up to one point four billion Euro from 2007 to 2008. “Low price and good quality” is the most important thing to IKEA. Low price is not equal to poor quality, on the contrary, quality show the valuable brand.

On the off chance that a firm utilizes a technique through which products and administrations are sold outside its residential business sector is actually common for some companies. Venturing into worldwide markets can permit potential chances to the firm being referred to. (Strategic Management: Concepts and Cases, 2012) As indicated by Ansoff 's development methodology, IKEA has taken Market improvement technique, attempting to offer existing items to new markets. They are entering to new land markets with their Swedish composed furniture. Be that as it may, on introductory development, IKEA earned more prominent come back from different nations than their nation of origin. Subsequently they investigated distinctive markets. Right now they have identified US, China and Russia as their principle markets which create better returns. Economies of scale can be exe of IKEA plotted by venturing into business sectors that contain homogeneous customer tastes and don 't require much adjustment, by utilizing institutionalized items everywhere throughout the world. IKEA 's principle center was to create exquisite items and offer at low prices. (Suarez F., 2006) . By distinguishing shared traits in shopper purchasing examples, the institutionalized Swedish

Apart from emphasizing its Swedish and Scandinavian design and quality, Ikea also promotes a simple philosophy which “We do our bit, you do your bit, and together we save money”. The founder of Ikea, Kamprad believes that pricing plays a very important role in Ikea. Through an interview with a store manager, he mentioned that on one of Kamprad’s store visits, he actually approach and questioned some customers and ask whether the items they are buying worth the amount that they are paying

IKEA established itself as the largest furniture retailer in Sweden by the early 1970s by reinventing the wheel of furniture manufacturing at that time. Majority of furniture manufacturers in Sweden produced expensive products with designs that were basic or passed down generation to generation, additionally other manufacturers stores where located in downtown congested areas. IKEA’s strategies which consisted of low cost low priced furniture, brave intricate designs, self-assembly,