IKEA Invades America

Group 6

Group 7

Overview

IKEA = Ingvar Kamprad Elmtaryd Agunnaryd

Founded in 1943 in south Sweden Motto - Affordable solutions for

better living

Revenues of $28.8 billion 280 stores across 35 countries 1,20,000 + employees

Ikea Concept

Low cost substitutes for the ones available in the market

Make furniture for the masses Low price with meaning Unassembled parts lead to low shipping

costs

Product Strategy

Price Matrix used to determine products/segment

Establish price before design Cost determines material used Different materials for one product to cut

costs Matrix used to identify gaps in company

lineup and identify market opportunities

Implementation strategy

Taking absolute advantage of different factors from different countries

Factor Endowments of 50 countries were well tapped by IKEA

They wanted to be a global company with standard product mix

IKEA products were redesigned multiple times to maximize the number of products that could be squeezed onto a shipping pallet

It put every element in its supply chain under a constant competition

IKEA Stores

15,000-35000 sq.mts. Upon entry shoppers coerced into a

predetermined path Customers free to lounge on model

furniture Natural light to reduce costs Food courts located strategically Play area for kids

US Furniture Retailing

Market consisted of case goods, upholstered furniture, ready to assemble furniture and casual furniture

Market highly fragmented Top 10 furniture retailers responsible for just

14.2 % market share Low end retailers aggressively promote on basis

of price, environment reflects low price focus High end stores offer luxurious environments,

various payment options, compete on quality and service

IKEA invades US

First store opened in Philadelphia in 1985 Products did not fit American homes The dimensions were in centimeters rather

than inches Kitchenware were too small for American

serving sizes Basically local responsiveness was missing in

terms of culture and likings

Adaptations then..

Product specifications were modified accordingly

Shopping experience was modified High profile ads to promote commitment-

free approach to furniture - Unboring Doubled revenues from 1997 to 2001 Educating the customer was the aim

Contd..

In house restaurants which became15th largest food chain in America

Pencils, paper, tape measure, store guides, catalogues, shopping carts, bags and strollers were available

They did not change their old strategy of matrix method for developing new products

Future

Increase the number of stores to 50 till 2013

Finding a balance between Scandinavian and American taste of furniture

Inference

Domestic to International to a Global company

Saturation in domestic market ie. Sweden paves a path to invade new markets

Local responsiveness to some extent is very important for a company to be successful

And finally to be a Transnational company