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IKEA: FURNITURE RETAILER TO THE WORLD case analysis

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by Richard Tomolillo on 6 April 2014

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Transcript of IKEA: FURNITURE RETAILER TO THE WORLD case analysis

IKEA: Furniture Retailer to the World
case study

By Jason Lewee
Richard Tomolillo
Rosilyn Cummings
Kaitlyn Deluca

Randy Martin
Where the Ships were Built
Works Cited
Fincantieri Monfalcone, Italy
Splendor, 2008-Present

Splendor Class
Kvaerner Masa-Yards Helsinki New Shipyard,Finland
Fantasy, 1990- present
Ecstasy, 1991- present
Sensation, 1993- present
Fascination, 1994- present
Imagination, 1995-present
Inspiration, 1996-present
Elation, 1998-present
Paradise, 1998-present
Fantasy Class
Fincantieri designs and builds merchant vessels, passenger ships, offshore, and naval vessels, and is also active in the conversion and ship repair sectors
Today Fincantieri is one of Europe's largest shipbuilding groups and the largest in the Mediterranean
In Italy, Fincantieri employs a staff of nearly 9,400 (rising to approximately 20,000 if the supply chain is included).

Fincantieri Monfalcone, Italy

Kvaerner Masa- Yards is a Shipbuilding Company that is currently employing some 4,000 people. It is part of STX Europe, a group of International shipbuilding companies.
STX Europe in Finland and its predecessors have built many luxurious cruise ships, including the very first modern purpose-built cruise ship, the Song of Norway.
The company is also the principal yard for theFinnish Navy and the world's leading builder of Icebreakers. It has a 50% share in  Arctech Helsinki Shipyard, a joint venture with United Shipbuilding Corporation.


Kvaerner Masa-Yards Helsinki New Shipyard, Finland
Ordered from MHI (Mitsubishi Heavy industries)
Name to be determined, estimated completion 2016

Ships on Order
Fincantieri Monfalcone, Italy
Dream, 2009-present
Magic,2011-present
Breeze, 2012-present

Dream Class
Fincantieri Monfalcone, Italy
Conquest, 2002-present
Glory, 2003-present
Valor, 2004-present
Liberty, 2005-present
Freedom, 2007-present

Conquest class
Kvaerner Masa-Yards Helsinki New Shipyard,Finland
Spirit, 2001-present
Pride, 2001-present
Legend, 2002-present
Miracle, 2004-present

Spirit Class
Fincantieri Monfalcone, Italy
Triumph, 1999-present
Victory, 2000-present

Triumph Class
Fincantieri Monfalcone, Italy
Destiny, 1996-present
Destiny Class
Locally manufactured furniture first showed up in the IKEA product range in 1947 and was received positively by its customers.  It wasn't until 1951 however that Ingvar began to focus only on furniture and discontinued all other products from the IKEA product range.  The first IKEA furniture catalogue was published that same year and 2 years later, in response to competition, the first furniture showroom opened in the village of Älmhult.  This same competition caused other furniture stores and manufacturers to put pressure on suppliers to boycott IKEA which led to the critical decision to design their own furniture beginning in 1955.
The founder of IKEA, Ingvar Kamprad, began his business career as a young boy selling matches purchased in bulk individually for a profit to his neighbours.  As his business grew, he expanded to selling fish, seeds, Christmas decorations and eventually, pencils and ball-point pens.  He was very clever in utilizing his resources - he delivered his goods by bicycle, and later used the local milk delivery vehicle to make deliveries.
In 1943, with a gift from his father, Ingvar established his business, using his initials, Ingvar Kamprad, the name of the farm on which he was born, Elmtaryd and the village nearby, Agunnaryd for the acronym. By 1945, the first advertisements for IKEA began showing up in local newspapers and he had developed a rudimentary catalogue.
BACKGROUND OF IKEA
Singapore 1978
France 1981
Canary Islands 1981
Belgium 1984
United States of America 1985
United Kingdom 1987
Italy 1989
The first IKEA store was opened in Sweden in 1958.

Since then stores have been opened in:

Norway 1963
Denmark 1969
Scandinavia 1970
Switzerland 1973
Germany 1974
Japan 1974
Australia and Hong Kong 1975
Canada 1976

IKEA has continued expansion into more countries in the 1990s and 2000s. Germany, with 44
stores, is IKEA's biggest market, followed by the United States, with 37. At the end of 2009
financial year IKEA group had 267 stores in 25 countries. However, the company has thus far not
shown much of a presence in the developing countries in about 300 stores in more than 35
countries.
IKEA’S SIZE
Threats of IKEA may stem from:

Social trends – such as the slowdown in first time buyers entering the housing market. This is a core market segment for IKEA products.
Market forces – more competitors entering the low price household and furnishings markets. IKEA needs to reinforce its unique qualities to compete with these.
Economic factors – the recession slows down consumer spending and disposable income reduces.
Some of IKEA’s weaknesses include:

The size and scale of its global business. This could make it hard to control standards and quality. Some countries where IKEA products are made do not implement the legislation to control working conditions. This could represent a weak link in IKEA's supply chain, affecting consumer views of IKEA's products.
The need for low cost products. This needs to be balanced against producing good quality. IKEA also needs to differentiate itself and its products from competitors. IKEA believes there is no compromise between being able to offer good quality products and low prices.
IKEA’s strengths include:

It promises the same quality and range worldwide
A strong concept – based on offering a wide range of well designed, functional products at low prices a 'democratic design' – reaching an ideal balance between function, quality, design and price.
IKEA's 'Cost Consciousness' means that low prices are taken into account when each product is designed from the outset.
Increasing use of renewable materials – IKEA improved its overall use from 71% in 2007 to 75% in 2009.
Ikea is a very successful multinational corporation, which indicates that
earlier discussed focused generic, or long-term strategy of cost leadership
and product differentiation has served it well.
The Ikea concept is unique and over twenty years of international operations have not triggered
any direct international rivalry.
EVALUATION OF IKEA
Ikea was warned that the housing downturn was to hit sales of its flat-pack furniture and said it has scaled back some of its expansion plans.
The world's largest furniture retailer suffered falls in like-for-like sales in some of its major markets, and was warned the declines would spill over to other European countries.
"The housing downturn is important for our business and we feel it quite a lot," Anders Dahlvig, the chief executive, said. "Our growth is going down slightly in the US, the UK and Germany. The downturn is affecting us quite a lot."
He said that future expansion would be at a "much slower" pace. "I definitely see big challenges in the western world and opportunities in emerging markets."
The retailer will concentrate its investment in emerging markets such as Croatia, Slovenia and Ukraine, and adding stores to those it has established in countries such as Poland, Russia and China. He also hopes to break into India if legislation on foreign ownership is eased.
IKEA’S PRESSURES
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