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IKEA Invades America

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David Bechard

on 24 February 2013

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Transcript of IKEA Invades America

IKEA Invades America IKEA Background Founded in 1943
1956 - Begins testing flat packages
First store opens in Stockholm in 1965
In 2002
154 Stores in 22 countries
World’s top furniture retailer
14 Stores in the U.S. IKEA Product Strategy Product/Price Matrix (See Graphic)
Benchmarks – 30-50% Lower than competition
Mix/Match Different type of woods – Achieve correct product/price mix
The matrix would pin point market opportunities for product markets
Balance cost efficient labor with product quality standards
Flat-packaging is a tradeoff – Saves IKEA/Customer money and changes design. While also makes more difficult for consumer to assemble.
“We don’t want to pay to ship air”
“Low Price with Meaning” – Low priced products that don’t look cheap Overview
U.S. Furniture Retailing $67Billion sales in 2002
Highly Fragmented Market
Top 10 retailers, responsible for 14.2%
of market share (Exhibit 8)
Specialty Retailers Compete on Quality and
Customer Service
Value added customer service and
conveniences (delivery services) IKEA Invades America Unsuccessful Early Adoption of IKEA brand
European sizes and measurements
To small for American standards (vases)
Market Research
Changed products and new ad campaign, "Unboring"
Mid 1990s IKEA Began to Improve
1997-2001 Double Revenue $600M to $1.27B
IKEA Describes its Typical Shopper
Traveled abroad, takes risks, fine foods,
frequent flier plan, early adoption of technology IKEA Invades America David Bechard
Chris Roekle
Ye Yuan Shopping at IKEA Preparing to go shopping, measure furniture,
space, etc. (Not the American way)
Product “Matrix” - limited product variety.
“Theme Park style” – Amenities, Food, etc. Looking Forward Goal 50 stores in U.S. by 2013
Find balance between Scandinavian and traditional American Central Problem Cost Leadership
American Consumer's are Highly Segmented
Very Limited Customer Service
Cheap Products Strengths Cost-effective business model
Low-cost products- “low price with meaning”
Strong network of distributions and firm relationship with supplies.
Minimalist product design
Flat packaging
Strong brand recognition:
Unique store attracts customers from long distention(“them park style” shopping environment)
Vast array of product selection Weaknesses Swedish Company & Concepts
American Consumer is Different
Product Matrix Selection is Highly Limited
Limited Product Options & Features
Limited Color Options
"Lots of Assembly Required"
Low Level of Customer Service
No in Store Home Delivery
IKEA's Limited Store Selections
Low Product Quality
Not Sturdy or Safe Enough for Family Life Opportunities A huge potential market: The United States
Furniture retailing accounted for $67 billion.
Focus on Upholstered Furniture and Case goods
Each categories for 45% of all furniture market.
High quality products in Low-end retailers.
Professional furniture manufacture
Provide different delivery services. Threats IKEA did not have price advantage in college students and
others on a tight budget.
Competition from Low-end Retailers
Wal-Mart & Office Depot.
Competition from High-end Furniture Retailers
Ethan Allen
American Consumer Taste - Constantly Changing Alternative Strategies Expand throughout the United States
Showrooms in Downtown Area
Expand Beyond Cost-Conscious Consumers
Repositioning Marketing Strategy
Focus on Customer Service
Computer Service Booths in Each Department
Improve Product Quality
More American Feel
More Localized Items - Focused American Themes
Offer "In-store Assembly" for a Fee
Offer Interior Design Services Course of Action Expansion across America
Focus on Internet Sales
Open Some Downtown Stores
Hire American Designers
Relate to the American Consumers Tastes
Create a "New" IKEA Brand
Focusing on American Made Products Discussion Questions Should IKEA build smaller downtown stores?
Would it be profitable?
Added rent expense
Smaller square footage for sales floor
What do you think about flat packaging?
Does it help the consumer enough?
Does IKEA benefit more than the consumer?
Do you like IKEA’s strategy of cost leadership?
What makes it effective?
What do you look for when it comes to purchasing furniture? Discussion Questions (Part 2)
Do you agree with how IKEA describes its typical American shopper?

Would you avoid buying from IKEA because it is not “made in the USA”?

What do you think about IKEA's product names?

What marketing strategies do you think IKEA uses in their stores?
Vision stimuli to keep customers attention.

What weaknesses do you think IKEA has in its business strategy? IKEA Market Research Panel IKEA Rep. - Chris
College Student - Cullen
Family/Home Owner - David
Business Consultant - Ye
Full transcript