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Copy of Marketing- Ikea

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Marine Piersotte

on 24 March 2013

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Transcript of Copy of Marketing- Ikea

Case Study - IKEA Store History & Layout Current marketing GOALS & OBJECTIVES Current Marketing Strategy & Performance Urvashi Kriplani, Shruti J.V, Milan Mahboob & Nikita Kelkar HISTORY IKEA is a privately held, international home products company that designs and sells ready-to-assemble furniture such as beds, chairs, desks, appliances and home accessories. The company is the world's largest furniture retailer.

Founded in Swedenin 1943 by 17-year-old Ingvar Kamprad, who later became one of the richest people in the world, the company's name is an acronym comprising the initials of the founder's name (Ingvar Kamprad), the farm where he grew up (Elmtaryd), and his hometown (Agunnaryd, in Småland, South Sweden)

The company is known for its modern architectural designs on various types of appliance and furniture, often associated with a simplified eco-friendly interior design. Older IKEA stores are usually very large blue buildings with yellow accents and few windows. They are often designed in a one-way layout, leading customers counter clockwise along what IKEA calls "the long natural way" designed to encourage the customer to see the store in its entirety (as opposed to a traditional retail store, which allows a consumer to go directly to the section where the goods and services needed are displayed).

Today, most stores follow the layout of having the showroom upstairs with the marketplace and warehouse downstairs. Some stores are single level, while others have separate warehouses to allow more stock to be kept on-site.

Most IKEA stores offer an "as-is" area at the end of the warehouse, just before the cash registers. Returned, damaged and formerly showcased products are displayed here and sold with a significant discount, but also with a "no-returns" policy. Most IKEA stores communicate the IKEA policy on environmental issues in the "as-is." In the United Kingdom, this is referred to as "Bargain Corner." Layout
Their main objectives are:
- IKEA produces cheap and affordable products for the customers
- The company wants better life for those who cannot afford expensive products
- IKEA always helps to produce right product for the right consumer
- IKEA always tries to sell their products at low prices
- The company’s global developments and its continual commitment is to have a positive impact on
people and the environment. The IKEA vision is to create a better life for many people who purchase their products. “Our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”
--(“ The Ikea Concept”). GOAL One of IKEA’s main goals is to provide products at low prices to customers. IKEA has good, stylish furniture for their customers. There are 316 large stores in 267 countries. IKEA works to maintain a wellknown brand identity. IKEA marketing plan is very well design to sell the product. The main IMC goals include product design, catalogues, advertising, and public promotions.  
How these goals and objectives are being achieved IKEA has everything to do with the home. The company has many products categories such as cooking, desk, eating, children’s IKEA, bathroom storage, beds & mattresses, chairs, clothes storage, decoration & mirrors, flooring, IKEA FAMILY cabinets & appliances, lighting, small storage, sofas & armchairs, storage furniture, tables, textile & rugs, transport & assembly and TV solutions.

Pricing: IKEA positions itself with low prices. They are extremely price/cost conscious.

Distribution: IKEA has 28 large distribution centres and 11 customer distribution centres in 16 countries.IKEA has 1400 suppliers for distribution.

Promotion: IKEA has its own website where they now have their catalogues virtually. Moreover, IKEA uses newspaper ads and television commercials. The company uses billboards ads and bus stop ads. IKEA does not spend largely on promotions. IKEA believes on their online catalogues and print publications of the catalogs. The catalogue is the main tool for selling. IKEA try to cut the cost with least advertisement. But it is very important part. When asked about IKEA’s perspective on resources, the company’s CEO, K, has said “waste is a mortal sin” (IKEA)! Taking in to consideration IKEA’s sustainability efforts, it appears that the rest of the world will run out of natural resources and IKEA will be able to still provide furniture to all! People like to buy IKEA’s products because of their low prices and medium-quality. People have great awareness of the brand. Moreover, we can see people like to go IKEA store because of good facilities. Brand preference and product awareness In regards to financial resources, the IKEA Group stands strong for the 2010 fiscal year, unlike many others in their industry. They witnessed a sales increase of 7.7% to 23.1 billion euros and net profits increase of 6.1 % to 2.7 billion euros from the previous year. “ Profits give us the resources to grow and reach more people on existing and new markets as well as lowering our prices. The main part of the profit was re-invested in existing as well as twelve new stores in order to become even more inspiring and accessible,” IKEA President and CEO Mikael Ohlsson had said (BusinessWire) . Financial Employs over 123,000 people worldwide; a decline of 5,000 personnel decline from 2008.
In North America there are approximately 15,500 employees. IKEA is bouncing back from the recession and with that new job opportunities are posted everyday on their website. At present they are looking to hire 98 people for varying positions across North America.
Human resource retention a strategy for the company to reduce costs and hiring within is encouraged. Human IKEA was established almost 70 years ago, and the original founder still participates in some activities. Experience is also derived for the Board of Directors. Experience IKEA truly takes care of their customers, and their customers are brand loyal.
Some of the current strategies they have in place to satisfy customers are their services offered in store, like childcare, and also 90-day return policies, and customer service contact information.
On the market research website SocialMention.com, IKEA has a 5:1 sentiment rating; this is the ratio of people on social medias that write about the brand in a positive way. Relationship with Customers Top five purchasing countries IKEA has developed a name for building very strong, long-term relationships with its suppliers. It currently works with over 1,400 supplies across the globe. IKEA tends to bulk-buy to save on costs. A study of several companies by Strand in 2009 discovered that IKEA was one of the corporations that “have implemented responsible supply chains wherein they have treated suppliers as their partners, as one of the key stakeholders. They state that these firms share an honest and trusted relationship with their partners, leading to the development of cooperative advantage by way of having a long-term relationship with their respective suppliers” (Kumar). The positive nature of their bonds helps to build higher standards to suppliers and aids in innovation. Relationship with Suppliers Their Code of Conduct is called “The IKEA Way” which is the basis for all customer relationships. It states:
IKEA offers a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. This is the idea at the heart of everything IKEA does, from product development and purchases to selling products in IKEA stores globally. Review of current and anticipated cultural and structural issues
Overall Customer Orientation The IKEA structure was developed in order to last forever and long-term planning is the base of all the strategies they make. By develop a Foundation their capital is able to be reinvest into innovation and research tax-free.



  Emphasis on Short-term and Long-term Planning IKEA’s current and potential customers are male and female consumers who are in their early teens to mid-70. Consumers who make their purchases at IKEA may be renovators or interior-designer, empty nesters, or just customers who want to decorate their home.
Price range is suitable for low-high income consumers
Customers can purchase IKEA’s products directly from the store itself, from the catalogue, or orderonline from their e-shop website where it sells more than 3000 products and also includes a step-by-step procedure
IKEA customers purchase the firm’s products at many different times. During sales events, because of the low price, customers can receive twice as much furniture and this encourages them to purchase from this company. Customer Environment Advertising more aimed at showing potential customers that they can get the same product they get at the competition but with more modern style and a lower price. Showing potential consumers that IKEA offers other services, such as restaurants and child care while you shop may persuade the customer to choose this store.
Advertising on TV, flyers and radio, including many great facts about IKEA such as the all-in-one store, including baby furniture, bedroom, kitchen, bathroom, lighting, gardening, candles and framed pictures.
They may also want to include advertising that promotes their environmentally friendly approach to selling – including reused and recycled boxes and wood.  Attracting Potential customers -Many residential purchasing have decreased, but because of this many people will see the moment of more IKEA stores a benefit to their areas.

Federal and local purchases have also downsized, which will put a hold onto movement to less developed areas of the U.S.A

 
-A company such as IKEA must have the ability to withstand very low point in sales and then provide inventory when the customer demand is increasing again Economic Growth and Stability S.W.O.T analysis  
1) Low cost structure
Despite the state of the economy, IKEA has been able to maintain their profit margin because of their affordable products, since customers must assemble the product itself. The company buys in bulk from their suppliers so they are able to offer a lower price to their customers. The completion offers a high price because they do not offer a do-it-yourself approach, IKEA has a competitive in that they have low price products and their furniture is stylish, modern, and functional. The company’s low cost structure is able to meet the consumers’ needs because of the downfall of the economy; therefore consumers are looking for affordable products.
 
2) Sustainability
IKEA is environmentally conscious and cost-effective. It is considered environmental friendly because they use renewable, reusable, and recycled materials as much as possible. For example, wood is IKEA’s primary source of material, and they obtain it from responsibly managed forests. Their catalogues are printed on chlorine-free paper and contain at least 10-15% post-consumer waste. The pre-press process is 100% digital, meaning no film is used and it is associates no chemical use. All of their products come in cardboard, compact packaging for easy use and easy recyclability. The company does not use plastic bags, in an effort to maintain its environmental responsibilities. These strengths differentiate IKEA from their competitors because their employees understand the consumers’ needs and are aware of their company’s carbon footprint. Strengths  
1) Size

IKEA is a warehouse style shopping center. Because of its size IKEA is going to have a hard time
breaking into smaller markets. There are not enough people in a smaller region to sustain a store the size of IKEA. The people in this region may be interested in purchasing and using IKEA’s products therefore limiting the access of their product to potential customers. The reason IKEA may not be able to penetrate a smaller market like Target would be able to, is because they only offer home furnishings. Target, on the other hand, is a massive “convenience” store essentially. A customer may visit Target for home furnishings but also for anything from clothing to groceries to technology.
 
2) Online Support

Although IKEA does have a website, which is interactive for customers, it has a very limited supply of products available to order online. “IKEA basically forces consumers to shop at their nearest brick-andmortar locations.” (Copeland, 497) This is a huge weakness considering their first weakness. Not only can they not penetrate smaller markets with an actual location but they do not even facilitate an online store for customers in those regions to use. The competitor Bludot.com has a superior online shopping experience, because they deliver anywhere in North America and facilitate through small retailers which allows them to target customers in smaller regions, which IKEA cannot. Weaknesses: 1) Internet
The market uses a high amount of internet to complete daily task from email to online shopping. This opportunity will allow IKEA to pursue new marketing expedition and go after other competitors like bludot.com, if there online shopping experience provides a positive image to their customer like their Facebook Fan page. It will provide a new segment of customers and easier access for usual IKEA customers.
Time: within 6 months to achieve better online shopping experience

2) Expansion
With the Population distribution across the world it clearly shows areas that could possibly be developed for new storesIKEA provides an edgy look for cheaper prices. This will be an opportune time for them to achieve this market because of current economic times and the current raise prices of Raw Materials. With new stores opening it will improve customer traffic within the IKEA stores; this will provide a bigger image for the overall company and also an opportunity for reaching a new segmentation of wealthier customers. Opportunities 1) Home Depot (competition)
The Home Depot is a huge threat to IKEA because of its huge online site with all their products, ratings and prices it give them a physical advantage to them. Also Home Depot is the 2nd largest retailer in the world which means they have very strong brand name and people response very well to the name. One of the biggest problem is that Home Depot also goes after one of the same segments as IKEA (do it yourself). The service of the customer will be met at different levels because of the different products provide in store: they provide hardware, lumber, kitchen appliances, furniture, and many other products.
2) Raw Materials
Increasing price for Raw materials, many importers and manufactures will have to increase final products prices to as much as 15%. While acknowledging increases in the cost of leather, wood, foam, glass, cardboard and even finishing sprays and coatings, and now with the increase of steel price it may be pushing suppliers to breaking points. This will affect IKEA through its product because it will close the line between cost and profit or they could increase prices to their customers and cause them there image as a company
Time: this is affecting them right now, if it continues for a long period of time, it will affect the bottom line of IKEA
  Threats -Because IKEA has a low cost structure we believe that they can expand into the online market without incurring too many costs.
-Because of the low cost structure IKEA should expand to the west coast, particularly California.
-Their sustainability makes them a perfect candidate for expansion into regions with enough people to
sustain a store of its size.
-IKEA’s product branding of low cost furniture and less in store sales pressure lead customers believe
there may be less of a markup and believe the product is cheaper in the stores in comparison to
competitors.
-Online support is the most important thing that IKEA focuses on in order to convert a weakness to a strength. If they were to facilitate an online store they would be able to expand without any further costs in building their “Brick and Mortar” stores. This also reduces the risk of expansion into smaller regions, if they were to open up a store in a region that may not be able to support a store that size they would potentially lose money and have to shut down locations.
-Because they are such a large retailer they cannot build in smaller regions or areas with a relatively small target market or population. Developing Competitive Advantages Developing a Strategic Focus
An aggressive strategic focus on bringing IKEA online.
Not only reach potential customers in less populated areas but catch up to their competitors. The other reason for this strategy is that this is the way IKEA can start to reach a younger demographic. Younger people are more aware of online activities and are more willing to buy online. The older demographic is still a little scared about buying online.
 
Strategic Canvas
-Channeling the low cost structure which IKEA currently leads along with innovative design, child care, pricing, meals, and overall experience. These are characteristics in which IKEA differs from its competitors.
 
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