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on 30 September 2014

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Transcript of IKEA

IKEA Competitive strategies in primary stage
IKEA Expansion
The characteristic of IKEA' s strategy

A: Standardization. When IKEA expand to other European countries, it use the same strategy in Sweden. That is low price, high quality,immediate availability and self-assembly.
How would you characterize IKEA' s strategy prior to its missteps in North America?
50 percent cheaper than Sweden - cut even further.

The relationship - IKEA with Poland become the base for further relationship with suppliers.
Competitive advantages in Sweden
Establish a location store where customers could come and see furniture set up.(1958)
Added restaurant to the store - customers could relax and refresh.(hommization)
Ideals - keep high quality but low price than other manufacturers.(1964)

IKEA Competitive advantages in early 1970s
Powerful brand
image, with clean swedish lines to attract the mass market.
' line interested people to take at low prices
New technology with
clean lines
self-service store format

IKEA source of success today?
Using in-expensive materials in novel way.
To cut transportation cost (flat packaging).
Making it one shop for customers ( consumer benefit from lower prices and IKEA get consumers).
IKEA buys “production capacity” rather than “product quantities”

IKEA strategy with suppliers
Ikea main suppliers are Swedwood an IKEA owned manufacturers.
Long term co-operation to give best possible results.
Produce products of good function- flexibility
Design at lowest possible price “not at any price”.
Strategy of limiting investment in productive capacity.

How would you characterize its strategy today?
A:Standardization combined with adaptation. After its failed in America and not very successful in china, IKEA realized the importance of adaptation.
Competitive advantages in Poland
The Strength and Weakness of IKEA
Ikea Strength:
• Promises same quality of product and range worldwide.
• Democratic design
• Cost –consciousness
• Use of renewable materials
Ikea Weakness:
• Supply chain Make-To-Stock (MTS) product.
• Lack a common structure and tactical planning.

Evaluation of IKEA
IKEA is the successful international company and as discussed, through its
Cost- Leadership
Product Differentiation
has served the consumer very well.
Cost-effective management
system of distribution centers is their competitive advantage.
Unique Retail concepts
in the business and serving in the international market for about 20 years have not triggered any international rivalry. However
social trends
market forces
economic factors
will always be a big challenge to IKEA’s business infrastructure in their long term strategies.
Why do you think IKEA' s expansion into Europe went so well?
Value proposition
Good quality- stylish furniture at prices so low that everybody can afford it.
the similar culture with Swedish.
Valued network
Why did the company subsequently stumble in North America?
IKEA failed to understand the culture.
"Self-service" was not huge success.
Store layout and products were too small for big American customers.
failed in targeting right market.
What lessons did IKEA learn from N. America experience?
Redesign to fit with native needs and culture.
Newer and larger store locations were chosen.
Optimize shopping process.
Improve the efficiency of delivery.
Offer delivery services.
IKEA Background
IKEA Expansion in 1970's
Marketing in Europe, N. America and China.
Strategies with Suppleries
Source of Success Today
Value Chain of IKEA
founded in 1943 by a 17-year-old Ingvar Kamprad in Sweden.
privately-held, international home products retailers
January 2008, the world's largest furniture retailer
over 332 stores in 38 countries, employing over 127,000 people
Example: Europe - China Culture Risk.
Price problem.
Price is still to high.
Different Culture.
Different National Condition.
Only 20% of customers own cars.
Cheap labor
The Value chain of IKEA
Primary Activities
Inbound Logistics.

Flexibility and efficiency of the supply chain strategy.
Flat- pack by machines increase efficiency and save storage cost and space. Maximum packaging capacity.

A professional team of 12 designers, 80 freelancers and
the production team in Sweden, work all together to reduce manufacturing and shipping costs.
Outbound Logistics.
Widespread supply chain (1300 suppliers in 53 countries) enables IKEA to cut the cost of shipping the products and “find the right manufacturer for the right product”.
Marketing and Sales.

Wacky promotions and “out of the box” thinking, helped Ikea to establish its personality into customers mind.
IKEA provide various services post-purchase to build and maintain a strong relationship with its customers.
Support activities
With 5 suppliers in Europe, 3 in U.S. and 2 in China, IKEA have the advantage of saving costs on shipping the products all around the world.
Human Resource management.
Since the first day in IKEA, pamphlets are given to the staff, trained to be part of the Company concept: “wasting resources is a mortal sin”.
Technological Development
The IKEA product development is an example of how the Company is always at the forefront of innovation and technologies, by testing and experimenting new materials and
It is in IKEA philosophy a sense of equality: inspiring the staff in a “family-friendly culture and with a very little hierarchy”.
Bo Edvardsson & Bo Enquist (2002) 'The IKEA Saga': How Service Culture Drives
Service Strategy, ‘The Service Industries Journal, 22:4, pp. 153-186

Business Today, ‘Ikea cannot retail food items in India’ Available online: http://businesstoday.intoday.in/story/how-ikea-adapted-its-strategies-to-expand-in-china/1/196322.html (accessed: 15th September, 2013)

Jonssson, A., Foss, N., (2011), ‘International expansion through flexible replication: Learning from the internationalization experience of IKEA, ‘Journal of International business studies, 42, pp. 1079-1102.

Malmo (2011), ‘The secret of IKEA’s success toady’ Economist Weblog 24th February, 2011 [Online] Available at: http://www.economist.com/node/18229400 (accessed on 17th October, 2013).

Molly Edmonds (2013), ‘How IKEA works’ Available at: http://money.howstuffworks.com/ikea.htm (accessed: 18th October, 2013)
PRLog (2011) ICD Research's 'IKEA in Poland: SWOT Profile' http://www.prlog.org/11530431-new-market-research-report-ikea-in-poland-local-profile-and-global-analysis.html

MALCOLM GLADWELL(2011) “The Color of Money” http://guardian.co.tt/business-guardian/2012-02-15/colour-money-part3

Features of IKEA:

Design at IKEA:

Right combination of five elements.
(Design and develop about 9,500 products in Almhult, Sweden)
Unique challenge that keeps IKEA innovative.

Raw Materials:
Use most sustainable materials
Cotton, Wood, Flax, Linen, Bamboo, Wood Plastic
Those are renewable, recyclable and recycled.

Democratic design
Believe in Quality and design
Made up of five elements :form, function, quality, sustainability and a low price

: to create better everyday life.
idea supports this vision by providing designed furniture at low cost.
IKEA Corporate Structure

Total Revenue in 2012: Euro 27.6 billion.

Thank you
Any Question?
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