POM AS2

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Lahore University of Management Sciences, Lahore *

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AMC100

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Marketing

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Nov 24, 2024

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Introduction The purpose of this report is to discuss the IKEA’s current market situation, suggest new market strategy and evaluate the option of further penetrating the UK market considering the present market conditions. In this report we also provide an alternative market, which can be explored in near future, for the further growth and expansion opportunity to the company. SWOT analysis is taken as the basis given in the case study and compared to the present condition and taste of customers in the UK to logically bring out the facts to support the further expansion in the UK market. Building a global brand is not an easy task. While excellent product quality and affordable prices can be good for penetrating new markets, the way a brand is marketed decides its fortune in the long term. In the global environment, success rests especially on marketing. IKEA is a well- known global brand of home furnishing products. Behind its global presence and excellent performance is an excellent marketing strategy. However, IKEA has not achieved its success without being through its fair share of troubles. It too has experimented and been through ordeals before being successful in the foreign markets. Goals and Objectives for Three-year Marketing Plan ● Increase sales by 7% each year over the next 3 years. ● Draw more foreigners’ attention and purchases ● Increase functionality of the website (foreign language, 3d model) ● Introduce new brands targeting higher end middle aged consumers, and value-conscious, stylish young consumers 1) Situation Analysis Swot Analysis Strengths The clear vision of IKEA to add value ti the customers regardless of the condition of market is the strength of the IKEA. In developing efficient strategies of marketing this clear vision may assist the company and the clear concept of the product which is to be provided to customers with ready to assemble products is strength of the company. The transportation cost and cost of production is likely to be reduced by the concept of ready to assemble products and the products may be provided to the customers by IKEA as a consequence of such strategy. WEAKNESS: 1

The standardization of operations in all the markets is difficult for IKEA as IKEA is a global organization and is operating in different countries. One of the major weaknesses of IKEA is that IKEA is not able to monitor the services quality in all the stores. To provide the products to the customer at lower price due to which the quality of the products should be compromised some times by the company is the main aim of IKEA as the prices of some raw materials is increasing that are used by the company. OPPORTUNITIES: The products that are environmental friendly are preferred to be purchased by the customer nowadays thus; one of the major opportunities that can be availed by the company is to follow the green model of business. By expanding to the emerging market like China and India such opportunities should be availed. THREATS: The similar products and service are also provided by rivals of IKEA and the cost leadership strategy that is followed by IKEA is also adopted by its competitors. One of the major driver for success is the increase in the inline shopping with DIY and is a threat for IKEA because as a unique selling proposition IKEA does not rely on DIY. Target Market Segments &IKEA’S Segmentation To define the target market four different segmentations strategies should be used by IKEA and the geographical segmentation is the first strategy of segmentation that emphasizes on the customer location. The factors like age, level of income and occupation should be take into account by the Demographic segmentation and the factors like demand and lifestyle should be considered in the Psychographic segmentation. The factors like buying behaviour, process of decision making and purchase frequency should be taken into account at last by Behavioural segmentation. TARGET MARKET SEGMENTS The customer declining in low and middle class of income that can afford products at lower cost should be the target segment for the IKEA is United States and Europe and different market if Asia should also be targeted by IKEA. IKEA’S POSITIONING STRATEGIES For sustaining the philosophy, decision, and activities on the products between the clients of the company is the main aim of the positioning strategy. For the services and products along with exclusive place in contrast to the competition a clear market position should be occupied 2

by IKEA in the customer minds. In differentiating the product along with other dimensions of customer value may be assisted by the method of positioning and IKEA uses differentiation as its positioning strategy for the features of the product from the product that are provided by the competitors. Marketing Mix strategy PRODUCT STRATEGY There are more than 9500 products across IKEA range and the company renews its product range annually launching approximately 2,500 new products [1] . IKEA products are designed by its in-house, as well as, contracted designers. IKEA promotes the idea of democratic design. The furniture maker adheres to the following five dimensions of democratic design: form, quality, function, sustainability and low price. IKEA products are associated with no-frills simplicity to sustain its cost leadership business strategy. Furthermore, some of IKEA products such as furniture are not assembled and ready to use by customer. Instead, the retail giant prefers to sell large furniture items as flat pack and customers have to assemble furniture themselves according to clear guidelines and illustrative instructions supplied by the company. Selling products in flat pack form immensely contributes to cost leadership business strategy because it is much cheaper to transport and store flat packs than ready assembled items. PLACE STRATEGY IKEA should organize the events of promotion and furniture fair in is stores and road shows in the market particularly where they have low market share and is required to enhance the features on its website. IKEA is required to expand its business as it is an emerging market and is a country currently that has very rapid economic rate of growth in Asia. In order to sold the products that are old the IKEA is required to recognize the promotional fares and the old inventory price should be reduced in it as it may provide lot of benefits to the company. PROMOTION STRATEGY In the past the promotion and sales of the company are mainly oriented coupons that are provided to the customers however, nowadays the company can use lot of different online channels like social media and websites of the company. 3

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In order to promote and advertise the products of the company social media should be used by IKEA and to search the location of the stores, online shopping and placing orders the mobile app should also be used. Price Startegy When it comes to pricing, IKEA has got its strategy perfect. At the deep discounters like Aldi one may come across even lower prices. However, the IKEA customers are generally more satisfied with the prices they are paying. It is because of the quality. IKEA matches prices with product quality. IKEA products are not expensive but they are not too cheap either. It also uses flat packing to save on the shipping costs. Still, when compared to the competitors like West Elm or Bed, bath and Beyond, the IKEA products come at much affordable prices. People: IKEA gives utmost importance to the people, ie its customers and employees. Employees at IKEA believe in the idea that they are straightforward people with passion for home furnishing. The employee culture is based on togetherness, enthusiasm and fun. Customer satisfaction is at the core of the values. There are 116000 employees in retail, 18000 in supply 21000 in production as of 2015.It does not discriminate on the basis of race, ethnicity and religion. In 2016 the employee base of IKEA has increased to 183,000. Process: IKEA has several business processes in place. It has 44 production units scattered across 10+ countries. IKEA makes its own wood by owning sawmills and produces high quality furniture. It has in house production facility with highly developed technologies. It follows the clean environment slogan. IKEA has the most unique supply chain and inventory management techniques. Its designs are differentiated in terms of price. It almost buys products from 1800 suppliers. IKEA itself gives a code of conduct to manufacturers that states rules and guidelines which help them reduce their checks for environment friendliness. Further the finished product is delivered In pieces to be assembled by customers which saves cost. Physical Evidence: IKEA has 350+ stores in close to 50 countries. Physical evidence for IKEA is its huge store layouts which provide more than just a shopping experience. It has specific path layouts once you enter the store and guide arrows which help you to your desired item. Stores are also equipped with restaurants for refreshments and also baby handling areas for mothers. Also, it provides large parking space as most of the stores are located outside the cities in large areas. Most of the stores have an area at the end where used, returned, damaged products are sold under huge 4

discounts. One of the largest stores are located in Sydney and Montreal. This covers the entire IKEA marketing mix. Conclusion IKEA is the only organization in the furniture retail industry that provides high quality specialized products of furniture at fair price. To become a leading organization in the global home furnishing market, to earn high profits and capture high share of market are the main aim of the company. In addition, for supporting the sustainability objectives if the company the condition of working should be developed in way that support it. As IKEA is differentiate from its competitors based on the approach of sustainability. The success of IKEA should be supported by different factors that contribute in it such as strategy of marketing, broad range of products, location of stores, functionality, strategy of pricing and customer services. References 5

POM AS2

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