Solving IKEA's American Market Essay.

Read the Case Study of IKEA Invades America.

You must analyze what is presented and state which specific actions best resolve major issues. These actions must reflect the information in the case and the environment facing the firm.

Steps In Solving A Case Study

Analysis should include these sequential steps:

1. Presentation of the facts surrounding the case.
2. Identification of the key issues.
3. Listing of alternative courses of action that could be taken.
4. Evaluation of alternative courses of action.
5. Recommendation of the best course of action.

Steps In Solving A Case Study

IKEA is a multinational group that is headquartered in the Netherlands and is responsible for selling ready to assemble furniture, home accessories as well as kitchen appliances. Since the last ten years, the furniture retail company has maintained its position as the largest furniture retailer of the world. It is the vision of the company to create a quality of life which is better for all the people and hence includes a wide range of well-designed functional home furnishing products. The prices of the products on offer by the company are extremely low, so much so that it is affordable for all and sundry. This is the reason that the company has slowly but gradually gained a significant position in the market. The company has taken it upon themselves to obtain a high level of quality for their customers by implementing several policies like the optimisation of the entire value chain, building of long-term supplier relationships, investments in highly automated production as also the production in large volumes. The policy of the company is to go beyond the concept of home furnishing and create a better and more comfortable standard of living for the people.

Although the first store was opened by the company in the early nineteenth century and the customers were happy with low prices, the company faced several problems with the consumer preferences. Therefore to make a steady hold on the American Market the company had to change several aspects of the products and also concentrated on the enhancement of customer services. The company also provided low quality products, lot of parking space, restaurants as well as facilities relating to childcare. All these aspects led to IKEA’s success in the American Market.

The case study discusses the story of how the IKEA Company overcame its problems and dominated the American Market. The company was founded by Ingvar Kamprad in the early 1943. The company started off by selling basic household goods, and later by selling home furnishings. Subsequently the first showroom was opened by Kamprad and after that the company started to design low priced furniture. After that the largest Scandinavian store was opened which was the largest furniture display store (Moon, 2004). Right from the start of the first stores of the company, the magnetic appeal was contagious. Another reason thousands of residents in Sweden visited the stores was due to the extremely low price of furniture. Another key feature in case of the company is the designing or arrangements of flat packaging of the furniture. The innovation and improvements in the design became the trademark of the IKEA Company. The innovation, low cost, the sustainable policies were not enough for the company as several issues and problems were also faced by the company before it could dominate or make a name in the American Market (Adams, 2015).

IKEA - World's Largest Furniture Retailer

The company followed an interesting product development process and it was overseen by the product strategy council consisting of managers at the senior level. The respective authorities and managers helped in establishing priorities for the IKEA’s product line-up. The consumer preferences, the existing as well as the emerging trends in the market in furniture, were taken care of. Price matrices were utilised for successful calculations in terms of the margins of profit to be kept for the products, the target price of the product as also the required adjustments in order to meet the existing demands. The basic price changes, the four basic styles comprising Scandinavian, Modern, Country and Young Swede were taken into consideration for the price range of high, medium and low. The price matrices differed for each type of the product. The target price selection of the products was followed by manufacturer selection for producing it. The engineers employed with IKEA were responsible for deciding the necessary materials for making the product. The company always aimed to balance cost efficient labour with the product standards. Opportunities for expansion in the different parts of the world were always sought by the company. Once a price point was successfully established, the suitable materials decided upon, the actual process of design would begin. The competition that was existent in the market was also utilised to the company’s advantage. The company aimed at providing products which were low priced and were meaningfully placed as well. The products were tastefully designed, which in no way made the customers feel cheap (Copic, 2015).

It might be stated that despite the several possible ways in which the company ensured that the products they made and sold were good, provided great value, did not make the customers feel cheap, gave better options for transportation after buying the products, it faced several problems. The American customer base was not being created despite all these attempts. It was found that the Americans did not like the type of furniture which was being manufactured by IKEA and also faced issues with the comfort provided by the furniture (Björk, 2015). Since different countries were responsible for providing different parts of the furniture, the proper assimilation after the orders of the customers were difficult to be met. Some customers had issues with the fact that they had to assimilate everything on their own as also transport their purchases home. It also led to problems in case of people who did not have their own transport. Many people did not identify their personal home decors with the Scandinavian design of furnishings (Harapiak, 2013). The reports revealed that the beds as also the kitchen cabinets which were manufactured by the company were not suitable enough to fit the American sheets as well as the appliances, according to the American standards of comfort, the sofas were not comfortable. In many cases there would be delay in delivering the furniture if the parts of a particular furnishing item were not properly assimilated. In case certain customers the waiting period from getting a product selected to ultimately receiving it at home was a long and tenacious procedure and many were unwilling to wait too long. It was also reported that the kitchen cabinets and beds did not fit the American households. All these factors posed several problems for the company (Sparks & Langford, 2012).

IKEA's Policies for Success

The best possible solution for the company is to create a balance between the Scandinavian design and the demands for the comfort at par with the American homes. The own resources should be utilized by the IKEA to prosper in the American market. The compromise on any aspect of the business or furniture manufacture should not be encouraged. A possible alternative includes asking the customers for the measurement of their beds and their homes in order to send furniture which matches the existing sizes of American beds, kitchen cabinets and so on. In case this is done, the customers need not be worried about buying furniture which does not match with the requirements of the American market. Suggestions can be taken from the customers themselves in case of any possible suggestion or preference in terms of furniture design. Pre-booking facilities can be made for that furniture which takes time to manufacture. In the time between pre-booking and final delivery the possible parts of the furniture can be assimilated and properly delivered to the customers. The product matrix help in benchmarking and decision making based on it should be continued and if possible improved. The 30-50% lower cost in comparison to the existing competitors of IKEA should be maintained and if possible be improved (Mochon, Norton & Ariely, 2012).

Implementation of the possible alternatives in the business operations would ensure that the customer count would be more and the invasion of IKEA in America would be more grounded (Morsing & Roepstorff, 2015).

It can be recommended clearly from the case study that the company should continue operating in the way it is and also continue to provide more and more services in addition to the childcare, parking lots, spending leisure, arranging for transport and whatever it already provides. As long as the services are provided to the customers at affordable prices and the demands for innovation are met, the customer base of the company will never suffer.

Figure 1: Purchase by region

Based on the figures for the different regions, it can be recommended that the policies be so developed as to increase the purchase in those areas where it is relatively les in comparison to other countries. In order to achieve the goal of 2013, IKEA needs to apply the market leader strategy by expanding the size of the total market, the developing and defending of the market share are also essential. The company should find new users, uses as well as the volume of usage of the current customers. It requires cultivating a new concept of furniture which is a representation of the changing lifestyles of the people. IKEA requires positioning itself by changing the mindset of the consumers by several consumer communication channels (Jonsson, Rudberg & Holmberg, 2013).

Conclusions:

On the basis of the case study as well as the available information on IKEA, it can be stated that the country has a long way to go in future. The furniture market of America is extremely fragmented. To increase the market share it is necessary for the IKEA to give time and importance to focussing itself as the one-stop centre for all the requirements of household furnishing. IKEA should also focus on the shoppers’ experience it provides apart from the low price products. The vision for future growth needs to be kept in mind before the company focuses on the avenues for retaining its customer base. The sustainable solutions as well as continuously lowering prices should be maintained. Keeping in mind the range of services that the company provides, it can safely be said that the possibilities of success for the company are huge and no external force can prevent it from becoming a global furniture manufacturing giant.

References:

Adams, N. (2015). Design by Ikea: A Cultural History.

Björk, U. J. (2015). “Far Darker than the IKEA Paradise of Sensible Volvos”: American Perceptions of Sweden Filtered Through Crime Fiction. American Studies in Scandinavia, 47(2), 63-79.

Copic, M. (2015). MKTG 772 Strategic Brand Management.

Harapiak, C. (2013). IKEA's International Expansion.

Jonsson, P., Rudberg, M., & Holmberg, S. (2013). Centralised supply chain planning at IKEA. Supply Chain Management: An International Journal, 18(3), 337-350.

Mochon, D., Norton, M. I., & Ariely, D. (2012). Bolstering and restoring feelings of competence via the IKEA effect. International Journal of Research in Marketing, 29(4), 363-369.

Moon, Y. (2004). IKEA invades America. Harvard Business School.

Morsing, M., & Roepstorff, A. (2015). CSR as corporate political activity: Observations on IKEA’s CSR identity–image dynamics. Journal of Business Ethics, 128(2), 395-409.

Sparks, R. J., & Langford, J. (2012). An Examination Of Traditional Business Case Studies-Are They Outdated In Today's Technology Connected Environment?. Journal of Business Case Studies (Online), 8(2), 217.