IKEA is a Swedish born private limited company that deals in household items. It was founded by Ingvar Kampar in 1943 at the age of seventeen. He coined the name from the initials of his name Ingvar Kampard, his home town Elmtaryd and his home parish Agunnaryd –IKEA. IKEA started small through selling home appliances such as plates, wallets, watches, jewellery and picture frames. IKEA comprises of two businesses namely, INGKA Holding B.V the mother company and Sweedgwood which deals in production of IKEAS house fixtures and fittings. Sweedwood carries out purchasing and supply of its furniture, IKEA, based in Sweden carries out innovation and execution of its products collection. Stitching INGKA Foundation exclusively owns INGKA Holding BV, whose establishment lies in the Netherlands. IKEA has over 186 outlets in 31 states. 166 of these outlets are owned by the IKEA Group. Franchises outside IKEA Group run the other 31 outlets. Companies wishing to run franchise business under IKEA undergo strict screening and assessment by its systems. Inter IKEA Systems B.V issues franchise licences to several of its stores. IKEA Group is a private establishment comprising several companies managed by a charitable foundation based in Denmark, IKEA International.
IKEA Business Strategies
Customers always stick around companies that put their best interest at heart. IKEA has proven so by offering customers a memorable shopping experience, which enables IKEA to maintain old customers and bring in new ones continuously, thus, ensuring customer loyalty. It welcomes customer’s complaints and suggestions. What they expect from its products and services and IKEA itself. Being a household name with its acclaimed world class furniture, IKEA’s secret to success must be offering products and services that are unparalleled in the market. Its competitors can not match its high quality stock. As IKEA continued to grow over the past decade, it has always concentrated on managing cost, specifications in operations and constant product development and design. This results into pricing their range of products in a way that customers can afford. < Highways Agency – PEST analysis
KBR: Roles and responsibilities within an organisational structure
Consumers are accustomed to a variety where one can evaluate the benefits of a product or service before making a purchase decision (Sandeep, 2003, p 78).
IKEA offers this by manufacturing a range of products such as furniture and home furnishings. It also makes sure that goods are supplied to all its outlet stores globally to ensure that customers are supplied with their products constantly. Another success tool for IKEA is that it does not wait for consumers to come in and shop manually; it offers online shopping, whereby, customers can make product requests through its webpage. Online shopping enables IKEA to reach millions of its customers by the touch of a button. The site has a record of 12000 products and is frequented by over 470 million people. E- Closet products illustration embodies a close update of its range of products called e closest representation. IKEA advocates for maximum exploration of raw materials through its contractor to curb wastage and use of sustainable energy which limits air pollution and cost reduction. IKEA has embraced the green campaign encouraging the use of biodegradable products that are not hazardous to the environment. It considers business being successful only when its surroundings are well taken care of. It is also the third largest user of wood behind The Home Depot and Lowe.
According to David & William (2007, p. 87), for a company to gain competitive advantage, it must aim to deliver products that are uniquely different from its competitors. The target group must always find it easy to choose a company’s product from the shelf with those of the competitor. The product must stand out through branding, or, the benefits it offers are far much better than the rivals. Differentiating products ensures customer loyalty. IKEA has managed to have a large customer base worldwide by paying more attention to product development and execution. This way the final product produced is unique. For example, IKEAS furniture is known to have a touch of Scandinavian style. It makes IKEA furniture stand out.
Consumers would settle for such a product because of its unique appeal. what really makes costumer want to enter an IKEA outlet to make a purchase? First the design of IKEAs store stands out. The stores are expansive and are painted in blue and yellow accents with a few windows. A one way illustration guides the clients along the store facilitating easier selection of goods. Some of its stores have a glass design layout, which serves two purposes; one, it makes the store look appealing, two, glass reflects light thus the working enviroment is fresh in the long run boosting employees morale. Most of its outlets have portioned a place within the store just before the cash register where discount is given on damaged ,returned and previous goods on display at the same time emphasizing on no return policy. IKEA stores have maintained a culture of long opening hours with maintenence and restocking done during the night. For example in Saudi Arabia IKEAs stores are opened from 10am in the morning up to late midnight weekly . compared to other rivals, it has tapped late night shoppers by doing so (Adrian,1998 p. 32).
Aside from selling home appliances, many of its outlets have side restaurants which serve traditional Swedish food for example, meatballs, cream sauce and lingonberry jam, blended with local delicacies. It has attracted millions of shoppers who always want to try new things. After shopping, one can always indulge in some local and Swedish delicacies. Restaurants are opened before the rest of the stores daily, offering affordable breakfast. In IKEAs Germany outlet, breakfast consists of two brad rolls, a slice of smoked ammonia slice of cheese plus a slice of salami. It offers playgrounds where parents can drop off their kids to play as they engage in a stress free shopping experience. Another different service that IKEA offers is its ready to assemble furniture which eases the company’s transport and packaging cost and customer satisfaction is achieved as he/she is spared the hassle of delivery cost. For first buyers of houses, buying price is cheaper because IKEA offers flat pack ones. The initiative which was started in 1996 dubbed BoKlok is a collaboration with Skanska. This venture has been successful in countries such as The UK and Netherlands.
IKEAs products are known to have single names. This way, consumers can easily memorize them. Naming process is carried out by IKEA’s unique naming method. For example, fabrics have women’s names while chairs and desks have male names. IKEA came up with a Business family idea in some of its outlets whereby, loyalty cards dubbed “IKEA family” which are priceless and are to acquire discounted range of products from its numerous stores. On top of that, a magazine called IKEA Family Live is featured every four months and printed in thirteen languages. It is predicted that about half a million people will subscribe for the magazine.
Following the 1980s and 1992 formaldehyde outrage, IKEA has taken bold steps in conserving the environment. The company invited Karl Henrick founder of The Natural Step to advise its directors on better ways of enhancing the company’s environmental approach. Thereafter, IKEA took up Karl’s Natural Step framework by developing the Environmental Action Plan in 1992; it focused on full use of resources supply and less consumption of energy crucial to deal with cut off concern. IKEA planned to reduce the use of formaldehyde in its products such as textiles, launch bicycles which consumers in Denmark could rent, the bicycles had trailers to curb fraudsters, to obtain wood for its home furniture from forests that are maintained through reforestation an afforestation, to package its products with reusable substance to promote recycling. IKEA latently ceased offering plastic packages to its clients rather, they replaced this with reusable bags for sale, its restaurants also provide reusable plates and knifes Gibson, (2008, p. 67).
IKEA Economy of Scale
Risk bearing, IKEA purchased Habitat a high end company to the tune of 78 million Euros its aim was to study the danger of selling a wide range of products at high or low prices. Being a low end brand, meaning it prices its products such that many can afford. The engagement was that consumers tend to buy cheaper products when faced with financial constraints and engage in expensive products in times of economic boom. In terms of financial economies, IKEA being a well known world supplier of home furniture has an upper hand when it comes to borrowing large amount of funds as compared to smaller companies.
Financial institutions are willing to lend larger companies funds because they have confidence that such big companies will mange such loans because they have higher credit ratings. In regard to Learning or Training Economies, IKEA offers an expensive hiring procedure to those hoping to work with it; the process normally runs for two weeks. Prospective IKEA employees go through rigorous on job training. They are taken through the company’s working and shopping experience. Rigorous training ensures that those hired are efficient in their duties by working under minimal supervision, increased work speed in the long run yielding positive results. Through bulk buying IKEA reduces cost of raw materials. By securing long term agreements with its suppliers and contractors the company pays averagely priced raw materials, thus transport and packaging costs are minimized in the long run (Graham & Nigel, 2008).
For a company that was started in the 60s, it commands a large consumer base not just in Sweden but globally. Research indicates that about 10% of furniture purchases in the United Kingdom are IKEA brands. It also indicates that within the past three years, a third of families frequented IKEA stores. As reported by retail analyst Mintel, IKEA has a market share of 9.6 percent which indicates that at least one of every ten pound spent goes into its cashpoint. Even though the housing market economy had dwindled the company’s shares rose up steadily in the furniture business fall (Graham & Nigel, 2008).
Aims and Objectives
IKEA prides itself to be the number one choice by consumers when it comes to purchasing home furniture and accessories. It also looks into producing a range of quality affordable goods. It also aims to make these goods available in all outlets to maintain a steady flow of customers, to put the customer’s interest at heart by welcoming complains, offering feedback and taking in suggestions. The company encourages a co-worker culture to maintain liveliness in service provision, to take care of the environment and to be a good neighbour.
Being in business for over decades and maintaining a steady flow of satisfied clients is a hard thing to go by as far as business is concerned. Judging from its aims and objectives, I have come to the conclusion that maintaining world class durable products is the key to acquiring brand loyalty. IKEA has shown this by being at par with the latest fashion styles. Creativity and innovation is core to satisfying consumer continuing changing wants and demands in stylish products. All in all a satisfied customer means a successful business.