Ikea Invades America

IKEA Invades America

INTRODUCTION

In the year 2002, IKEA held the title of the world’s top retailer for furniture, holding sales that approached $12 billion. IKEA is able to operate 154 stores across 22 countries and service 286 million customers per year. This store was founded by Ingvar Kamprad in 1943. Originally, the store sold basic household goods at discounted prices. It was not until 1947 that Kamprad began to sell home furnishings. In 1953, Kamprad opened his very first furniture showroom and in 1955, IKEA began to design its own low-priced home furniture. IKEA opened its first store in Almhult, Sweden in 1958. Then, in 1965, they opened their flagship store in Stockholm. At that time, it had become the favored furniture store for all the price-conscious shoppers in Sweden. Ultimately, the store became the prototype for all of IKEA’s outlets. Soon, the company expanded beyond Scandinavia, starting in Europe and then eventually branching into Asia and North America. By 2002, IKEA’s revenues approached $12 billion and their brand was considered to be one of the most valuable in the world. Though this company has had much success, IKEA’s corporate culture has still been able to retain its cost-cutting mindset. Their managers always traveled in coach instead of first class, or took the bus instead of a taxi if at all possible. Their employees were constantly reminded to be conscious of their energy use, and reminded to turn off things that were not in use. IKEA also has the reputation of being a very personal company environment as well, as all 70,000 employees were on a first-name basis with each other.

SITUATION ANALYSIS

It was IKEA’s goal to have 50 operational stores in the United States by the year 2013, and had a very good shot at reaching this goal. They were a quick growing furniture retailer in the country, and was the seventh largest furniture in the United States - excluding general merchandise retailers such as Wal-Mart, Office Depot and Sam’s Club. The main problem for IKEA was them being able to put together the perfect marketing and business plan to make this expansion a reality. The design and style of IKEA’s products appealed to a specific niche and did not appeal to everyone’s taste, and IKEA knew they needed to find some way to appeal to the broader public.

STEEP ANALYSIS

SOCIO-CULTURAL

- Specialty retailers are able to provide dozens of styles for one individual product, instead of one cookie cutter model (+)

- Trained salespeople work in furniture stores to educate customers (+)

- Americans were notorious for their reluctance to buy new furniture (-)

- Almost all furniture retailers offered a delivery service (-)

TECHNOLOGICAL FACTORS

- Non-applicable

ECONOMIC FACTORS

- In the U.S- furniture retailing accounted for $67 billion in sales in 2002 (+)

- Top 10 furniture retailers were responsible for just 14.2% of market share (+)

- “General merchandise retailers tended to aggressively promote their furniture products on the basis of price” (-)

ECOLOGICAL

- Non-Applicable

POLITICAL

- Non-Applicable

SWOT

STRENGTHS

- The IKEA brand is one of the top furniture brands

- IKEA is able to keep the cost of their items low, even with their brand name

- The IKEA corporate team works to keep production costs low

- The company has a product-strategy council which established priorities for IKEA’s product lineup

- They have effective store layouts with bright and inviting atmospheres

- 10,000 different products

- The company-operated child care facility is very useful for parents

- Restaurants in stores

- Unique Scandinavian design

WEAKNESS

- Redesigns of products would often increase the product assembly burden on the customer

- Customers found that the products did not last very long and did not withstand anything as disruptive as a move

- Had yet to expand their design style from Scandinavian

- Items had to be assembled by customers