Ikea

Ikea

When Ikea opens a new store people come from hundreds of miles away to be one of the first in the door, people make tents and camp in the parking lot for days. Why does Ikea have the loyal customer base that no other retailer can achieve? People decorate their entire houses, or furnish their businesses in Ikea furnishings. Is it that Ikea offers good quality furnishings at a fair price? Is it that Ikea sells modern trendy furnishings, or that you can buy the glasses for you kitchen and the book shelves for your den at one time? Ikea incorporates all these things into their stores and marketing strategies, Ikea also is socially conscious, and promotes organizations like UNICEF. Besides getting a good price on a book shelf, customers are also promoting human rights, and advocating for children in impoverished countries.

Company Information

The Ikea strategy has plenty of room to grow the retailer accounts for just 5% to 10% of the furniture market in each country in which it operates. More important, says CEO Anders Dahlvig, is that awareness of our brand is much bigger than the size of our company, that's because Ikea is far more than a furniture merchant. It sells a lifestyle to customers around the world. As long as consumers from Moscow to Beijing to Boston MA and beyond keep striving to enter the middle class, there will be a need for Ikea.

For the fiscal year ended Aug. 31, revenues rose 15 percent, to $17.7 billion, and estimates of Ikea's pretax operating profit at $1.7 billion. Ikea maintains these profits even while it cuts prices steadily. To keep growing at that pace, Ikea is accelerating store rollouts. Nineteen new outlets are set to open worldwide in the fiscal year ending Aug. 31, 2006, at a cost of $66 million per store, on average. CEO Dahlvig is keen to boost Ikea's profile in three of its fastest-growing markets: the U.S., Russia (Ikea is already a huge hit in Moscow), and China (now worth $120 million in sales). In the US Ikea has twenty five stores, where in Europe the market is the size of the US there are more then one hundred and sixty stores. Ikea has a goal of opening another twenty five stores in the US by 2010.

However, Ikea is not invincible. There is a certain amount of brand fatigue in countries like Sweden where the brand has furnished entire houses for generations. It also faces stiff competition from furniture close-out stores and even the cheap knock-off designs offered by larger retailers. Here Ikeas competes on price, but it is hoped that discerning customers will choose Ikea for its stylish design and higher quality materials.

The global middle class that Ikea targets shares buying habits- The $120 Billy bookcase, $13 Lack side table, and $190 Ivar storage system are best-sellers worldwide. Spending per customer is even similar. According to Ikea, the figure in Russia is $85 per store visit -- exactly the same as in affluent Sweden. Wherever they are, customers tend to think of the store visit as more of an outing than a chore. Right at the entrance, for example, you can drop off your kids at the playroom, an amenity that encourages more leisurely shopping. Half way through your shopping you can stop and have a snack or entire meal to motivate you to shop longer and buy more. Every Ikea store is designed the same way, this also gives customers a since of comfort as they enter a new store in a different area. Along the way, one touch after another seduces the shopper, from the paper measuring tapes and pencils to strategically placed bins with items like pink plastic watering cans, scented candles, and picture frames. These are things you never knew you needed but at less than $2 each you load up on them anyway. You set out to buy a $40 coffee table but end up dropping $500 on everything from storage units to glassware.

All of this came out of Ikea's humble beginnings. Kamprad started the company in 1943 at the age of 17, selling pens, Christmas cards, and seeds from a shed on his family's farm in southern Sweden. In 1951, the first catalog appeared Kamprad wrote all the text himself until 1963. Saving money is Ikeas principle goal, not just for the customers but for the company. Ikea works hard to come up with the cheapest and most efficient way of manufacturing, shipping, and selling all their items.

Environmental Protection and Child Labor

Ikea is a socially conscious company; they have strict company policy on child labor and protecting the environment. Ikea has a popular saying, "Low price, but not at any price". Ikea believes is good working conditions for co-workers, and manufactures, and the protection of the environment. Ikea strives to provide home furnishings that are manufactured under acceptable working conditions by suppliers who care for the environment. In 2000 Ikea introduced The Ikea way of purchasing home furnishing products, or called IWAY, as a strict set of guidelines to follow for all aspects of the organization. This code sets the requirements expected of suppliers involving working conditions, child labor, and environmental protection. Ikea works continuously to minimize the environmental impact of their operations. By producing many items of furniture with plastic composite, and using the least toxic ink, or recycling things like milk cartons and cardboard boxes to make the pressed partial board wood. Ikea feels particularly strong on issues regarding child labor. Ikea believes that no child labor should be involved in the manufacturing of their products; this applies to all their