2. BACKGROUND OF IKEA The founder of IKEA, Ingvar Kamprad, began his business career as a young boy selling matches purchased in bulk individually for a profit to his neighbours. As his business grew, he expanded to selling fish, seeds, Christmas decorations and eventually, pencils and ball-point pens. He was very clever in utilizing his resources - he delivered his goods by bicycle, and later used the local milk delivery vehicle to make deliveries. In 1943, with a gift from his father, Ingvar established his business, using his initials, Ingvar Kamprad, the name of the farm on which he was born, Elmtaryd and the village nearby, Agunnaryd for the acronym. By 1945, the first advertisements for IKEA began showing up in local newspapers and he had developed a rudimentary catalogue. Locally manufactured furniture first showed up in the IKEA product range in 1947 and was received positively by its customers. It wasn't until 1951 however that Ingvar began to focus only on furniture and discontinued all other products from the IKEA product range. The first IKEA furniture catalogue was published that same year and 2 years later, in response to competition, the first furniture showroom opened in the village of Älmhult. This same competition caused other furniture stores and manufacturers to put pressure on suppliers to boycott IKEA which led to the critical decision to design their own furniture beginning in 1955.
3. PURPOSE OF IKEA Ikea's mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them. The company targets the customer who is looking for value and is willing to do a little bit of work serving themselves, transporting the items home and assembling the furniture for a better price. The typical Ikea customer is young low to middle income family. IKEA products are identified by single word names. Most of the names are Swedish in origin. Danish place names - Carpets Flowers, plants, precious stones - Bed linen, bed covers, pillows/cushions Mammals, birds, adjectives - Children's items Mathematical and geometrical terms - Curtain accessories Foreign words, spices, herbs, fish, mushrooms, fruits or berries, functional descriptions - Kitchen utensils Swedish place names - Upholstered furniture, coffee tables, rattan furniture, bookshelves, media storage, doorknobs Norwegian place names - Beds, wardrobes, hall furniture Scandinavian lakes, rivers and bays - Bathroom articles Grammatical terms, sometimes also other names - Kitchens Colloquial expressions, also Swedish place names - Boxes, wall decoration, pictures and frames, clocks
4. IKEA’S MANAGEMENT IKEA's main strength was its committed workforce, which was often the source of the company's innovative concepts. IKEA adopted a positive approach toward human resource management. Key responsibilities for a role in IKEA include: Strategic Implementation of IKEA Concept - Working in partnership with the franchise owner to formulate strategies, objectives and targets to maximise return of the investment. Store Operations: As the key custodian of the IKEA brand you will ensure the brand integrity is maintained throughout the Store and implemented to the Franchisor standards and guidelines. Staff Management: You will ensure that the Store has a positive and supportive work environment and the staff are suitably recruited, trained and motivated to perform their jobs effectively. Store Development: You will support the process of developing the store by proactively keeping abreast of advances in theآ business locally, within the region and within the international market. The quotation below describes the qualities required to gain a Store Manager role: “With a minimum of five years experience in a similar level role, you will be a strong manager and team leader who has the retail operational knowledge required to continue to lead the team towards the highest of standards. Your track record influencing and negotiating with key decision makers will compliment your strong leadership and relationship building skills. You will have a solid understanding of the retailآ industry in theآ local area’s market with demonstrated experience in driving sales and building customer loyalty.” - the Egyptian IKEA man
5. IKEA’S SIZE The first IKEA store was opened in Sweden in 1958. Since then stores have been opened in: Norway 1963 Denmark 1969 Scandinavia 1970 Switzerland 1973 Germany 1974 Japan 1974 Australia and Hong Kong 1975 Canada 1976 IKEA has continued expansion into more countries in the 1990s and 2000s. Germany, with 44 stores, is IKEA's biggest market, followed by the United States, with 37. At the end of 2009 financial year IKEA group had 267 stores in 25 countries. However, the company has thus far not shown much of a presence in the developing countries in about 300 stores in more than 35 countries. Singapore 1978 France 1981 Canary Islands 1981 Belgium 1984 United States of America 1985 United Kingdom 1987 Italy 1989
6. IKEA’S EMPLOYEES In 2008 the number of worldwide employees stood at 127,800. At all levels, Ikea rewards its staff well financially. Holidays are generous and you will receive other benefits such as: Co-worker discount End of year gift Long Service Award Pension First day of school leave Staff restaurant Sick pay Uniform Ikea has also been known to give each of its 9,000 employees a bicycle for Christmas. The company, which presented staff with the fold-up bikes at the company’s annual Christmas breakfast, said they would help to cut environmental pollution and offer an alternative method of transport to get to work also offering staff 15% off travel tickets to encourage employees to take public transport rather than travelling by car. Peter Hogsted, UK country manager at Ikea, said that other employers should follow their example: “The bike is a fun present but there is a serious message. We all have the responsibility to do what we can to protect the environment," he said. Jobs available within the IKEA family include: Ikea Customer Service Co-Worker - Available full time, part time and temporary Ikea Internal Communication Specialist - Available full time, part time and temporary Ikea Food Chef Specialist - Available full time, part time and temporary Ikea Store Manager - Available on a full time, permanent basis
7. IKEA’S FINANCE IKEA, who has been the subject of attacks from Government ministers over the construction of its stores and from unwilling shoppers who see it as a retail hell, have said pre-tax profits for the year to last August dived to £104m. That is a drastic slide from the prior year when they leapt 15% to more than £150m. The latest reporting period takes in Ikea's disastrous opening of its Edmonton store in north London, where there were reports of shoppers acting like animals, with some hospitalised. Sales in the year rose marginally to £1.1bn. The company blamed the collapse in profits on one-off costs such as extending and rebuilding various premises around the country. It is trying to shake up its image in the UK after founder Ingvar Kamprad conceded it needed to invest more in its staff and raise its prices. Ikea said earlier this year that it was spending £60m in an attempt to end its reputation for providing 'nightmare' retailing experiences.
8. IKEA’S MARKETING "To create a better everyday life for the many people … To offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them … Your partner in better living. We do our part, you do yours. Together we save money.“ The IKEA concept builds on a relationship with the consumer. Many key messages are used within the IKEA marketing communication to build this relationship and give an understanding of how IKEA can fulfil their customers needs. Price: Low price is not appealing unless it represents good value for money. This is where IKEA is able to make a real difference. IKEA is committed to having a good relationship with our suppliers and so are able to purchase good quality, economically produced designs that are bought in bulk to keep costs down. By making all our furniture flat packed they cut down on transportation and assembly costs. Place: The IKEA store offers "everything under one roof", most of it available for immediate take-away. IKEA offers service where you need it, but allows customers to make most of the decisions themselves. Products are displaying correctly, described accurately and a simple returns policy is offered. Product: The quality of a product must be appropriate for the intended use. For example there is no need for an expensive back panel on a bookcase if a less expensive alternative does a good a job as long as the bookshelf is used for the purpose it was intended for. IKEA products are subjected to rigorous tests to make sure that they meet national and international safety standards. Promotion: IKEA has a long tradition in marketing communication focusing primarily on printed media which has proven its values and success to the company over the years. Other media now being used to an increasing degree include TV, radio, and internet based communication. The IKEA catalogue is the main marketing tool with around 70% of the annual marketing budget being spent on this alone. It is produced in 38 different editions, in 17 languages for 28 countries. 110 million catalogues were circulated last year - three times higher than that of the Bible, with 13 million of these being available in the UK.
9. IKEA’S PRESSURES Ikea was warned that the housing downturn was to hit sales of its flat-pack furniture and said it has scaled back some of its expansion plans. The world's largest furniture retailer suffered falls in like-for-like sales in some of its major markets, and was warned the declines would spill over to other European countries. "The housing downturn is important for our business and we feel it quite a lot," Anders Dahlvig, the chief executive, said. "Our growth is going down slightly in the US, the UK and Germany. The downturn is affecting us quite a lot." He said that future expansion would be at a "much slower" pace. "I definitely see big challenges in the western world and opportunities in emerging markets." The retailer will concentrate its investment in emerging markets such as Croatia, Slovenia and Ukraine, and adding stores to those it has established in countries such as Poland, Russia and China. He also hopes to break into India if legislation on foreign ownership is eased.
10. EVALUATION OF IKEA Ikea is a very successful multinational corporation, which indicates that earlier discussed focused generic, or long-term strategy of cost leadership and product differentiation has served it well. The Ikea concept is unique and over twenty years of international operations have not triggered any direct international rivalry. IKEA’s strengths include: It promises the same quality and range worldwide A strong concept – based on offering a wide range of well designed, functional products at low prices a 'democratic design' – reaching an ideal balance between function, quality, design and price. IKEA's 'Cost Consciousness' means that low prices are taken into account when each product is designed from the outset. Increasing use of renewable materials – IKEA improved its overall use from 71% in 2007 to 75% in 2009. Some of IKEA’s weaknesses include: The size and scale of its global business. This could make it hard to control standards and quality. Some countries where IKEA products are made do not implement the legislation to control working conditions. This could represent a weak link in IKEA's supply chain, affecting consumer views of IKEA's products. The need for low cost products. This needs to be balanced against producing good quality. IKEA also needs to differentiate itself and its products from competitors. IKEA believes there is no compromise between being able to offer good quality products and low prices. Threats of IKEA may stem from: Social trends – such as the slowdown in first time buyers entering the housing market. This is a core market segment for IKEA products. Market forces – more competitors entering the low price household and furnishings markets. IKEA needs to reinforce its unique qualities to compete with these. Economic factors – the recession slows down consumer spending and disposable income reduces.
