Joverth John Lopez

Case Study #3 IKEA

Columbia Southern University

Advanced Marketing 5501

Professor Dr. R. Kay Green, DBA.

February 11, 2020

IKEA’S BUSINESS MODEL AND STRATEGY

IKEA is a global furniture retail company that was established in 1943 by Ingvar

Kamprad in Sweden. The stores are painted with yellow and bright blue which symbolizes

Sweden’s national color. The shoppers view furniture on the main floor in different realistic

setting inside a house. Shopping is a self service activity; after browsing and writing down the

desired items, shoppers can pick up their furniture at the loading area of the store. Now, IKEA

has 302 large-scale outlets in 41 countries around the world. It continues to promote the motto

“better life for everyone” and low cost furniture ever since its inception. It focuses on low price,

good quality household furniture and strives to create customer and social benefits as the center

of business (Kotler & Keller, 2016). It is a foundation and does not depend on investors. That is

why; IKEA is not on the stock market.

For the IKEA business model, its goal is to create a great designs and huge range of home

furnishings at a lowest price possible. One strategy to create lower costs for a customer was to

introduce the do-it-yourself home furnishings so that design, functionality, and affordability can

be combined together. IKEA engineers have been praised for the creativity, versatility, and the

multipurpose function of IKEA’s furniture (Hammett, 2018). IKEA’s pro’s is the ability to

address each customer’s needs. This will help build a relationship and brand loyalty because it

gives IKEA information about the specific needs of the customer for his home because of

previous history and based on the information provided by the customer (Kotler & Keller, 2016).

IKEA takes the extra step to discover space, functionality, and design requirements of each

customer. However, IKEA has been accused that the materials they use for their products are not
durable and can easily break. The package furniture will be assembled by the customer which

can cause frustration and human error.

IKEA’s PEST ANALYSIS

The PEST analysis is a tool used to understand how the 4 factors political, economic,

social, and environmental factors create a huge impact on the company. IKEA is known for its

one-stop-shop for furnished furniture and fixtures.

Multinational companies like IKEA operating across different continents are subject to

political and legal factors. IKEA depends on the economic stability of the government while

maintaining a good relationship in order to benefit from it; otherwise IKEA’s profit is at stake.

IKEA’s expansion to Asia has been a success (Edvardsson & Enquist, 2011). However, IKEA

continues to be on top of international importing and exporting laws. If IKEA is affected by

international laws, the company continues to rely on the world economy. Store closures in

England have affected IKEA’s profits in the UK. The UK is a major market for IKEA and with

the Brexit it may result in increased prices and the export and import of goods (Gaille, 2018).

With IKEA’s expansion to ASIA, it delivered a strong moderate growth. With the

emergence of strong economies IKEA can benefit from research. The social factors that impact

IKEA are cultural beliefs, attitudes, and values that the majority of the population which it

operates in important. Understanding customer’s lifestyle, beliefs, and profession would help

design both the products and marketing messages that would lead to a venture becoming a
success (Gaille, 2018). The demographics of the population can impact whether or not a certain

product may be marketed to them. It would be unable to promote premium-products to the

general public. The social classes can make it difficult to draw in the target market effectively.

This is where IKEA should be very careful not to lose the connection of its target market's

interests. IKEA needs to be fully aware of what level of country’s health standards, safety, sexual

harassment, and environmental concerns (Hammett, 2018).

IKEA uses cloud based business solutions to help run logistics and track products. It is

important to monitor the competition and what business solutions are they using when it comes

to marketing and logistics. The impact of cloud-based business solutions in companies has the

potential to increase profits and reduce the loss greatly. If these profits are great in number, they

may be reinvested into the research and development department, where future technological

innovations would further raise the level of profits, and so on, ensuring sustainable profits over a

long period of time (Edvardsson & Enquist, 2011).

IKEA uses Inter IKEA Systems, it is a cloud based business solutions to help run

logistics, track supplier and customer products to optimize customer experience. It is important

to monitor the competition and what business solutions are they using when it comes to

marketing and logistics (Gaille, 2018) The impact of cloud-based business solutions in

companies has the potential to increase profits and reduce the loss greatly.
IKEA’S COMPETITORS

Amazon’s Rivet, Stone & Beam and will serve as their home furnishing brand. Amazon

started a free shipping policy for both the brands. IKEA being the most renowned furniture

seller on the globe, rarely offers free shipping of its products, whereas the delivery charges of

IKEA is high (Gaille, 2018). IKEA does not sell most of their items online versus, Amazon’s

product is easily ordered online.

Wayfair is also selling home improvement related items online. The company holds more than 10

million products which can be supplied throughout the world. It has a wide selection of indoor and

outdoor furniture along with a great level of customer service.

Walmart is another competitor. It made sure that every furniture design has a specific match for

different home décor requirements. The retailer provides a wide range of furniture from bedroom

furniture to kitchen furniture to office furniture (Kowitt, 2017). Walmart continues to be a competitor and

continues to improve their furniture designs and catalogue.

CONCLUSION

IKEA’s success is attributed to the different business concepts which support the global

expansion, influence and value of the company. Different strategies are being used especially in

stores with an increasingly uncertain economic environment. While examining IKEA’s existing

business solutions model, supply chain, innovative product designs, had me to conclude that the

company will continue to grow its profits in years to come. Moreover, IKEA should look at

target groups who are in the metropolitan areas and universities because of its unique furniture

design and multiple usages. The location of the store should be accessible for the target

customers to come and make a purchase. Customer loyalty should be one of the many things the

company needs to improve on.

REFERENCES

Edvardsson, B., & Enquist, B. (2011). The service excellence and innovation model: lessons
from IKEA and other service frontiers. Total Quality Management & Business
Excellence, 22(5), 535–551. https://doi-
org.libraryresources.columbiasouthern.edu/10.1080/14783363.2011.568242

Essays, UK. (2018). Business Model Of IKEA. Marketing Essay. Retrieved from
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Gaille, B. (2018). IKEA Business Model and Marketing Strategy. Small Business Article.
Retrieve from
https://brandongaille.com/ikea-business-model-and-marketing-strategy/

Hammett, E. (2018). IKEA shifts marketing strategy to focus on product innovation rather than
rooms. Marketing Week (Online Edition), 2. Retrieve from
http://eds.b.ebscohost.com.libraryresources.columbiasouthern.edu/eds/detail/detail?vid=3&sid=8
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&db=bsu

Kotler, P., & Keller, K. L. (2016). Marketing Management (15th ed.) [VitalSource Bookshelf
version]. Upper Saddle River, NJ: Pearson. Retrieved from
https://online.vitalsource.com/#/books/9781323591512

Kowitt, B. (2017). It’s IKEA’s Worldpass. Fortune, 171(4), 166–175. Retrieved from
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?
direct=true&db=bsu&AN=101421257&site=eds-live&scope=site