IKEA Invades America

Multinational Strategy
Group 3

Did You Know?

IKEAacronym for Ingvar Kamprad (the
founder), Elmtaryd (the farm in which he grew up)
and Agunnaryd (the village in which he grew up)
IKEAs crazy product names used in place of
numbers were because Ingvar Kamprad is
dyslexic
IKEA stores are designed like a maze to prevent
customers from leaving
IKEA products use approximately 1% of the entire
worlds commercial supply of wood
IKEA is building its own town near London. It will
contain shops, schools, theatres, a hotel and a
flat-pack housing for 6000 people

Company Background
In 2002,
$12 billion revenues

Top furniture
retailer in the
world

Company:
Private
Products: Self
assembly
furniture
Founded:
1943 in
Sweden

154 stores

22 countries

286 million
customers a
year

PODs:
Self service stores
Amenities such as playrooms for children, Swedish cafes
Unassembled Do-it-yourself furniture

Founder:
Ingvar
Kamprad

Vision

Market Positioning statement:

To create a better
everyday life
for the many
people

Your partner in better

living. We do our part,
you do yours. Together
we save money

Culture
Pragmatic, cost-cutting
sensibility
Waste was considered a sin at
IKEA
Employees were on a first-name
basis regardless of seniority or
position

IKEAs Product Strategy

Group of Senior members
Established product lineup priorities based on consumer trends
Product Strategy Council
Set product price lower than competitors benchmark
Identify gaps and opportunities

The Matrix

IKEAs Product Strategy (cont.)

Product
Priority

Set Target
Retail Price

Selection
of
Manufactu
rer

Materials
to be used

Internal
competitio
n to select
Designer

Redesign ?

Flat packaging
IKEA designs its products so that they can be packed flat and
assembled by customers
Less storage space required
Reduced labour cost
Reduced transport cost and damage
Transport volume was 6 times less

Store Design

Furniture Retailing in the US

US Furniture Industry:
Highly fragmented market
In 2002, Top 10 retailers accounted for 14.2% market share$67 billion Sales in 2002
Wide dichotomy between high and low-end retailers
45
%

Case Goods

Upholstered
furniture

10
%

45
%

Bedding,
Ready-toassemble &
casual
furniture

Low-End Furniture
Retailers

High-End Furniture
Retailers

General discount retailers

Cut-rate pricing, low margins
Dreary & dingy environment
Haphazard Product displays
Inconsistent poorly managed
inventories
Poor to non-existent sales
assistance
Limited & dull product
selection

Single & multi- brand

retailers
Focussed on affluence &
comfort
Luxurious store environments
Huge inventories
High-touch sales consultants
Heavy selection 6-10 styles
of product type, 6-10 substyles within each style

Americans Love their Couch..

Americans were notorious for their reluctance
to buy new furniture
Americans hung onto their sofas much longer
than their cars and tended to change their
spouse as often as their dining room table,
about 1.5 times in a lifetime
They bought sturdy furniture that lasts a
lifetime

Enter IKEA
1985: First
Store in
Philadelphia

The company discovered that Americans did not like its products
The product life was less
IKEAs beds and kitchen cabinets did not fit American sheets and appliances
Sofas were too hard for American comfort
Product dimensions were in cms rather than inches
Kitchen ware was too small for American serving size
Very less staff to help out customers
Prior preparation for buying furniture

Its just Furniture, change it !

Market Research to adjust product lineup and merchandising
High Profile Advertising campaign for a commitment-free
approach to furniture
Ad campaign- Unboring
Lamp-Video
By 2002, US was IKEAs third largest market
Its 14 stores were servicing close to 30 million American
customers a year
The companys in-house restaurants were now the 15th largest
food chain in America

Competitive Advantage
Low price with meaning: Aesthetic designs
with reasonable pricing
Single Alley Stores
Scandinavian design and heritage
Flat-pack distribution concept
Interior competence
Bundle of Additional Services
The Brand itself

IKEA Today
As of FY2015,
IKEA Group has
operations in 43
countries

IKEA.com had 1.9

billion visits during
FY15, up 21% from
FY14

771 million
store visits in FY
2015

213 million
catalogues printed
in 32 languages

328 stores in 28 countries

Key takeaways

Adjust product offering according to Country

Beat competition with innovative and trend setting practices
Communicate through advertising
Train your staff according to customer needs

Thank You.