Discussion: Target and Market Position

Ikea is one of the biggest furniture and household appliances retailing company in the world. It was founded and established by a Swedish businessperson named Ingvar Kampard, in the year of 1943. Ingvar started with selling pens, picture frames, and wallets. In five years he came up with his line of furniture. The whole purpose of the business set up by him was to be affordable while selling furniture. For most cases furnishing homes take up a big budget for families. He attempted to sell home furnishing lines at a friendly cost (Hultman et al. 2012). The TRP of the products are based on their high quality, low-price and their special Scandinavian styling. The company has more than 313 stores across 37 countries. (Wenzel and Förster 2013).  

Following paragraphs of the report offers a brief summary stating the marketing strategies, SWOT and PESTEL analysis of the organization, pros and cons of their business strategies, their sales planning. There are recommendations for better sales and marketing plans for the future. It also sheds light on how IKEA has successfully spread its business models in various continents like in Europe, Russia/Ukraine, Asia Pacific and North America.

Ikea’s main business idea is to provide a wide range of functional home furnish able products for a low price. They have targeted a broad area. The products from Ikea appeal to all age groups, sex groups, global geographic location delivery and the most common thing in common is the price preference for all products (Mochon, Norton and Ariely2012). IKEA has started to produce furniture’s specific for lifestyles. Interior design experts have joined their team to work with them. Quality products with cheap price than the competitors are one of the main strategies of the company. Innovative and modern designs to make the customers feel more modernized, catering to different market groups consisting of international customers, age and purpose of usage have been considered. The customers want modern designs with unique functions suiting their lifestyle with cheap price tag and Ikea successfully has been catering to that.

Ikea focuses on the commitment to product designs, valuing their customers and giving suitable solutions for future considerations (Hultman and Elg 2013). They have used cost effective materials and by minimizing their production cost to make the best designs of appliances at a cheaper cost. Their big part of cost comes from young furniture owners who require cheap and long lasting furniture. Cost has become an important aspect of the company. Customers often do their own pickup or pay a nominal amount of fees for the delivery to be done, which helps in the costing process of the company. The customers get a home like setting in showrooms, where the appliances and furniture are arranged in a way to represent a home. Ikea mainly gives emphasis on the prospect of cost reduction and manufacturing. Design has been considered the least important for a project. So, there are only 10 in house designers and a large community of freelancer designers (Han and Zhong 2012).

SWOT

• The main strength of Ikea is that they deliver value products irrespective of the market conditions they are in. Customer satisfaction has always been their highest priority. This has made their market position perfect in the competition (Perchinunno and Schirone2012)
• Making products, which can be easily assembled by the customer by following the instructions manual, has made the products more appealing. The facility of self-assembly or Do It Yourself products reduce the cost of the product thus, making the company the leading retailer of furniture’s.
• Ikea measures its performance strengths by using the key performance indicators (KPI). The KPI provides a list of rules, which include using renewable raw materials, reducing waste production and maintaining long-term relations with the suppliers for future cheaper product availability (Hildeman and Carlsson2014).  

• Being a global organization makes the company difficult to maintain quality throughout the global market. The company tries its best to maintain the quality across the world it fails to do it often (Baier, Rese and Schreiber 2015).
• The companies possessiveness with the cost reduction of products has often made the product not so quality dependent. Cost reduction in raw materials make up the large margin of their profit. It needs to be considered that the cost of raw materials is not same across the globe but they still try to replicate the standards across the globe.
• The company also faces environ mental concerns, which are not always shared with all the stakeholders and the customers.

• Many environmental conscious people around the world become the main target of Ikea. They are all waiting to be tapped out by the company.
• The biggest opportunity of the company is the cost effective products, which are also a demand of many people. People tend to buy products, which are cost effective in nature. The customer rarely consider if they are getting the product effective to their cost (Ngai and Falkheimer 2017).
• The company’s expansion to the developing countries helps them increase their profit margin. The untapped customers are the advantage, which the company can take on. The company has already planned its entry into India and China.

• The company’s main motto of low cost products has already been copied by many organizations.  This makes them vulnerable to more competition. The company needs to upgrade their production standards and strategies to combat such companies.
• With the introduction of online shopping, DIY projects are the main norm of all products. Every other product sold comes with a DIY instruction manual. IKEA has to make up innovations, which can combat the lower cost model and DIY strategy (Novicevic et al. 2012).

Ikea is spread globally and it needs to plan the sales as per the topological features of the country. The product and the service portfolio of each country differs as per their culture, economy and social stature and these have helped them to win their customer’s heart in a single go (Dudovskiy 2017).

Ikea has operations in more than 37 countries. Every country has political forces which has their effects on a business. All factors of the business are affected by the political factors of countries where they operate. How friendly a government is to any outside company doing business with a country also affects the market value of the company. Political environments can affect the growth of a company. In the last few years the company has been able to increase their markets in China and India as the governments have eased out the barriers for them. Ikea is undergoing plans to take over larger portions of the Asian markets. However a large chunk of the company’s supply is in Europe. Any kind of political disturbances can change that.

Economic factors play a secure role in shaping the market of a certain company. The condition of the world economy as well as the country in which the company is trying to set up a business are very essential factors in determining the kind of business they will make or the kind of profit they may attain. For instance, during the recessions, people lack the possibility to go buy things as much as they would do otherwise. This directly affects the business outcome for any company. Ikea has always been known as a brand whose costing and pricing of goods have been well balanced which has allowed it to maintain the good health of the company’s profit. With the betterment of economic conditions in the US, Ikea along with other companies is getting better with employments and profits. The pricing of products depend on the economic strength of a certain place.

Ikea has planned to provide customers goods at a pocket friendly price. They have contributed quite lot to the society. The employees of the company are eligible to enjoy benefits such as insurances and pensions. Ikea has delivered what it has promised to provide in terms of durability of products and pricing. So the company attracts customers from varying cultures to invest in products they sell. They have a social stature by now which is unparalleled by many companies of the kind. Their attempt to reach out to their customers better is reflected in their attempt to go online and guide better. Staffs are trained well enough to handle online queries, which help to cater to customers better and more effectively.

The brand uses the latest technology for production of goods for the best outcome, and all this is done keeping in mind the company’s benefit in terms of costing. They use trained staff to perform tasks. The main aim is to produce effectively keeping in mind customer demands and quality. Each country has a trading pattern and a different kind of market. The workforce is equipped to cater to the needs of each kind of market. Stranne is one of the most popular lamps that have been a part of Ikea’s range of products. But the company has used advanced technologies and updated the product with LED powers, which lower the consumption of energy. This is a clever move, as more people will be attracted to buy LED lamps, as they consume less electricity and environment friendly. They have also come up with low-energy bulbs, which attract many buyers.

PESTEL Analysis

With the help of leftover foods, the company uses technology to turn wastes into biogas, which is a great initiative. The company also recycles plastic bags and uses them to make plastic trays and holder baskets from them for the best uses. These initiatives have proven beneficial for the company as not many other contemporaries have come up with ideas such as this, and even if they have, they have not been equally successful in implementation as Ikea.

Micheal Porter had introduced five forces to analyze any industry. These are points which when analyzed give one an idea of the market scenario of a certain company. A Porter Five Analysis of Ikea has been provided in the following paragraphs to understand the business of the company better (Dudovskiy 2017):

Ikea satisfies the customers with the best goods of premium quality at a friendly price. The customers are left with very few options outside the company if they are looking for such products. Ikea is unique that way among its competitors. Tackling such a successful business, selling goods at such a low price is another strategy of the company to retain the faith and loyalty of the buyers For Ikea the power of buyers have always been very strong, as they have centered the company products based on the best needs of their customers. They always attempt to live up to the expectation, not bringing up the cost. Another important factor is the quality they provide at that cost. So power of customer is important and high as they base their market values on customer reviews.

Asia, Africa and other countries provide several of the company’s suppliers which set standards high in materials. Owing to the low-cost strategy, the profit margin of the company affects the prices of raw materials. Ikea has always been known for the strong supply of products they have. They ensure that the best quality products come from around the world. The reason why they go diverse to this extent to get their product is that they want the best keeping in mind the cost of production.

Ikea has a strong market. However, the company has several rivals who sell products which are a bit different in style and functionality. In USA, Cornin is setting a target to produce low costing furniture lines. Wal-Mart is also another competition who is targeting to make similar structured products. But these companies do not offer so many variations which are like complete packages to customers who are looking into durability, cost, and convenience together.

The rival companies would not be able to replace any specific product of Ikea but can only offer something close to similar. But the company keeps up with the market and improvises accordingly.

There are several smaller companies who do not get the chance to establish their business in bigger markets, although they can be considered as competitors. This can be seen as a good opportunity for Ikea. New entrants are supposed to establish a huge and widespread supply chain while creating a brand name with low prices to compete with Ikea.

Ikea is known for their dedicated service quality. Some of the stalwart’s aspects in their service domain are:

• Overall cost leadership
• Development of complementary services
• Aim to become a franchisee
• Target the global market via globalization strategy

Worldwide presence, affordable products, leading brand with strong financial position, brand image are a few core strengths of Ikea based on studies. It is a company that is present worldwide, and operates more than 370 stores. The company has also introduced online marketing and buying options to increase user friendliness and sales. Despite the affordability of its products, Ikea has maintained its standards in terms of quality of products (Businesscasestudies.co.uk 2017) This has always kept their brand image safe. Apart from the fact that they have a wide range of variety, they have their stores well equipped too. They are simple in their settings and at the same time accommodate their wide range of products (Epinearticles 2017).

Sales planning element is important to succeed economically in the competitive global market. It helps an organization to define its sales target, choose sales strategies, which is appropriate for the business (Yüksel 2012).

As much as it wanted, Ikea has not been as good in establishing a market in Asia as the other continents. The presence in the market and the demand has both been towards the receding side. Increased competition from other brands is being faced by the company. What can be understood from the situation in Asia is that the brand lacks the right kind of awareness in the Asian markets. That one domain has to be looked into and improved. The company needs to generate new campaigns and marketing strategies to publicize their products in Asian countries (Pratap 2017). Expansion of their product range is a helpful strategy to increase growth. The main drawback is their e-commerce website. They should put up a team to see to the correct working of their website. They should also start the home delivery of their online bought products. Also, targeting the Asian markets more consistently will help them get better outcomes.

India is known to be one of the fastest growing nations in the world in the next two years, as compared to the economic slowdown of China, as per reports (South China Morning Post, 2017). So it is obvious that retailers are attracted to the lucrative market that India is, to set up their business (Chew 2017) . But there have been major challenges faced by the company. The European Union limits the amount of chemical contents in each product of the company such as cutlery, table tops and other things. But inspections have revealed the presence of high levels of formaldehyde in table tops Indian suppliers. Steels plates have been discovered to have had chemicals that could leach into the food (Ideasmakemarket.com 2017). There were workers who wanted to do overtime shifts to get more pay, but that is something beyond the company norms which states a total of 8 hours of work daily. Factors like cultural differences among different markets of Ikea are another alarming challenge for a company which has such a widespread market (Kibin.com 2017).

From the above report, it can be derived that Ikea is mainly focused on producing cost effective products, targeting customers who like pocket friendly products. The main attraction of their products is their DIY theory (Zambelli and Smith 2017). The modern market competition is increasing and new entrepreneurs are emerging with the idea of selling products cheap in cost. The products can be assembled at home and are home delivered. But there would be a point where every market may come to a stagnant point, where reception of products will not be as smooth as it started out to be. Better innovations as well as targeting new continent markets are a good idea that the company should implement. Keeping in mind the Asian markets, the company should come up with better schemes.

Conclusion

From the above report, it can be concluded that Ikea has strategically framed their product lineup to establish their target market with a cost-effective solution for furniture lines. Furthermore, regulating the manufacturing cost via streamlining operations with colloquial suppliers has reduced the overall cost of the production. Ikea have successfully captured the global market via adopting a global expansion strategy by making a good study the economic stature of both developed and developing countries. This kind of marketing management analysis of Ikea will benefit analysts who are willing to learn more about of success and weakness of this organization. However, there are several missing things that could be included to make the business achieve a better place in some countries which have been mentioned in the recommendations.  

References

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