CASE a high degree of costumer loyalty. Forth,
CASE STUDY pic International Strategic Marketing Management Success Factors of IKEA IKEA is one of the most successful furniture retailer’s worldwide. The factors that contributed to this success and distinguished IKEA from its competitors will be monitored in the following analysis.
First, IKEA has found “niche” to serve. The fact that they are producing “Scandinavian style” products makes them unique. Their idea of offering a very broad range of products, with limited style variations, the bold colors and the typical Scandinavian names, has created a very strong brand image and also a high recognition value of its products.Also, their slogan “Design with meaning” distuingishes them from their competitors. IKEA offers stylish furniture at low prices. Usually you either have the choice between low price and low degree of stylishness or both up high.
IKEA has found its place “in between”, where it has been working efficiently for decades. By designing and building their products “themselves”-by choosing the most efficient designers and producers etc out of a “pool”-, they have set the basis for a very efficient pricing strategy, which helps them to keep prices down low, and for a unique style.Second, IKEA has set up a very unique concept that perfectly fits its mantra. In order to save costs, they are pursuing a strategy of self service. The customers chose their products themselves, get them from the warehouse, transport them home and assemble them.
This helps them to save costs. IKEA has, for instance, implemented flat packages for their products. With this packaging method they can save transport costs, since they save space and IKEA can thus ship more products at once.
Furthermore it supports the idea of customer self service, since you can easily transport the flat packages in your car, to carry the products home.Moreover, IKEA is constantly redesigning its products, which helps them to save money and thus keep prices stable or even lower them. Third, IKEA is very focused on the customer. They want to involve the costumer. They want to build up a partnership with the customer, where they can support each other mutually. This is reflected in the self-service of the costumer, the “advice” boxes in the IKEA stores, but, for instance, also on their homepage where they advice their customers to come prepared to IKEA. They even want to help them to “shop more efficiently”.
As IKEA puts it they want to “side with the many”. They want to make style and function available for “the broad range”. This focus helps them to build up a high degree of costumer loyalty. Forth, IKEA shops have a much elaborated layout, which has been carefully designed. When you enter the shop you walk through sceneries of kitchens, dining rooms and bath rooms, which together with the bright colors create a very homely and inviting atmosphere.
The fact that you can “try out” the furniture, helps clients when making their decision. Moreover, IKEA is providing the costumer with a lot of extras.At the entrance you get anything you may need for your shopping tour. From pencils, guides and measuring tapes, to bags for small shoppers and special carriages for the flat packages to transport them to your car. If required you also find assisstance “on location”. IKEA also has big parking spaces, special playing areas for children to ensure their parents a stress-free shopping tour and restaurants to satisfy hungry “hunters”. Another important point is IKEA’s corporate culture.
Employees work together on a first-name basis, which leads to a virtually non existent hierarchical order within the company.Furthermore, the company wants its employees to strongly identify with its strategy of saving costs. Employees turn off non used computers and lights and also managers take buses instead of expensive caps in order to keep costs low.
The strong identification and “passion” of its employees for IKEA concept, helps the company to keep it up and also convey it authentically to the customer. Due to all these factors, IKEA is also protected against imitation. Companies might be able to copy some parts of their strategy, however for IKEA it is “the whole package” that made their success possible.
Therefore, you would require IKEA’s entire strategy, since all the factors combined might work like the famous 2+2=5 effect. Some of the factors used seperately might work in some way, but never as strong as all of them put together. Downsides However, there is also another side of the coin.
Firstly, IKEA’s idea to use expensive, high-quality materials on the “outside” of their products, but inexpensive materials on the inside, may help to reduce costs; however some clients might not be happy with this “all show and no substance”-strategy. Secondly, IKEA’s products might well be cheap; however they are not built to last.Hence, the furniture might not well survive relocations, and sometimes falls apart without extraneous cause as time goes by. Thirdly, some people might be deterred by the fact that they have to build up their furniture themselves. Some might try it once for the sake of cost reduction, however never again since it might sometimes result in heavy arguments and strange looking furniture with left over nails.
Furthermore, the fact that IKEA constantly redesigns its products is not only helpful since it sometimes even complicates assembly of products for the costumer.Another negative aspect might be the fact, that even though you have the opportunity to get assisstance at IKEA, the ratio compared to costumers is very low. This might force some costumers to wait quite a while until they get served. Furthermore, a tight price strategy does not leave too much money for trainings and other educational programms for employees to ensure highly profiscient service.
Some customers might also complain about the habit of some employees to adress them informally, virtually transferring the internal IKEA culture on external people.Moreover, there have been recent cases of product recalls of IKEA, which shows that focus should not shift too much away from quality. A last negative aspect might be the limited selection of styles which is caused by the matrix used in IKEA’s product strategy. Product range In general, it can be said that IKEA’s product range is quite broad and versatile in many different ways. Shopping at IKEA, you may find anything you need for your home under one roof, be it furniture or cutlery, lamps or curtains, pans or toys or even entire rooms, in short anything that helps you to functionally make your home a better place for living.In fact, the range of different styles is probably not too wide, missing over-decorated and premium styles, however the “broad mass”‘s tastes might be satisfied by IKEA’s choice.
Another big plus is the typical “IKEA-style”. The products offered there are different and often you are able to distinguish between IKEA-products and other products only by looking at them, which is certainly not a bad thing. What makes IKEA products so special is that even though they are relatively cheap, they do not have this “cheap” reputation.Admitting you have bought your furniture at IKEA does not give you “strange looks”, such as the confession of wearing jeans from “Kik” would do.
Product Strategy Basically, IKEA’s product strategy is very organized and very well figured out. Having strong structures like this, is definitely an advantage for the company. The strong focus on price is reflected very strongly in this strategy, as price is determined before a product’s look. This helps you to stick to the company’s guidelines and very strongly represents their priorities.By sort of playing their producers and designers off against each other, they can ensure the best design and best prices and thus a highly efficient production. However, this focus on price puts strong pressure on IKEA’s producers.
In order to produce less costly than the others they probably might take certain measures that might endanger the sustainability of our planet or that might not be coherent with human rights. Nevertheless, IKEA is strongly aware of these issues and tries to prevent them. Another problem is the fact that due the matrix IKEA can offer only very limited choice of style of various products to its customer.
However, due to this limited number of styles, IKEA’s products are very coordinated, which means that they match with each other. If you buy, for instance, a table at IKEA, you will easily find a shelf, chairs and other elements that will go with it. The bottom line is that probably the best evidence for the efficiency of IKEA’s strategy is shown in the company’s global success. IKEA’s Vision Again here, it has to be said that the best proof for the effectiveness of IKEA’s vision, ideals and concepts is IKEA’s success and its huge and loyal customer base.
Especially in times of the financial crisis, loyalty of customers is extremely important to ensure a company’s revenues. IKEA’s vision of building up a relationship with the customer by focussing strongly on the customers, their needs and wishes is a very efficient way for building up a high degree of loyalty. What makes IKEA so special is that they apparently can put themselves perfectly in the customer’s position and hence offer the kind of products and service required by the costumer.The fact that they involve the customer even enforces the relationship. Costumers are a part of the entire process. As already mentioned, IKEA gives the customer clues to be prepared for their shopping, when shopping there IKEA provides them with anything they need and then customers can manage the rest on their own. You chose the product, you can for the most part also “try it”, you have the price there, you know your measures, you have cards with the available colours, you pick it up, you transport it home, and you build it.
It seems like IKEA takes care of anything you will need in this process (preparation clues before shopping, pencils etc and chariots for transporting in the shop, additional information on the products to facilitate your choice, low price for small budgets, flat packaging for easy transport, functional designs for living, …
) and somehow creates a “frame” for you and within this frame you can proceed almost individually. You can, for instance, decide whether you want to build up your furniture yourself, saving further costs, or letting somebody else do it for you, like that you are even able to control the amount of money your spending.Probably, this high degree of customer involvement is one of the keys to IKEA’s success. This somehow makes products, rooms..
. sort of unique to a customer, due to the “effort” you put into it. IKEA’s strong focus on cost-efficiency, which is also mentioned in its vision, is especially in these times an advantage, since people are partly struggling to finance their “daily” life and do not have much money left to spend on expensive furniture and accessories.Since sustainability is a bigger issue than ever before, IKEA’s focus on the environment and participation with associations such as UNICEF, definitely improves the company’s reputation. IKEA does not only want to improve people’s everyday life, but the company also shows responsibility for people (e. g. their workers) and the environment.
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