Marketing Plan: IKEA - Research Paper Example

?Running Head: IKEA MARKETING PLAN or IKEA Marketing Plan (Teacher’s Executive Summary IKEA is a global leader in home furnishing. It has come a long way since it was founded by Ingvar Kamprad in Sweden in 1943. It remains to be the largest retailer of furniture in 267 countries worldwide. It currently has 316 stores selling its high quality products. In its pursuit to maintain its position in the market, IKEA intends to maintain its sales and even gain further ground through expansion and possibly through the creation of new products. This marketing plan will serve to assist in such pursuit. A look into the present situation of IKEA is included in this plan along with other pertinent information that would help in deciding how to further develop the IKEA business, e.g., situation, product, competition and SWOT analyses along with the look into IKEA’s mission and vision and its financials. The analyses made in this plan showed that IKEA is indeed a strong brand to contend with and is capable of expanding and growing further. It offers products that consumers patronize and gives value to those products. Further expansion can be made and better plans for marketing the products of IKEA is currently being handled mainly through the use of technological advancement such as the use of the internet, phone applications and social networking. With all its achievements and with the goals it intends to achieve in the future, it can be surmised that IKEA has indeed achieved its aim of being a leader in its industry. Mission and Vision Statements IKEA started in Sweden and was founded on the concept that more people would afford well-designed and highly functional home furnishings at low prices. Kamprad is its founder and control the company through INGKA Foundation which has its headquarters in The Netherlands. The foundation owns INGKA Holding B.V., the company which owns IKEA. This organizational structure is the reason IKEA is not listed in the stock exchange (Tengblad, 2004). It is the vision of IKEA to offer many people a better living through affordable solutions. This is done through the company’s offering of a wide array of high quality and well designed products for home. More people are able to afford these home furnishings due to its low prices. It is the mission of IKEA to provide its consumers a wide array of home furnishings that are functional, well-designed, durable, high quality and low priced in order that more people can afford them (IKEA USA, 1999-2011). The company goes beyond just offering furniture. Instead, they offer customers comfort and better homes and lives. IKEA is cognizant of how home environment affects the well-being. This is it offers the kinds of furnishings that would enable individuals to have an attractive, practical and comfortable home without the need to spend a fortune. IKEA is a good example of an organization that managed to line up its values both in and out. Value proposition creates use in a company’s product as offered to its consumers (Bovet & Martha, 2000). It is what customers consider as an advantage when purchasing a product (Best, 1997). It is taken to be a bundle of value delivered to the consumers by the company (Sheehy, Bracey & Frazier, 1996). Value proposition includes such intangibles as image, brand and equity along with price, selection and service. This is going beyond just the product, i.e., it is not what the buyer is purchasing but what he thinks he is buying. The value proposition determines the duties of stakeholders as well as the offer to the organization (Webster, 1994). It serves as a selling proposition to potential buyers or the reason why buyers should patronize a company’s product instead of buying from its competitor. IKEA’s value proposition that serves as an attraction to buyers is its offer of affordable, functional and distinctly designed furnishings. This value is well communicated and implemented consistently. To allow the company to lower the price, buyers are the ones who assemble the furniture and accessories themselves. The actual purchase from the warehouse is also actually done by the buyers themselves who are the ones to bring them home. If the item purchased will have to be delivered, a reasonable fee will be applied. This DIY (do-it-yourself) or self-service environment in IKEA allowed it to keep the prices of its products to a minimum. Situation Analysis Due to the global crisis, residential purchasing has decreased significantly. Yet, this fact led many to find IKEA stores to be beneficial in their areas. IKEA’s capability of offering furnishings at low prices tied well with the economic downturn since people are looking to pay less. In the US, IKEA stores remain limited thus disabling them from reaching more customers. With the local and federal purchased also decreased, movement into less developed portions of the US are put on hold. Fortunately for IKEA, the ability of consumers to buy durable goods has increased. This includes furniture and other home furnishings. The trends would show however, that this may vary with high increases and decreases all throughout the year. It becomes necessary for IKEA therefore to be able to withstand sales’ lowest points and provide products when the demands of customers start increasing again. In terms of power and political struggles in IKEA, its most current conflict internally is the issue started by a disgruntled employee who released a tell-all book narrating his experiences as Kamprad’s secretary. Johan Stenebo’s “The Truth about IKEA” made Kamprad look like a racist who even employed corporate spies. Stenebo also intimidated that the company did not really advocate eco-friendly products. This book seemed to confirm an earlier discovery by a reporter that IKEA’s founder was involved in the Nazi regime (Watson, 2009). Despite the issues and scandals however, IKEA remained to be a strong industry leader whose goals of sustainability and environmental design situated at the center of its business strategy. In fact, it has launched a new plan for sustainability that would take the firm through 2015. This includes issues on economy, society and environment. IKEA SWOT Analysis IKEA makes use of SWOT analysis as a strategic tool for planning that enables it to achieve its goals. This will serve as guide that will help it focus on the key issues at hand. Basically, strengths and weaknesses are considered to be internal aspects and are within the company’s control. This could refer to such aspects in business as finance, marketing, organization or manufacturing. On the other hand, opportunities and threats are considered to be external factors since they are outside the business’ control. These could be social changes, the environment, technological advances or the economic situation. The following are IKEA’s SWOT analysis: Strengths IKEA possesses an internationally known and very strong brand that can attract consumers of key demographic groups. The business model offered is unique in construction and implementation with limited competition. Despite the economic crisis, IKEA survived due to its affordable prices. Its ability to buy in bulk allowed it to command low and affordable prices for its products. Its DIY approach gave the company a competitive advantage since shipping the products in flat packages is achievable. Promotes environmental-friendly through its refusal to use plastic bags. It obtains its raw materials, especially wood, from responsibly-managed forests. Weakness Despite being an international brand, IKEA possesses a certain level or reliance on the European Market since most of its stores (90%) are in Europe. The balance of 10% are scattered across the United States, Asia and Middle East. Its warehouse shopping style makes it hard for IKEA to enter small markets. It opens itself to more competition such as Target, Costco, etc. since it only offers home furnishings while the others have a wider variety of products available to consumers. Despite the low prices that attract customers, the low level of customer service has been seen as a problem that has to be improved to ensure return customers. IKEA is currently struggling with their online store making them unable to enter small markets. The emergence of e-commerce and the necessity of going along with these technological advancement makes IKEA move away from its basic vision of having consumers seeing and actually touching the products it offers. Opportunities IKEA is expanding and going global with its opening of stores in Asia and Eastern Europe. IKEA maintains its low priced high volume products that are within value but there is a move to create middle and high priced products that would cater to different demographic groups. IKEA makes use of the high internet usage among US consumers allowing it to take advantage of new online marketing expeditions. Online shopping through social networking, e.g., Facebook, allows IKEA to gain a positive image and allows for easier and more convenient access for its customers. There is a big room for expansion in the United States particularly the market in California. Increased customer traffic due to new store openings. The negative effects of e-commerce to IKEA is compensated by the opportunity it creates for growth, provision of better customer service and allows for reduced store pressure. Threats The growing mainstream of retailers starts to mirror the flat packed low cost model for furniture spearheaded by IKEA which can have a big effect on it. Home Depot remains to be its main competition being second largest home furnishing retailer in the world and also maintaining a huge following online. Home Depot also possesses strong recognition and brand name like IKEA. Its DIY offerings also are a threat to IKEA. With Home Depot set to open over 176 stores across the United States, IKEA will continue to be threatened particularly in the US. The price of raw materials continues to increase forcing IKEA to also increase the price of its products by 15%. Cost and profit could be divided by a very fine line for IKEA due to the increased prices of raw materials. An increase in its products’ prices brought about by the increase in the price of raw materials may prove negative to its image. Economic problems, depleting incomes and rising costs of living in both US and UK can prove to be detrimental to IKEA. Competitive Analysis IKEA’s main competitor remains to be Home Depot. Home Depot is a large retailer for home improvement in the US and is the 2nd biggest in the world. It has over 2,242 stores around the US (mostly the East Coast) and operates warehouse type buildings like IKEA. The products of Home Depot are in direct competition with that of IKEA. The products it carries however are supplied by different brand names. Its target market can be divided into two segments, i.e., the DIY home improvement customers and the professional business customer. As its marketing capabilities, Home Depot managed to establish a large market and high customer traffic through the use of the internet. Its huge variety of products allows it to cater to various demographic groups and different price points and product quality. Stores in North America are beginning to decrease product prices and improve warranties that allow it to gain more customers. Home Depot’s weaknesses are its products being geared towards men with the female market’s involvement still unexplored. It only targets sub-market and the rate of turn-over is high (Home Depot Website, n.d.). Another smaller but significant competitor of IKEA is the Bluedot.com. This company aims to bring to people good design at low cost. Like IKEA, they provide affordable, attractive and useful products. Its online products include various types of furniture similar to IKEA. Its pricing is from moderate to high and allows its consumers to obtain products that are of high quality but low price. The company’s profit of 4.6 million dollars ballooned to 22.7 million in a matter of few years. This made competitors take notice. Its use of the internet to sell its products is in line with the consumers move to get their needs from the internet. The company was founded by 3 architect friends thus the passion for design. Their marketing style allows for customer excitability. The markets they target are those who prefer modern and edgy designs. These are the younger and educated type with salaries ranging from $40,000 or more. The company is more product than service based. This company’s strength is its target market, i.e, the young and modern segment which allows for continuous traffic over the years due to longer brand awareness. It can also expand into smaller retailers in other countries since they are the suppliers themselves. Being a pioneer in the retail of modern designed home furnishings through the internet, they could get instant recognition. It being an internet based company, it misses a huge segment of the market, particularly those who are unable to use the internet particularly the more matured customers whose preference remain to be the classic types of furniture. As a small retailer, this company misses out the opportunities in selling in huge department stores. Lastly, since the products it offers are limited to the modern, edgy type, those who do not appreciate this style will not likely become customers, thereby limiting further their target market (Lange, 2000). Product Offering IKEA’s products have everything to do with the home. Categories of products varies, e.g., bathroom, cooking, chairs, beds and mattresses, etc. People prefer buying IKEA products due to its low prices and durability as well as its quality. Customers also enjoy visiting IKEA stores due to its great facilities. The following chart shows the number of customers who visit IKEA stores worldwide. Currently, the products IKEA offer has only to do with the home. No new products are offered except of the changes in style in line with what is in fashion or to adapt to certain themes. Much of the furniture produced is designed to be assembled by IKEA’s customer instead of the commonly available pre-assembled types. This approach allows it to reduce the costs of the products even for the shipping costs since smaller space is utilized since the products can be placed in flat packaging. Comprehensive Communication Plan IKEA’s marketing allows it to reach as many people as possible to inform them of what the company has to offer. Each local market is targeted to be reached. This is the reason personnel in the areas of marketing and communication in all the retail countries of IKEA are provided. They are tasked to build the brand and inspire prospective customers to visit the stores. Different channels situated outside the stores are put in place to ensure that the full offer of IKEA is explained to the public. However, the starting point has always been the needs of IKEA’s customers. IKEA’s best known conduit for such information is the IKEA Catalog. This is developed in Almhult, Sweden by the IKEA Communications. Other equally important channels are used by IKEA such as publications, websites, PR, advertising, and brochures. The communication style imparted regardless of channel has to reflect the values promoted by IKEA, be it in tone of voice or visual. Therefore, the people working in the marketing and communications would include professionals such as copywriters, art directors, project leaders and interior designers. These people work together to come up with the IKEA catalogue, publications, online sites, brochures, public relations, advertising and internal communications and advertising (IKEA Website, 1999-2011).  IKEA has also to go along with the technological advancements. Just with the other companies, IKEA also capitalized on the convenience brought about by the internet. Through it, IKEA made the company more visible and accessible online. In fact, in 2009, it provided for the IKEA phone application which is continuously improved and updated. This application allows customers to access the website of IKEA even with the use of their mobile phones. The application was made available through two of the most sought after phones as the chart below would show, i.e., iPhone and Blackberry RIM. This allowed customers to view the IKEA catalogue anytime using their mobile phones. IKEA also made use of the internet knowing that many people, particularly those in the United States are making use of the internet for many of their needs. This saves them time especially for those who are always on the go. This can compensate for the lack of stores in the US. The diagram below would show how frequent US makes use of the internet for much of their daily errands. Another channel that IKEA are now making use of is social networking, e.g., Facebook. With these networks, the brand name becomes even more recognized and the products more known to consumers. Even the actual purchases are now made online. Financials IKEA’s CEO himself hates waste and considers it to be a mortal sin. This is why others would say that the sustainability efforts of IKEA would have it continuously producing furniture while the rest of the world has run out of natural resources. Its financial resources stands strong for fiscal year 2010 compared to other companies in the same industry. The company gained a sales increase of 7.7% or €23.1 billion. It gained a net profit of 6.1 % or €2.7 billion compared to 2009. These profits allow the company to expand and reach new markets. This also enables IKEA to lower the prices of its products. The bulk of the profits are invested back on the existing stores and the 12 new ones (BusinessWire, 2011). The chart below shows the upward trend in sales profits over the years. Conclusion From the time it started business, IKEA’s goal was to be a leader in the industry of home furnishing. It clearly has reached that goal. However, IKEA cannot be satisfied and just wait for its profits to come. It needs to continuously change, improve, develop and grow. Failing to do so could allow other competitors to surpass what IKEA managed to achieve. This marketing plan, more than anything else, is designed to assist IKEA in focusing clearly on the company’s strength and weaknesses as well as the threats and opportunities ahead of it to enable to be ready for what ahead. It can base it moves and improvements on the findings in this marketing plan and implement possible solutions that can be seen from problems that arose from it. What is admirable about IKEA is that fact that it ties its objectives with its intention to allowing people to get a better everyday life by providing them with affordable, durable and functional furnishings. As a global organization, IKEA takes on the role of a leader in creating sustainable working methods. Things such as this make IKEA ahead of its rivals. The company also busies itself with its commitment to organizations such as WWF and UNICEF. This only confirms that it deserves what it achieved. References Best, R., (1997), “Market-based management: Strategies for growing customer value profitability”, Prentice Hall. Bovet, D. and Martha, J., (2000), “Value nets: Breaking the supply chain to unlock hidden profits”, John Wiley and Sons. Business Wire (2011), “IKEA group announces strong financial growth for fiscal year 2010 with net profit up 6.1% at €2.7 billion”. BusinessWire.com. The Free Library. Accessed on 20 August 2011 from http://www.businesswire.com/news/home/20110114005089/en/IKEA-Group-Announces-Strong-Financial-Growth-Fiscal. Home Depot Website (n.d.). "Home Depot Home." Home Improvement, Home Renovation, Tools, & Hardware, Home Depot Canada. Accessed on 20 August 2011 from http://www.homedepot.ca/?gclid=CIHH5ZmSi6cCFYQUKgodlnsjeg. IKEA USA. (1999-2011). “Our business idea”. Accessed on 20 August 2011 from http://www.ikea.com/ms/en_US/about_ikea/the_ikea_way/our_business_idea/index.html. IKEA Website, (1999-2011). Marketing and communications, Inter IKEA Systems B.V. IKEA Website. www.ikea.com. Lange, Alexandra. (2000), "Blue Dot's Big Plans”, Metropolis Magazine. Sheehy, B., Bracey, H. and Frazier, R., (1996), “Winning the race for value: Strategies to create competitive advantage in the emerging age of abundance”, American Marketing Association. Tengblad, P. (2004). The Operations and Functioning of European Works Councils: The Case of IKEA. ATK Arbetsliv/IMIT, Stockholm. Watson, Bruce, (2009). “Ikea's heart of darkness: A tale of racism, lies and Swedish meatballs”. DailyFinance.com. Accessed on 20 August 2011 from http://www.dailyfinance.com/2009/11/16/ikeas-heart-of-darkness-a-tale-of-racism-lies-and-swedish-me/. Webster, F., Jr. (1994), “Top management concerns about the marketing functions,” Journal of Marketing 45 (Summer), 9-16. Read More

 

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