Market Periphery Surrounding the Business Environment of IKEA - Essay Example

Marketing Plan Executive Summary This paper illustrates a marketing plan for an actual product i.e. coffee tables for a renowned Swedish company IKEA. The company would intend to revitalize the product after completely analyzing the current market situation. The aim of the marketing plan is to ensure that the company is able to establish its product successfully amid the rapidly altering competitive market scenario. In this regard, it has been observed that the incorporation of effective marketing strategies is quite significant for the success of any business. In order to develop a comprehensive understanding of the wider market periphery surrounding the business environment of IKEA, the present market position of the company is recognized. The discussion also entails an assessment of the potential competitors of the company whom it has to override in order to place its product as a unique entity in the market. The plan further illustrates the mode of promotion and distribution that the company would implement in order to ensure high performance from the product. At the outset of the planning stage, a crucial factor which can be recognized is that the strong brand name of the company would certainly help it to establish its one of the invaluable offerings i.e. coffee tables in the market. Contextually, an action program with regard to the marketing plan has been substantiated in the paper which would enable to guide the various activities of the entire process. Introduction The present day market scenario is changing rapidly on a global basis. It has been noticed that the preferences and the choices of the customers have also been altering simultaneously. There are many companies which offer similar kinds of product. For this reason, the companies now-a-days are quite concerned about making their products or services distinct from their competitors. In this regard, the concept of marketing has become quite crucial. It is the process through which the value of the product would be communicated to the customers. In other words, it can also be regarded as the art of selling goods. In context of today’s business scenario, it is not enough for companies, just to make a good or better quality product. They should also market the product effectively and communicate the quality or the benefits of the products or the services to the customers. There are various aspects of marketing that companies need to follow. The company should understand that customers will only prefer a product that is widely available in the market at a cheaper cost. A product or service would only be marketed on its strengths (Palmer, 2012). Marketing mainly involves exchange of goods or services between buyers and sellers or any other parties. The concept has an impact on companies, suppliers as well as customers and other people associated with it. It can also be considered as a process of enhancing rapport between buyers and other parties. The entire process of marketing involves creating, communicating, supplying and exchanging goods. The success and failure of any business would largely depend on its marketing plan (Sandhusen, 2000). This paper would aim at presenting a marketing plan for selling coffee tables for the company IKEA. Company Overview IKEA is among the top most retailers of furniture in the world. The company has an exceptional combination of function as well as affordability that distinguish it from other furniture companies. It operates in over 42 countries in the world. It has been observed that there are approximately 70000 employees who work for the company in all around the world. IKEA is usually based in Sweden, built with the idea of offering a wide variety of furniture of high quality at a cheaper price. The company was started in the year 1940 by Ingvar Kampard (Tengblad, 2003). Current Marketing Situation Financial Situation of IKEA The financial year of IKEA runs from the 1st of September to the 31st of August every year. It has been observed that the sales of the company have been continuously on the higher side. It has been enjoying a considerable amount of growth in its business from the last few years. The preceding five years financial scenarios of the company are depicted hereunder: End of Year Price 2008 2009 2010 2011 2012 Stock Price Per Share Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Revenue (As on August 31) 21.5 21.8 23.5 25.2 27.6 Profits 21.2 21.5 24.2 11.09 11.4 Profit Margin % 7.8% 11.3% 6.1% 11.7% Not Applicable Growth Rate (As per Revenue ) 1.39 7.7 7.2 9.5 Not Applicable Source: (IKEA, 2012; IKEA, 2012; Business Day, 2011; Market Watch, 2012) Note: 1) As IKEA is a private company, it is not listed in the stock exchange. 2) As the annual report of the company for the financial year 2012-2013 is yet released, the paper could not calculate the profit margin% and growth rate for the year 2012. It can be observed from the financial report that the company has leveraged a substantial amount of growth in the last five years. It has a healthy profit margin in the past few years. Market Description Market description of any company consists of aspects related to the products of the company. It would also involve how the company operates its business worldwide. Moreover, market analysis would also contain the performance of products of the company in the market. Market description enables to determine the target customers of the company and how does it satisfy their needs. IKEA is a well-known furniture company based in Sweden. It operates its business in various countries of the world. The company manufactures a varied range of furnishing products with high quality and minimum price. The range of products of the company includes living room furniture, office furniture, kitchen appliances, bathroom storage and bed and mattresses among others (IKEA, 2012). The main aim of the company is to ensure that the customers are confident about the product of the company. The company is committed towards quality, sustainability, style and price of the product. IKEA also has a generous return policy and allows the customers to return the product within 30 days of the purchase irrespective of the reason for the return. It is worth mentioning that the customers of the company have various options such as from furnishing their home, plants and living room to toys and whole kitchen as the company provides a wide variety of products. Moreover, it has been observed that the styling of the products of the company is quite unique and would attract the customers instantly. It can be said that making a good quality product with high price and a low quality product with low price is quite easy for any company. However, the company i.e. IKEA has a unique quality of producing products with high quality at a considerable price which attracts the customers the most. Moreover, it has been noted that the company is quite innovative in designing its products which satisfies its customers considerably. The corporation is known for its quality of seeing things differently. Additionally, the products of the company are packed in such that it becomes convenient for people to carry it to their home with less cost of transportation. The instructions to assemble are printed on the pack of the product. Furthermore, it requires to be mentioned that if the customers find it difficult to assemble the products on their own, the company would send its service personnel and look into the matter. Apart from this, the company also ensures that the products or the materials they use in making the goods would have minimal or no effect to the environment. Subsequently, it also makes sure that the health of customers would also not get affected by the products of the company (IKEA, 2012). Target Customers/Market of the Company for the Product i.e. Coffee Table The company i.e. IKEA is witnessed to have targeted the entrepreneurs, small business units and families for selling its products. As it provides furnishing products, the aforementioned types of customers would need it the most. The target customers for the coffee tables product would be same as mentioned above. It has observed that coffee is one of most popular beverages in the world. Now-a-days, there are a lot of coffee shops and restaurants available in the market. For this reason, the prime target for this product of the company would be the restaurants and coffee shops. Moreover, the need for coffee tables can primarily be said to be quite high in offices and homes. Therefore, the company would also target the entrepreneurs and houses of people to exemplify the offering amid the masses. In terms of age group, the target customers or audience of the company are not limited, but in certain cases they prefer to target the age group of 18 to 49. Moreover, it has needs to be mentioned that the company would mostly target the budget conscious families of the market as the price of this product of the company is quite affordable (Rowe, n.d.). Product Review The product for which the marketing plan is illustrated is coffee table which is quite a common product now-a-days. Almost all the furniture companies would manufacture this product and make it available in their product line. Thus, it would be quite significant for IKEA to maintain variations in the product as much as possible in comparison to the competitors’ offerings. The detailed features of the product (i.e. coffee table) are depicted below: The price of the product would vary in accordance with the color of the product The product would be available in three colors which include white, grayish brown and dark brown. The dark brown color would cost US$180; the white color would cost US$220 while the grayish brown color would cost US$200 The table would be made with solid wood that would be checked several times There would be distinct shelf for storing magazines or books. This would keep the table organized and the top side clear The dimension of the product would be in terms of length 118 cm, width 80 cm and height 45 cm The customers would be advised to wipe the table with dry and clean cloth to enhance its performance (IKEA, 2012) Target Segment Customer Need/Want Corresponding Need Addressed Middle income group/families Good quality product with reasonable price Coffee tables with good quality and low price along with attractive designs Competitive Review It has been observed that there are a lot of products in the market which are quite identical to the product offered by IKEA. The competitors of the company are also coming up with similar kind of products in the market. For this reason, the company would have to be extra cautious about the performance of the product. The list of the competitors of the company is given below. Company Model Features Price Design Within Reach Skagen Coffee Table Made with solid walnut frame with brass Spacers. It has separate shelf for books and magazines 1,071 USD Ethan Allen Trekker Coffee Table Plank-effect wood top and shelf with textural, knotty surface and steel frame Levelers. Separate shelf for magazines and books 1049 USD Source: (Design Within Reach, 2013; Ethan Allen, 2013) The two of the most vital competitors of IKEA in the market are Design Within Reach and Ethan Allen. Both the companies have a good set of the product (i.e. coffee table) alike IKEA. It has been observed that both the products mentioned in the above table would be tough competitors for the company. Although it has been observed that the price of the both the mentioned product are much higher than that of the coffee tables of IKEA. In this regard, the company has an upper hand on its competitors. On the other hand, it has to be mentioned that the product of Design Within Reach and Ethan Allen are superior from the product of IKEA in regard to quality. On the whole, it can be said that IKEA has a competitive edge over its competitors in the market as it is offering the product at a minimal price with considerable quality. Channels and Logistics Review Distribution of products is one of the crucial aspects of any business. Various modes of communication are used for moving products from one place to another. The distribution network of IKEA is quite efficient. The company ensures that the offered products reach the customers or the market at the right time in an efficient manner. The coffee tables would also be distributed in the same way that the company usually does. There are various personnel who are responsible for the execution of the entire process of distribution. First of all, the store distribution manager ensures that the distribution centre of the company is able to accommodate the amount of goods required by the stores. In the subsequent step, the customer distribution manager would distribute from the warehouse to the customers with the assistance of the transport operational coordinator who ensures the efficient flow of goods. There would also be a warehouse operations manager who ensures the effectiveness of the distribution centers and also responds to the requirement of the supply chain. Moreover, the quality of the goods would be checked in every step by the quality manager of the company. He would also be responsible for the quality of the product in the warehouse and should ensure that the product reaches efficiently to the customers. Apart from these, there would be a transport business developer which would intend to maintain the relationship between the company and its different carriers by getting agreed upon mutually beneficial transport scenarios. In the concluding stage, there would be a goods flow coordinator who would ensure the utmost product availability to the customers with the lowest possible supply chain costs. In this way, the product would reach the targeted customers (IKEA, 2010). SWOT Analysis The company i.e. IKEA is amid the topmost furniture companies in the world. The company would like to market its latest product i.e. coffee tables in the market. In this regard, the SWOT analysis of the product is illustrated below. Strengths The brand name of the company can be regarded as its prime asset. It has been observed that people have the perception that the products offered by IKEA are always of good quality. This is one of the biggest strengths of the company. Furthermore, it has been analyzed that the company has the reputation of offering good quality products to the customers at a reasonable price. This would also be an added strength for the company when it would market its product i.e. coffee table. Also, it has been noted that the quality of the coffee tables marketed by the company is quite high and come at a reasonable price. This would also be a vital strength for the product (IKEA, n.d.). Weaknesses It has been observed that since the company i.e. IKEA is a globally functional company, it would be tough for it to maintain the quality of the products all the time. It has also been recognized that the company at times fails to provide quality services to the customers. In certain countries where the product of IKEA is manufactured does not execute the legislation to control working which could affect the quality of the product and also the perception of the people towards the product of the company, of which coffee table is one of them. This would also be a weakness for the product (IKEA, n.d.). Opportunities One of the biggest opportunities for the coffee tables product would the rapid global expansion of the company. As the company has an efficient brand value, it would be a bit easier for the product to make its mark in the market. Furthermore, it has been noted that the product i.e. Coffee table is very much popular among people all around the world. It would deliver the company a good opportunity to establish its product. Moreover, the reputation of the corporation for offering products at an affordable price would also help the product to establish itself in the market. The company would also have to take the advantage of the rapid growing demand for greener products in the markets (IKEA, n.d.). Threats The growing competitive market is among the biggest threat for the both the company and the product. It has been noted that there are many companies in the market that come up with the similar kinds of product as offered by IKEA with the claim of being high quality along with reasonable price. This would be a strong threat for the company as the market is perfectly competitive where the customers have lot of options to select from. The increasing economic concerns also tend to decrease the purchase behavior of the customers which would also be a threat for the product (IKEA, n.d.). These four aspects would be quite crucial while marketing the product. The marketing team would have to consider all the above mentioned facets while preparing the marketing plan for the product. Objectives and Issues First Year Objective of the Product The main objective of the company regarding the product would be to maintain the market share of the company. In the first year of initiation of the new marketing strategies, the company would intend to promote the product at the maximum level. The main intention would be to communicate the value of the product to the customers. The company would further ensure that maximum number of people knows about the product and how it differs in terms of quality and price as compared to the previous products of the company. The company would aim to take the feedbacks from the customers which would help the concerned personnel to shape the product more efficiently in the next stage of production. Sales volume of the product would be one of the prime points of focus for the company in the first year of the product launch. Objective of the Product for the Second Year In the second year, the company would take decisions more confidently as the verdict of the customers regarding the product would be present in front of them. The company could be able to enhance the quality of the product and could also make the necessary changes in the product in accordance with the verdict as well as opinions of the customers. Moreover, the company would also intend to considerably increase the sales of the product in the market. Apart from this, an increase in the market share of the product would also be amongst the major intentions of the company. Issues In relation to the issues that can be faced by the company while endeavoring to implement its diagnosed marketing objectives, it can face tough challenges in the market from its competitors in the market. The other crucial issue that can be faced by the company can be in terms of quality of the product as incase if the products need to be transported to global destinations then it might create a concern regarding its safety from hazards such as scratches or other damages. Moreover, there are also companies in the market which are coming with similar kinds of products in the market. For this reason, the company would have to be more particular while making the product. They should maintain high quality and innovative designs so that it could differ from the products of its competitors. The company would also have to provide free services to the customers regarding assembling of the furniture. Marketing Strategy Positioning the Product A vast diversity has been witnessed in the preferences of the customers over the years and the company i.e. IKEA has been able to meet the needs of the customers by providing various forms of products with considerable services. It has been observed that the company has different sets of strategies for diverse segments of customers. The company would pack its product in way that would facilitate the customers to carry it to their home on their own. Moreover, the product would be quite easy to assemble and anybody can do it due to the availability of clear instructions about the fittings of the product which are printed on the pack. If the customers find it difficult to assemble the product, the company would provide free assemble services to the customers. Moreover, the quality of the product would be quite superior as it passes through a number of quality check processes and then reaches the ultimate customer. Apart from this, the company would also offer a 30 days exchange period. In between this period, the customers can exchange the product or may even take refund from the company. This kind of exchange policy that the company would follow will not be available much in the market (IKEA, 2013). Product Strategy IKEA is a reputed company all around the world. It has its products offered in various parts of the world. The company always aims at offering high quality products. The company manufactures approximately 9500 variety of products and always intends not to compromise with the quality. The product i.e. coffee table would not differ from other products regarding quality. It would maintain a high quality and intend to satisfy the customers. Moreover, the company has always indented to produce environment friendly products which would be continued with this product. The product would also be available in attractive colors in the market. The company would also provide 1 year additional free services to the customers which would only be applicable in the first year of the initiation. Additionally, the company would also come up with more offers or schemes in the later stages after it has ascertained a sizeable market for its product (IKEA, 2011). Pricing Strategy IKEA is aware of the price sensitiveness of the customers of the market. In this regard, the company always intends to produce products with comparatively low prices so that maximum number of people can afford to buy their offerings. For the product in consideration i.e. coffee table, the company would aim to maintain its reputation of being a provider of products with marginal price. The company would also offer a lot of attractive discounts on the new product as an introductory offer and this would be applicable only for the first few months of initiation of the program. Moreover, the price of the product would also differ for certain colors. Loyal customers of the company might also receive additional benefits on buying the product. Overall, the customers can be assured from the company that pricing of the product would be completely on the basis of its quality. There are major pricing strategies that could be used by the company in pricing the product. The company would intend to use the market-penetration pricing strategy where the company would set a low price for the product in the initial stage of the introduction. This would help the company to grab the maximum amount of market share (Hirschey, 2008; IKEA, 2011). Distribution Strategy The distribution channel of the company is quite effective. The company maintains a strong supply chain that ensures that the product could reach the customer on time. The supply chain of the company is divided into two distinctive areas which include back end and front end. The front end supply chain is concerned with the distribution of the final product to the market. The coffee table product would be distributed throughout the stores of the company in all around the world. The distribution centers would have an experienced set of personnel who would provide a detailed description of the product to the customers. Moreover, the customers would also be allowed to order or book the product online which would be delivered to them after a certain mentioned period of time. Furthermore, the company would also ensure that the product is abundantly available in all distribution centers of the company all across the world. This type of distribution strategy that the company is using is referred as intensive distribution where the company stocks its product in stores and distribution centers (Lamb, Hair & McDaniel, 2011). Marketing Communication Strategy The incorporation of marketing activities allows a company to reach a wider section of consumers and to inform them what the company is exactly offering. The main intention of IKEA through the marketing communication strategy would be to reach as many people as possible in the local market. The overall task of the marketing team would be motivating people to come and visit the IKEA stores. The company would market its product through various medium. As the company is a reputed one, it would not be much difficult for the company to promote its product. The product i.e. coffee tables would be promoted through media like electronic and print media, online promotion and promotions made through various stores of the company situated all over the world. The company would also promote the product through its catalogue which is published in the month of September of every year. The company distributes millions of this catalogues throughout the world. The catalogue is said to read by many people in the world. Thus, it would be an effective mode of promotion for the company (IKEA, 2012). Market Research It is quite significant for companies to carry out market research before entering the market with any product. Through this process, companies can understand the attitude and behavior of the people towards a particular type of products. IKEA would aim to understand the needs and the requirements of people through various surveys. They would also see the demand of coffee tables in the market. The preference of the people is of prime importance for the company. The company would also attempt to gather the responses of its competitors regarding the product. This would help the company to be more confident along with providing it a sustainable path to achieve continued growth through its quality product i.e. coffee table. Action Programs Action How Sensible Measurable Achievable Realistic Timed 1) Introducing an existing product i.e. coffee table in the market in a new manner. According to the requirement of the customers on the basis of marketing research It would improve employee loyalty Could be measured through its performance in the market With the help of a marketing plan Low cost Within 1 months 2) Low pricing of the product Through market research Beneficial for customers Through market performance With effective production process Low cost Within 1 month 3) Product available in the distribution stores Make the customer known about the product Increase market share of IKEA By evaluating the preferences of the customers With the help of market survey Low cost Within 2 months 4) Promoting the product through various electronic and print media Increase the volume of customers Increase the performance of the product Through the performance of the product With the assistance of various people associated with the company Low cost Within 3 months Budget Controls After the entire process is completed the company would observe the performance of the product. Data would be acquired from all parts of the world where the stores of the company are situated. Through the analysis of the data, the company would intend to know the performance of the product in the market. The feedbacks of the customers regarding the product would enable the company to enhance the quality of the product and ultimately its performance. Conclusion From the overall evaluation of the marketing plan, it can be summarized that marketing is among the key elements of the modern business scenario. It is one of the prime reasons for the success or failure of companies. It has been observed that marketing is a tool for enhancing relationship of companies with its customers. The process of marketing involves a lot of steps to be followed. It has been noticed that before making marketing strategy, the financial situation of the company is required to be assessed. In this paper, marketing plan for an existing product of IKEA i.e. coffee table has been prepared which is based upon certain important aspects such as product, pricing and promotion strategies. It has been observed that the analysis of the market is quite essential before introducing a reinvigorated plan for any product. Market analysis provides the present scenario of the market and the attitude and the preference of the customers which further enable companies to make strategy for its product. Moreover, targeting the customer and the market is also quite essential for the better performance of the product. It has further been analyzed that reviewing the competitiveness of the market is also quite crucial before preparing marketing plan for the product. From the overall analysis, it can be concluded that the one of the leading products of IKEA (i.e. coffee table) would face a tough challenge with regard to certain aspects. However, it needs to be mentioned that the company would have an edge over its competitors regarding the price of the product which is on the lower side as compared to the product of its competitors. Thus, such distinct advantages along with efficient features of the product would enable the company to attain profitability and sustainability in the long run. References Business Day. (2011). IKEAs strangely shrinking gross profit margin. Retrieved from http://www.smh.com.au/business/ikeas-strangely-shrinking-gross-profit-margin-20110331-1chdd.html Design Within Reach. (2013). Sale. Retrieved from http://www.dwr.com/product/skagen-coffee-table.do?sortby=ourPicks#.UUHHLdZ8-rd Ethan Allen. (2013). Description. Retrieved from http://www.ethanallen.com/product?productId=5971721&categoryId=8019 Hirschey, M. (2008). Managerial Economics [With Access Code]. US: Cengage Learning. IKEA. (2012). Marketing and communications. Retrieved from http://www.ikea.com/ms/en_US/the_ikea_story/working_at_ikea/work_areas_marketing_communications.html IKEA. (2012). Coffee tables. Retrieved from http://www.ikea.com/us/en/search/?query=coffee+tables IKEA. (2012). Welcome inside. Retrieved from http://www.ikea.com/ms/en_US/pdf/yearly_summary/ys_welcome_inside_2012.pdf IKEA. (2012). IKEA Group net profit FY09 up 11,3% to €2.5 billion - IKEA Group releases first Yearly Summary. Retrieved from http://www.ikea.com/ms/en_CN/about_ikea/press/press_releases/annual_report.html IKEA. (2013). Return policy. Retrieved from http://www.ikea.com/ms/en_HK/customer_service/return_policy/index.html IKEA. (2012). People and planet. Retrieved from http://www.ikea.com/ms/en_US/about_ikea/people_and_planet/index.html IKEA. (2012). Our product range. Retrieved from http://www.ikea.com/ms/en_US/about_ikea/the_ikea_way/our_business_idea/our_product_range.html IKEA. (2011). Sustainability report. Retrieved from http://www.ikea.com/ms/en_US/about_ikea/pdf/sustainability_report_fy11.pdf IKEA. (n.d.). SWOT analysis and sustainable business planning. Retrieved from http://www.ices-study.org/WhatIsEnterpreneurship/CaseStudies/(case%20study)%20ikea.pdf IKEA. (2010). Adapting to the future. Retrieved from http://www.ikea.com/ms/en_US/jobs/business_types/distribution_logistics/index.html Lamb, C. W., Hair, J. F., & McDaniel, C.D. (2011). Essentials of Marketing. US: Cengage Learning. Market Watch. (2012). IKEA profit rises, will double investment in 2012. Retrieved from http://www.marketwatch.com/story/ikea-profit-rises-will-double-investment-in-2012-2012-01-20 Palmer, A. (2012). Introduction to marketing: Theory and practice. United Kingdom: Oxford University Press. Rowe, C. (n.d.). IKEA marketing plan. Retrieved from http://www.scribd.com/doc/65014303/IKEAMarketingPlan Sandhusen, R. L. (2000). Marketing. New York: Barrons Educational Series. Tengblad, P. (2003). The operations and functioning of European works councils: The case of IKEA. Retrieved from http://www.imit.se/pdf/reports/2003_131.pdf. Read More