1. INTRODUCTION In this report, focus will be on IKEA, a multinational home-furnishing company. It is also the largest companies in the world that retails furniture. This report will also focus on Singapore. Several environmental forces that impact Singapore and IKEA will be analysed. The following report will also cover the backgrounds of Singapore and IKEA, a PESTEL analysis followed by a further analytical framework known as “Porter’s Five Forces”. Several issues will be identified and discussed, followed by strategic recommendations and a conclusion that will summarize the entire report. 2. COMPANY BACKGROUND IKEA is an internationally known home-furnishing retailer, with over 300 stores in 40 countries, that specializes in products …show more content…
IKEA specializes in ready-to-assemble furniture that is of good quality. It also specializes in food and other cheap accessories for the house. Because of its uniqueness and low prices for such good quality, it is very likely that consumers may deem it incomparable and thus reduces their ultimate range of choices for alternatives. Rivalry Among Existing Firms Strong Several other companies also specialize in furniture that is discounted e.g. Walmart, Home Depot, Galiform et cetera. However, the inevitable allure of ready-to-assemble furniture aids IKEA in its growth in developing countries like China, Japan and Singapore. Global recession has also intensified IKEA’s competition as it can cause more expensive priced companies to have to reduce their prices. Such recession, however, can also decrease competition as it render’s the consumers’ spending power to lessen and thus they will not prioritize furniture as a needed expenditure. Threats of Substitute Products Weak As explained in the “bargaining power of consumers”, it is hard to substitute the products that are offered by IKEA. This is further intensified by the fact that IKEA has formed a brand perception that makes it stand out amongst its
In 1951, to reduce product returns, he opened a display store in nearby Älmhult village to allow customers to inspect products before buying. It was an immediate success, with customers traveling seven hours from the capital Stockholm by train to visit. Based on the store’s success, IKEA stopped accepting mail orders. Later Kamprad reflected, “The basis of the modern IKEA concept was created [at this time] and in principle it still applies. First and foremost, we use a catalog to tempt people to visit an exhibition, which today is our store. . . . Then, catalog in hand, customers can see simple interiors for themselves, touch the furniture they want to buy and then write out an order.”2 As Kamprad developed and refined his furniture retailing business model he became increasingly frustrated with the way a tightly knit cartel of furniture manufacturers controlled the Swedish industry to keep prices high. He began to view the situation not just as a business opportunity but also as an unacceptable social problem that he wanted to correct. Foreshadowing a vision for IKEA that would later be articulated as “creating a better life for the many people,” he wrote: “A disproportionately large part of all resources is used to satisfy a small part of the population. . . . IKEA’s aim is to change this situation. We shall offer a wide range of home furnishing items of good design and function at prices so low that the majority of
IKEA is known as the biggest furniture company in all over the world. The specialization of IKEA is
IKEA is a unique Swedish furniture company. The company we so widely recognize today for selling good quality budget friendly Scandinavian style furniture began in 1943 as merely selling pens picture frames and wallets. Ikea was founded by a then 17year old Ivor Kampard, of the farm Elmtaryd near the small village of Agunnard in Smaland, hence giving rise to the name IKEA. This area is know for its thrifty and hard working ethos and Kampard very much incorporated this into his business venture. His innovative idea was to offer home furnishing products of good function and design at prices much lower than competitors by simply using cost-cutting solutions that did not affect the quality of products.
At the time of IKEA’s entrance into the US market in 1985, IKEA spent a decade struggling with low sales. The US furniture retailers were separated between high-end and low-end retailers. The IKEA 's low-end competitor is Wal-Mart; it was America’s number one furniture retailer. The low-end retailers focus on promotes their products on low pricing (IKEA Marketing Mix). The high-end competitor included both single-brand retailers such as Ethan Allen and Thomasville as well as multiple-brand retailers such as Jordan’s Furniture. The high-end retailers focus on luxury environment, they
IKEA’s clear vision is to offer well designed and useful home furnishings at low prices so many customers will be able and capable to afford them. IKEA designs exclusive products that meets firm requirements for task, well-organized delivery, excellence and has a good impact on the environment.
IKEA is the largest furniture chain in the world, and in 2011 the Swedish company operated over 270 stores in 25 countries. In 2011 IKEA sales soared to over $35 billion, or over 20% of the global furniture market. Most of its stuffs believed IKEA will massive growth throughout the world in the coming decade because IKEA could provide what customer wanted: good design, and good made contemporary furniture with an affordable price. In one word, IKEA’s global approach focuses on simplicity, attention to detail, cost consciousness, and responsiveness in every aspect of its operations and behavior. (Jones, 2013)
Based in Denmark, IKEA International A/S is one of the world 's top retailers of furniture, home furnishings, and housewares. The company designs its own items, and sells them in the more than 140 IKEA stores that are spread throughout approximately 30 different countries worldwide. The company also peddles its merchandise through mail-order, distributing its thick catalogs once a year in the areas surrounding its store locations. IKEA is characterized by its efforts to offer high-quality items at low prices. To save money for itself and its customers, the company buys items in bulk, ships and stores items unassembled using flat packaging, and has customers assemble many items on their own at home. The company is owned by
Ikea's mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that as many people as possible can afford to buy them (www.ikea.com)
IKEA is the world’s largest furniture retailer of ‘knock down’ furniture with 300 stores in more than 35 countries. It was founded by Ingvar Kamprad of southern Sweden whose main innovative idea was ‘to offer home furnishing products of good function and design at prices much lower than competitors by using simple cost-cutting solutions that did not affect quality of products so that as many people as possible will be able to afford them. ( www.ikea.com). He used every opportunity to reduce costs without compromising on ideas and quality.
IKEA is a manufacturer of home and business furnishings who offer interior furnishing products to consumers in several countries across the globe. Before IKEA plans on expanding and entering any new market, they are required to obtain a clear understanding of what consumer behaviour and requirements are in that particular market. There are basically two types of Markets which include Consumer Market and Business Market.
Besides, IKEA also offers product diversification for new market segments such as specific furniture for office and traditional furniture for older richer people. Therefore, IKEA business model had a little adjustment when the company’s focus on selling not only furniture but a prosperous lifestyle to the customer with developed complementary services like restaurant, cafe, and supervised children play area. Hence, IKEA redefines its image as an ideal place for family hangout in the weekend without compromising their vision of always affordable price for their stylish design
At the outset, it may be useful to characterise IKEA in terms of the characteristics of demand (also known as the four Vs, see Slack et al. p 20). First, IKEA is clearly a high volume operation – as indeed most international retailers are – which lends to systematising operations but which implies capital intensive processes and therefore cost considerations will be crucial. Second, IKEA offers a large number of products (up to 14000 depending on the country/store) so there is high variety in the
IKEA’s strategy towards its suppliers is that of a low production costs strategy. IKEA wants to sell its products at the lowest possible price therefore their
3. Standard products. IKEA’s main competitive advantage derives from low costs, which in part are achieved due to standardized products. Standardized products attract fewer customer segments. Therefore, the business inability to offer better quality more customized products allows its competitors to fill that niche and fortify their position in it.