IKEA

BUSINESS
REPORT

JULY 21, 2020

‘

Prepared By: Akhil Sistla

For: IKEA Management
Contents
No table of contents entries found.
Executive Summary

1.0 Introduction
IKEA is a Swiss company founded by Ingvar Kamprad in 1943 as a small Swedish mail-order business.
Currently, IKEA is known as one of the best home furnishing brands in the industry offering a range of
products including furniture and appliances. It is currently experiencing competition from online
businesses as their online services are lacking when compared to other online retailers. The purpose of
this report is to analyse the current marketing and operational strategies implemented by IKEA and
propose new strategies to be used by the business to remain competitive.

2.0 Business Situation and Problem

https://brandongaille.com/17-australian-furniture-industry-statistics-trends-analysis/

One of the key characteristics which are common in businesses that are in their maturity phase is a
highly competitive nature with increasing competition. IKEA has been at the top of the home-furniture
industry for at least 40+ years making them one of the most experienced brands. According to source
‘IBISWorld’, the current market value of Australian Furniture Retailing is valued at $7 billion with an
annual growth rate being estimated at approximately 2.2% till the year 2022. The current number of
operating businesses in the industry is 5803. Some of the key competitors in the industry include
Harvey Norman Holdings Ltd, BBQSAM Holdings Pty Ltd and GreenLit Brands Pty Ltd. IKEA’s brand
value in this industry has declined in the past year from $21.531 billion in 2019 to $19.499 billion in
2020. According to ‘Forbes’, the current challenge faced by IKEA is that recently consumers have
picked up interests in the digital age with services and products that are designed to match their
particular lifestyle and their specific needs in future. Therefore, IKEA must embrace online retailing and
make sure that the business can manage the increasing online business as well as keeping their bricks
and mortar retail stores relevant.
3.0 Branding Strategies
Integrated Marketing Communication strategy has been used where all aspects of IKEA are interpreted.
There is a very simplistic yet premium perception when customers shop in IKEA. This is due to IKEA’s
branding strategies of offering the greatest range of products for the lowest cost and creating an
experience before a product, and inclusion of technology to ensure consumers are carefully prepared
for decision making.

- IKEA believes that low prices are the cornerstones of their vision, their business idea and
concept. The ideology behind every IKEA product is that lowest prices improve the accessibility
to any type of customers and provide the same experience without any discrimination
regardless of their income level, status etc. This is achieved by cost-effectively doing every
business operation as every small reduction can play an important part in creating IKEA’s low
prices which are offered back to the customers.

- Additional product strategies implemented by IKEA include selling furniture directly to customers
in the same flat boxes provided to IKEA by suppliers. Flat box system has worked very well in
the eyes of customers due to the easy accessibility/transportation as well as being simplistic
and the satisfaction the customers get when assembling their furniture.

- IKEA also integrates several networks of marketing communication. Some of these networks
include print and media advertising, sales promotions, events and experiences and direct
marketing. IKEA currently has

(https://contently.com/2014/11/07/how-ikea-became-kings-of-content-marketing/)

4.0 TQM Strategies

Lean Management – (Patterson, 2019) IKEA Case Study
https://www.6sigma.us/customer-service/six-sigma-and-ikea/ - 6Sigma

IKEA uses Operational Strategies such as Lean Management and SixSigma to ensure operations are
run smoothly at an efficient rate. (REFERENCE) Lean management is a strategy that contributes to the
growth of the organization. (REFERENCE) Additionally, the techniques of lean management also
support a long-term approach for the organisation to achieve small and important changes for the
improvement of efficiency and quality of the organization. IKEA has gained various benefits with the
adaptation of lean management in the working system of their manufacturing. The benefits include cost
reduction, increase in efficiency, reduction in manpower, total involvement of company, improvement in
the morale of employees and environmental sustainability.

IKEA decided to use the “Six Sigma DMAIC” approach, which stands for Define, Measure, Analyse,
Improve, and Control. (6Sigma, 2020) This would give IKEA the chance to increase their level of
efficiency and performance, allowing them to stay competitive in the global market. IKEA also uses the
SIPOC approach, which stands for Suppliers-Inputs-Process-Output-Customers, this provides IKEA
with a general outline of the entire process from the suppliers providing the product to IKEA getting the
product to its customers.

IKEA ensures, that to maintain its utmost product quality, suppliers are required to follow a 4 level
quality check guidelines. IKEA calls this strategy as 'IKEA Quality Staircase Model’ which is aimed at
improving the Suppliers’ overall performance in Quality, with a focus on securing “CEPQ (Customer
Experienced Product Quality)”. (IKEA Supplier Quality Assurance Group, 2006) CEPQ is the IKEA
concept to describe the customer’s expectations on the product and within what areas the customer
experience and assess the quality of the product.

5.0 Analysis of Branding Strategies

The marketing strategies applied by IKEA defines how the business has successfully established itself
as a top competitor in the furniture retail industry. By utilising the latest technology such as Augmented
Reality, and adhering to their business rule of providing top quality products for the cheapest prices, as
well as providing simplicity and accessibility with their unique packaging, IKEA has demonstrated
qualities of a premium brand. To further analyse these effective branding strategies, a Strengths-
Weaknesses-Opportunities-Threats (SWOT) and a Unique-Selling-Proposition (USP) has been
created.

5.1 SWOT Analysis - http://www.circleinternational.co.uk/circle/strategy_files/ikea

%20mrktswot.pdf

Strengths Weaknesses

1. Strong global brand 1. The size and scale of global business

2. Wide product range 2. The need for low-cost products

 3. Good social media presence 3. Struggle to maintain communication with
4. Good brand vision consumers and stakeholders.
5. Strong brand concept

Opportunities Threats

1. Online Furniture Retail Growth 1. The decline in demand due to an increase in

2. Growing demand for greener products consumer income.
3. Growing demand for low priced products 2. The emergence of competition from Asia
4. Growing demand for reduced water usage and other populated areas.
and lower carbon footprint. 3. Increase the cost of raw materials.
4. The global economic and financial crisis
(COVID-19 crisis etc.).
5.3 USP of IKEA

Customer Values Ranking List of Business Strengths Protecting gains from

Values and USP new USP

- Quality of - Quality of - Quality of - Quality of

Products Products = 8 products products is
(Excels) currently very
- Range of - Range of good and can
products products = 7 - Range of be maintained
Products (On by using their
- Up to Date - Up to Date par with quality check
Product Design Product Design competition) program.
=8
- In-Store - Up to date - The product
Experience - In-Store Product range is wide
Experience = 8 Designs and is up to
- Accessibility (Excels) date with the
- Accessibility = 7 trend which can
- In-Store be improved by
Experience asking
(Excels) feedback from
customers on
- Accessibility their
(Excels) procedures and
check if any
changes are
needed.

- The in-store
experience is
currently good
and can be
maintained by
sticking to
current
procedures.

- Accessibility is
currently very
good and can
be maintained
by keeping their
flat packaging
and low costs.
5.4 Evaluation of USP & SWOT

In the table of SWOT and USP displayed above, several relationships can be seen regarding strengths,
weaknesses, opportunities and threats of IKEA. Strengths of IKEA include a dominant place in the
industry, a variety of products ranging from kitchens, bathrooms & bedrooms. They have also improved
on this by implementing upcoming new technology such as Augmented Reality and providing top tier
quality products, which takes shopping experience at IKEA to a whole new level. Whilst this can allow
IKEA to promote their products at a more expensive price range, they have always maintained a
consistent mentality and rule of providing high quality for low prices which can significantly reduce the
extra income they could be made by just increasing the price by just a little bit. Other strengths include
having an immensely positive brand reputation which brings more customer following to the business
and can provide opportunities for more sales. The major threats of IKEA include an increase of the
price of raw materials such as wood, metals, plastic etc., the emergence of competition from Asia and
other dense populated countries, global economic and financial crisis. To minimize the threat of an
increase in cost, the business can pass on the supplier’s increased prices on customers just like how
they have passed on the discounts to ensure fair treatment. The opportunities present for IKEA are very
clear and big as developing countries are improving their economy and presence, IKEA can potentially
expand into these developing countries with immense customer bases to improve sales and potentially
even the profit margin. When compared to other major competitors IKEA holds a significant advantage
in majority of the categories, this is due to their long investment in the market and many years of
operation in the industry.

6.0 Analysis of TQM Strategies

7.0 Evaluation of Branding and

Operational Strategies

Marketing/Branding Strategies
 Strategy Efficiency Effectiveness Stakeholder
Satisfaction

Current

Proposed

Operational Strategies

Strategy Efficiency Effectiveness Stakeholder

Satisfaction

Current

Proposed

8.0 Recommendations
9.0 References
Reference
 
Petterson, T. (2019) IKEA: Global Expansion [Class handout], Springboard Education Australia
 
Primary Research
 
Payne, J, Class Interview, Monday 3 February 2020 (cite this as (Payne, 2020))
 
IKEA Store Visit, Monday 3 February 2020 (cite this as (IKEA Store Visit, 2020))

IKEA Supplier Quality Assurance Group, I., 2006. IKEA Supplier Quality Assurance Program Report. 1st ed.
p.1. (cited as ((IKEA Supplier Quality Assurance Group, 2006))