IKEA assignment Essays

IKEA assignment Essays IKEA assignment Essay IKEA assignment Essay Essay Topic: IKEA In this writing we will try to analyse IKEA, the furniture retailer in relation to the assortment of its products and the position it holds in the market. Another question we would analyse is what causes the consumer to decide on where to buy their products enabling the companys position in the market To complete this report we would use a SWOT analysis and a map positioning IKEA along with its competitors with reference to the variety of designs and the value for money. Mintel will be used to obtain statistical information and further research will be carried out from journal, books and news paper articles to support the evidence. As a result of the research we would also develop a list of factors that effect IKEA completing it with a summery. Facts and figures Ingvar Kamprad the founder of IKEA was 24 when he started selling furniture in 1943 opened his first store in his home town Sweden in 1958. As to date IKEA has 180 outlets operating in 22 countries to which 60% of the products are developed in Sweden and consists of approximately 10,000 home ware products in various assortments as listed below. * Bathroom, Beds, Mattresses, chairs and Childrens IKEA * Bookcases, storage systems, Kitchen Cook wares * Floors, Rugs, Lighting, Mirrors * Sofas, Sofa beds and Armchairs * Tables, Textiles, Wardrobes cloths storage * Workspace Furniture accessories During the year 2004 over 365 million customers have visited IKEA stores. The company purchases products from approximately 1,500 suppliers in 55 countries with 27 distributions centres in 16 countries. IKEA is 40% dependent in sourcing from other countries and also transporting from swedwood (own industrial groups)1 to other outlets, therefore it is important for these transport to supply their end of the purchasing to the customers. However the approach IKEA follows is mainly based on being environmentally friendly and they expect their suppliers wherever they are in the world to follow their code of conduct the Ikea Way (IWAY) which is explained in further details in Appendix A Ikea requires the routes from the suppliers to customers to be direct, cost effective environmentally friendly as possible which is also why flat packs are important to them and the customers Ikeas ethos is to provide affordable furnishing for working families, the flat pack nature of the products developed specifically in that format to enable prices to be kept low2. 12 months prior to February 2003 the mintel report has stated that Argos was the favourite source of decorated house ware products but less in functional house ware at 18% whereas IKEA attracted 12% of consumers holding its position in the 2nd place. However it would be necessary to mention that Argos also attracts shoppers interest in other products such as clothing, electrical and entertainment. Below is a table with further details from Mintel. On the other hand as seen on the table below in 2004 the retailer used for purchasing furniture is IKEA with 16% followed by Argos with 10% and department stores being 3rd with 5%. Source Mintel report3 Although IKEA may have counteracted with difficult situations in the past such as the the deadly poisoned bookshelves4 where formaldehyde was found after a tests were conducted by an investigative team from Germany. They have taken immediate action with stopping production world wide showing how the values of the customers were important to them. There may also be difficulties for the shoppers with no transports, with IKEA stores located in retails parks out of the city; however they do ensure transport via train and buses along with the offer to deliver. Position mapping After completing a research travelling the stores, browsing the catalogue and websites, it has helped to analysing the variety of products IKEA produces in comparison to its revelries. This has enabled us to compare prices and position them on the map as seen below. The map is designed to show where the companies stand in relation with its competitors with one line marked as the design/style of assortment the company has and the second line is to measure the value/pricing with both indicating the low and high levels. With approximately 10,000 assortments of furniture the consumer would know that there are varieties to choose from at reasonable prices with quality. This also helps the positioning of IKEA to be the 1st in the market place. `The UK is Ikeas third biggest market, generating 12% of group sales, or pounds 800m last year. Germany is biggest, with 21% of sales. In addition, Brent Park is the busiest Ikea store in the world.5 We can see that IKEA has the highest assortment of all 5 companies with 10,000 products at reasonable pricing. Whereas Habitat was placed on the map for the lowest design yet high with pricing. On the other hand although Argos was the cheapest company the assortment was also much less than IKEA with 3,500 furniture products. John Lewis was positioned on the map to be the third least expensive with the third in line for the variety of assortments in its product range, whereas MFI was placed to be 4th in line of varieties but 3rd with higher prices compared with IKEA. This is a tool used to measure the strength, weakness, threats and opportunity of a company in the market upon competitors as shown in Appendix B One of the major strengths of IKEA is that it a wide variety of products therefore giving them a competitive edge in comparison to their competitors. IKEA strengths come from storing their products under one roof and producing catalogues in various languages and delivers to homes. Last year, a total of 145 million copies were printed in 48 editions and 25 languages 6 The idea was to produce and sell simple, practical items of furniture that were easy to install The flat pack packaging is another one of IKEA strength with easy to install instruction. Another weakness of IKEA is the number of outlets with in UK and in order to strengthen that weakness it would be advisable to open further outlets which would be to their advantage. Although MFI has more outlets, unfortunately most of their furnitures are made as units which are one off to order that requires few weeks of delivery time where the likes of MFI or Courts may make money selling to the customer on a one-off basis7. An opportunity for IKEA is that it does not do e commerce as it is missing out on a great opportunity with large market segmentation, which is one of Argos strengths On the companys website it states that trade through the Internet is small but growing. However, in the UK IKEA does not offer home shopping either through its websites or the catalogue. Customers must make a trip to one of the stores to actually make a purchase8 One other weakness of IKEA is as stated by Mail on Sunday is the queuing system It is reckoned that customers often spend an hour queuing to pay at the checkouts of a busy store. And that helps explain why it wants to build 20 more9. Factors effecting IKEA There are a few factors which affect Ikea in a positive and negative perspective such as the change in fashion If you bought a new coat or boots this winter, the chances are it was not because your old ones had worn out but because you wanted the latest style, label or colour.10 Below listed are few other factors that effect IKEA and the consumer before buying the product. * Change in fashion and taste * Busy life schedule * E commerce * Retailing mistakes/Delivery issues * Marital status Factors in selecting a retailer * Flexibility Buying furniture is an emotional process. Customers require time, flexibility and support from their retail outlets when making such important decisions. We have to respect their needs11. * Quality and Price We are the ones who make the selection of the products by the quality, variety, and also by the price. It doesnt work if we pay a high price12 * Assortment of Product range * Location/ packaging * Media Pressure * Fashion change * Customer loyalty and perception.