IKEA was founded in Sweden in 1943 by Ingvar Kamprad. IKEA is a home furnishings retailer unlike any other. It was founded on the basis of low cost and it offers modern and stylish furniture for all types of people at affordable prices. IKEA’s unique way of shopping, store layout, and do-it-yourself approach continues to help maintain their popularity. 1)Given the SWOT analysis presented in the case, what are IKEA’s key competitive advantages? What strategic focus should the company take as it looks to further expand into the U.S. market?
Given the SWOT analysis presented in the case, IKEA definitely has some key competitive advantages. All of the strengths mentioned in the case are very beneficial but the strongest I feel are the low cost structure, do-it-yourself approach, and the added amenities. The low cost structure benefits both IKEA as a company and the customers. IKEA is able to maintain low cost because they design their products around a target price. Also, the strong relationships IKEA has with their vendors is another way that enables the low costs. The do-it-yourself approach ties in with the low cost structure.
In addition, the do-it-yourself approach makes the shopping experience at IKEA unique. Customers are able to go into IKEA, get what they need, and then get out without having to deal with sales people. In today’s world time is everything to people and IKEA recognizes this and it is shown through their method of the shopping experience. The added amenities are a huge competitive advantage to IKEA. No other furniture retailer has such amenities. Continuing with the whole time concept the amenities help to solve many problems. Some solutions that IKEA offers is a restaurant in the store if customers are hungry, a child care service so parents can take their time shopping knowing their children are being looked after, and rents racks for customers cars so they can transport the bigger bulky items to their home.
The strategic focus that IKEA should take while it further expands into the U.S. market would be to continue following their core operating philosophy. The philosophy states “ Our vision is to create a better everyday life for the many people. Our business idea is to offer a wide range of well-designed, functional, home furnishing products at prices so low that as many people as possible can afford them.” IKEA needs to create products following this motto but have these products molded to the tastes and styles of the U.S. population. The prices must still be low but IKEA must force the message that even though the price is low that does not mean the quality of the product is poor. This message will be key for expansion in the U.S. to be a success. IKEA must maintain their shopping experience as that is a strong competitive advantage, and tweak their philosophy so it fits the American lifestyle. If they do this then they will have success in expansion.
2) What factor is the biggest reason for IKEA’s growth and popularity: value or image? What can IKEA do to sustain growth after it loses some cache? Value and image are equally important for being the biggest reasons for IKEA’s growth and popularity. Value is important because for the majority of people this is their main criteria. The value the people receive from IKEA are portrayed through the cost, quality, and style of the product. These three terms if done correctly will continually help IKEA’s growth and popularity. The image of IKEA is what helps IKEA stick out amongst its competitors. The image is one of a stress free environment where customers can shop without being heckled by store employees. The showroom is clean and open with the aisles being wide enough so there are no traffic jams amongst the customers. The customers are attracted to IKEA because of both the value and image IKEA portrays.
IKEA can do a few things to sustain growth after it loses come cache. First, IKEA can increase their marketing efforts to get more customers in the stores. Social media is a very dominant force in today’s world and IKEA should definitely start focusing on that area. Second, IKEA should continue to be innovative and creative in their products. This is how they became a strong force so they should continue down that road because they have proven facts that it works. Lastly, IKEA should try and delve into new market categories or diversify. I say this is an option because just this week I came across an article in the Wall Street Journal discussing how IKEA’s parent brand, INGKA, is planning to develop a hotel chain.
3) What strategic alternatives would you suggest IKEA employ to further penetrate the U.S. market? There are two main strategic alternatives I would suggest IKEA employ to further penetrate the U.S. market. First, I think it is important to tailor the needs of the U.S. customers in their product developments. The products should match the style of the Americans. Second, I would suggest IKEA update their marketing efforts. I mentioned in my answer to question number two that I feel social media is a huge opportunity to get the IKEA brand and message out to the U.S. population. In addition to social media, I think advertising in commercials would be beneficial. People in the U.S. love to watch television so they would sure to be get popularity from this effort. I think either one of these strategic alternatives would have a positive effect but both of these alternatives together would be a HUGE increase in IKEA’s brand and make further penetration in the U.S. market easier.