CARMEN VICTORIA AGUADO LÓPEZ

INTERNATIONAL CASE OF STUDY

IKEA

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The ikea approach

International Case Study

“If there is such a thing as good leadership, it is to give a good example. I have to do so for all the Ikea employees.” Ingvar Kamprad

Carmen Victoria Aguado López

IKEA´S HISTORY

The business that we are going to talk is Ikea , the most famous furniture Company over the

World .This Swedish deal , created by Ingvar Kamprad1 ( “IK” Ingvar Kamprad , “E” Elmtaryd

was his farm , “A” Agunnyard was his hometown)2 . In

1945 Ikea launched the first advertising into a local

newspapers, three years after the furniture’s appear in

the company (originally the company makes office

equipment not furniture’s).

But if one thing is famous of Ikea, a part of the prices of campaigns, it´s the catalogue. 1951

was the year of the first Ikea catalogue.3The catalogue is

now published in 27 languages for 36 countries, Africa is

the only continent where you cannot find an Ikea, and it

´s considered to be the main marketing tool of retail giant. The Catalogue it´s distributed in

stores or by mail, in Spain you can find in your mailbox each September.

1958 is another famous date, was the opening of the first shop in Sweden and the creation of

the “Tore box”, who have not used a mythical box of those? Ikea´s restaurant, created in 60´s, it

´s one of the other pillars with Swedish dining. As well, we have to take into account, the

creation on Ikea Family, the card with which families have advantages (20 % of discount in

products family) 4

Basing on the expansions, these started in 1963 when Ikea went to the neighbour country,

Norway. It was the leap to the expansion and the beginning of the empire that´s today. The first

continent where Ikea has entered was Oceania, Australia specifically. North America has

received Ikea´s group in 1985 with the opening in Philadelphia and in 1998 arrived to Asia,

China.

1 Forbes Magazine, The world´s billionaires, 2015 Ranking Ingvard Kamprad .Image of http://www.forbes.com/profile/ingvar-kamprad/. 2 Thisismoney .co.uk , IKEA Founder Ingvar Kampard , Lucy Balinger , 14 April 2008.3 Home Design. Inspiring Ikea Catalogue Cover (1951-2014) http://homemydesign.com/2013/inspiring-ikea-catalog-covers-1951-2014/ 1951 catalogue cover 4 IKEA FAMILY. www.family.ikea.es/hazte-socio-family_en (Web in Line) ©Inter IKEA Systems , B.V 1999-2014

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But nevertheless Ikea is not only expansions, furniture’s etc…In 1990, they created the first

environmental policy, three years after started to join part of FSC (Forest Stewardship Council)5

and in 1998 hires the first forestry manager.

In conclusion IKEA in our days is a good positioned deal thanks to the mistakes of his creator

and his persistence to overcome barriers.

IKEA´S MARKETING

STRATEGY

Ikea the same as other

companies, has poor

beginnings but in our

days in famous over the

world. How has not visit

an IKEA once in live?

The first shop was not

equal to today, the

figures have grown to be multiplied by an incalculable amount. If we look the results of 2014, we

can see that the total sales were 28.7 billion and their food about 1.46 billion. (In the Key Figure

as we can see)6

Regarding the strengths of IKEA, anyone who like IKEA knows. In first stay, powerful brand

image, who doesn´t know Ikea? , thanks to globalization could be disclosed, but in a different

way than Coca-Cola or Apple. IKEA started in Sweden and after that jump into another

countries with only good – prices and a catalogue that appear after not with subliminal publicity

as Coca-Cola. Financing and deferred without interest (for example until the 14 of August 0% in

entire your purchase)7 , that can allow families to buy more and if we add that IKEA has a

friendly atmosphere with facilities like restaurant (for example in Spain Ikea has this offer;

Breakfast 1€, Lunch 2€ and Dinner 3€, that includes their famous “Köttbullar”)8 or day care

centre, its value rises. Also, the wide range of products and the special offers that they put to

remove during the year some articles to introduce others. But we must take into account other

two things; own brand manufacturing and brand installed thanks to the franchise system.

On the other hand we have the weakness, an extremely weakness’ is the relatively few location

in some countries , for example the IKEA that I have more near is 45 kilometres away of my

house , in Murcia, and it´s on the suburbs of a city so for people is not so comfortable to drive or

to catch a bus. Then the shops have many employees for nothing because is an auto service

shop, you enter with your basket and after you write the references of the furniture you receive.

5 Ikea History 1990 , http://www.ikea.com/ms/en_JP/about_ikea/the_ikea_way/history/1990.html 6 Key Figure 1. www.ikea.com/ms/en_GB/this-is-ikea/about-the-ikea-group/index.html 7 Customer service of IKEA 86 Principal page of IKEA in Spain , www.ikea.com/es/es

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But buy the furniture is not a problem, the problem is when you arrive to your house and you

start assembling yourself and this for certain groups of consumers would not be so funny , you

lose many time with instructions with difficult names , “fixa” , “frakta” “behandla” … and to make

matters worse the furniture’s are not for the whole life.

Focusing on the Marketing mix (4P´S ; Product , Price, Place, Promotion) , Ikea´s is known for

its affordable prices to suit all budgets , the designed their products then they search a raw

materials sourced, the products are manufactured, then are distributed, and they sold by retail,

without no-frills low-cost framework. So they can save money of transportation to negotiate with

suppliers. The Place where Ikea´s lays down their surface is on the outskirts of neuralgic cities

(Cologne, Madrid, Murcia, Paris…) and the location is over the world ;Europe ,Asia, Australia,

North America. What makes Ikea being what is? From my point of view, their promotion and

their products. The Swedish names that they put, make show people interest in knowing what is

and when they discovered they want to buy it. But go to Ikea in a certain period of time depend

on the publicity or the catalogue. Campaigns like “Bienvenido a la república independiente

de mi casa”- Tony Segarra (“Welcome to the independent republic of my house”) or “It´s a

big country. Someone’s got to furnish it” – Donny Deutsch9.

Other aspect to consider are, in my humble opinion they are what we look more and it´s better

to highlight them together. IKEA was the key to enter into a world of furniture like Lego, you can

assemble and disassemble when you want and put wherever you want. The only disadvantage

that you have to carry with the furniture to your car and then when you arrive home, remove of

the car and “down to work”. But you have the marvellous rate of transport that Ikea offer to you

(between 29 and 149, depending on the amount by which the lot is valued) 10to transport.

Another aspect is the design, IKEA recreates living spaces so you can form an opinion. The

pillows and the sheets are what most stand besides lamps ( during my Erasmus I realized that

as happens in Germany and thought it was something that only happened in Spain , a more

focused strategy I thought). Finally the famous Hot Dog (in Murcia in the structure they have a

large picture as a teaser), this kind of Hot Dog give you the necessary quantity of energy to

continue shopping, believe in me I tested. The price nowadays is 0.50€ 11 in Spain and 1.00€ in

Germany 12 , as we can see the price are not the same. Another example the Halogen bulbs

GU10, 7.99 € in Spain 13 and 4.99€ in Germany14. Perhaps the level of competition or taxes are

what determined that.

9 Bernice Kanner, New York Magazine 1 June of 1992 , pp. 22-2410 Leifer Service , Ikea Deutschland 2015 http://www.ikea.com/ms/de_DE/campaigns/services/service_und_leistungen.html11 Ikea Restaurant Spain http://www.ikea.com/es/es/catalog/categories/departments/food/12 IKEA Restaurant Deutschland http://www.ikea.com/de/de/catalog/categories/departments/food/13 Halogen Bombilla GU10 http://www.ikea.com/es/es/search/?query=bombillas14 Halogen Lampe GU10 http://www.ikea.com/de/de/search/?query=lampe

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IKEA FAILURE AND SUCCESS

IKEA is a company so standardised that doesn´t change so common for enter into a market,

which have produced many problems. China, Arabia Saudi or Japan (they entered in 1974 and

they went out in 1986, 20 years after they decided to re-enter)15 are the leading countries. But

we are going to talk about China , that at the beginning was a stone in their shoes, a country

with a 66% of masculinity 16 that have evolved in recent years and increasingly closer to the

West and away from its eastern customs. The new generation looks more for the trendy

technology and brands with a good image.

China is a country where the tradition premium over the innovation (same products from outside

China), as an example their square tables instead of roundtables that Chinese citizens use.

China and Japan are famous for their little apartments and IKEA offered big sofas that were not

so compatible. Nevertheless we don´t take into account the competitors of IKEA (“YiJia”, “proper

home”), AIKA (“loving home”)17 it´s one of its biggest competitors, Hola18 a brand from Taiwan.

For this reason the prices of IKEA in China are so cheaper and another reason it´s the facility to

copy the products.

After all, we will consider all the changes you made Ikea to seize the Chinese market, they put

their shops in the city centres near the public transport (they adapt that because in a European

Country, Ikea is located in the suburbs) they introduce chopsticks and special tea cups for the

Chinese New Year. They discover that Chinese consumers prefer the traditional shops, the

specialist stores so we can coupled with the location of the shops in the centre to competition

and gain market share.

On the other hand we are going to talk about a success of Ikea, Germany. In our days Germany

is the winner in the five top selling markets of IKEA 19 behind countries like USA, France, Russia

and Sweden. One success of Ikea in Germany was the first city centre store of IKEA opened in

June of 2014 in the city centre of Hamburg and IKEA the first one opened in Europe so close of

the population. Hamburg is a city where a 40% of the 1.8 millions 20of citizen have no car. But

with this shop the pretend to create a model and stablish one in Berlin, Johannes Ferber, the

managing director who’s spearheading Ikea’s expansion in Germany. “It’s a very expensive

experiment for us, but we want to know if the city-store concept works out,” he said.

15 Global Strategic Management , Jedrzej George Frynas and Kamel Mellahi 3rd edition , November 2014, p. 4-516 Source : Geert Hofstede , http://geert-hofstede.com/china.html 17 Danwei , Bilingual Brands : Love in the time of IKEA , Dror Poleg , 9 may 2006 18 IKEA and it´s competition in China , 20 April 2013 ( marketingtochina.com ) 19 IKEA Group , Yearly Summary FY 13 ,2013 p.24 20 El Economista , El primer Ikea en el centro de una ciudad pincha con la venta de muebles , 4 August of 2014

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“Altona could serve as a model for other big cities such as Berlin.”21 So, in future we could

discover if they are going to be stablish in Berlin

Based on their success, the firs IKEA was opened in 1974 22 in Munich Eching one year after in

Cologne, the expansion ok IKEA in Germany started until arrive 44 stores. Germans not just

seeking cheap prices, quality was the key. Ingvard start business with Poland to achieve that.

Another country where IKEA obtained a success was in USA, one problem that they have when

they entered was the recognition of the name, change of adverts, in 2002 they produced

“Unborring”/”Lamp” by Spike Jonz. The sport had opened with a discarded lamp sitting on the

sidewalk in the rain and had concluded with an actor saying;” Many of you feel bad for this

lamp”, the lamp is the basic model that cost 3.95$23. Moreover, fight with competitors like Ethan

Allen, Bassett Home Furnishing, William Sonoma and Lexington24. But another problem appear

the size of Europe was smaller than American. On the other hand they started to be a success

and not only selling vase( they bought the big one because they drink many drinks with ice and

that occupy much), because stores offer adventures ,the stores are also places where families

can spend big load of time, thanks to the play area for children and the large cafeteria. Another

cause was Ikea buyers were more likely people that has

travelled abroad , and this kind of people is

concentrated in the coasts where are more freedom,

Americans’ started to be more concerned with the

design and more open with IKEA´s world perhaps

because IKEA began production in USA to save costs.

But a company in USA is not important until it arrives in

New York, 1990, 27.000 people visited it on opening

day25. But visitors are not all, other claims in USA is the

politics as seen in the image26. This may be another of

the hits of IKEA in USA.

To sump all , IKEA is a company that have learned of their errors in pass , as an example Japan

where they re-opened another time , China where they change to adapt, Spain where they put

in strategic places for not to saturate the market and bring together a larger number of

customers. But IKEA is a well-recognised company over the world. That will give this fame

someday a place in the Latin American market?

Bibliography

21 Bloomberg Business, Nicholas Brautlecht , 30 June 2014. “ IKEA GOES URBAN WITH FIRST HIGH STREET STORE IN HAMBURG” 22 IKEA Germany 23 Ikea Unveils “Unboring” Campaign , 16 September 2002 , 24 Apartment therapy , Top 100 US furniture store by sale , 18 January 2011 25 Arlene Hirst ,How IKEA became America´s furniture-selling powerhouse, 8 October 2014 26 New York Magazine ,24 September 1990 , page 41

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Brainy Quote http://www.brainyquote.com/quotes/quotes/i/ingvarkamp322818.html ( Visited 10 April 2015)

Forbes Magazine, The world´s billionaires, 2015 Ranking Ingvard Kamprad .Image of http://www.forbes.com/profile/ingvar-kamprad/. ( visited 10 April 2015 )

Thisismoney .co.uk , IKEA Founder Ingvar Kampard , Lucy Balinger , 14 April 2008 http://www.thisismoney.co.uk/money/news/article-1630047/Profile-Ikea-founder-Ingvar-Kamprad.html (visited 15 April 2015)

Home Design. Inspiring Ikea Catalogue Cover (1951-2014) ,1951 catalogue cover http://homemydesign.com/2013/inspiring-ikea-catalog-covers-1951-2014/ (visited 10 April 2015)

Nn: ( 2014) : IKEA FAMILY. http://www.family.ikea.es/hazte-socio-family_en (Web in Line) ©Inter IKEA Systems , B.V 1999-2014 ( visited 10 April 2015)

Nn : Ikea History 1990 , http://www.ikea.com/ms/en_JP/about_ikea/the_ikea_way/history/1990.html ( Visited 10 April 2015)

Nn: Key Figure 1 http://www.ikea.com/ms/en_GB/this-is-ikea/about-the-ikea-group/index.html ( Visted 10 April 2015 )

Nn: Customer service of IKEA http://www.ikea.com/ms/en_US/customer_service/splash.html ( Visited 10 April 2015)

Principal page of IKEA in Spain , www.ikea.com/es/e ( Visited 10 April 2015)

New York Magazine, On Madison Avenue , Bernice Kanner 1 June of 1992 , pp. 22-24 https://books.google.es/books?id=eeQCAAAAMBAJ&pg=PA22&dq=Donny+Deutsch+new+york+magazine&hl=es&sa=X&ei=975UVcydOumUsQSqiYH4Bw&ved=0CCAQ6AEwAA#v=onepage&q=Donny%20Deutsch%20new%20york%20magazine&f=false ( Visited 10 April 2015)

Ikea Deutschland 2015 ,Leifer Service http://www.ikea.com/ms/de_DE/campaigns/services/service_und_leistungen.html (Visited 14 May 2015)

Ikea Restaurant Spain http://www.ikea.com/es/es/catalog/categories/departments/food/ (Visited 14 May 2015)

IKEA Restaurant Deutschland http://www.ikea.com/de/de/catalog/categories/departments/food/ ( Visited 14 May 2015 )

Halogen Bombilla GU10 http://www.ikea.com/es/es/search/?query=bombillas (Visited 14 May 2015)

Halogen Lampe GU10 http://www.ikea.com/de/de/search/?query=lampe ( Visited 14 May 2015)

Global Strategic Management , Jedrzej George Frynas and Kamel Mellahi 3rd edition , November 2014, p. 4-5

Source : Geert Hofstede , http://geert-hofstede.com/china.html ( visited 11 April 2015)

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Danwei , Bilingual Brands : Love in the time of IKEA , Dror Poleg , 9 may 2006 http://www.danwei.org/intellectual_property/ikea_china_plays_love_games_wi.php ( visited 11 April 2015)

IKEA and it´s competition in China , Oliver ,20 April 2013 http://marketingtochina.com/ikea-and-its-competition-in-china/ ( visited 11 April 2015)

IKEA Group , Yearly Summary FY 13 ,2013 p.24 ( visited 11 April 2015)

El Economista , El primer Ikea en el centro de una ciudad pincha con la venta de muebles ,4 August of 2014 http://www.eleconomista.es/interstitial/volver/mapfmy15/empresas-finanzas/noticias/5990624/08/14/El-primer-Ikea-en-el-centro-de-una-ciudad-pincha-con-la-venta-de-muebles.html#.Kku8qVFlvvquOif ( visited 11 April 2015)

Bloomberg Business, Nicholas Brautlecht , 30 June 2014. “ IKEA GOES URBAN WITH FIRST HIGH STREET STORE IN HAMBURG” http://www.bloomberg.com/news/articles/2014-06-29/ikea-goes-urban-with-first-city-store-in-hamburg-s-altona ( visited 13 April 2015)

IKEA Germany http://www.ikea.com/de/de/ ( visited 13 April 2015)

Ikea Unveils “Unboring” Campaign , 16 September 2002 , http://adage.com/article/creativity-news/ikea-unveils-unboring-campaign/35788/ ( visited 13 April 2015)

Apartment therapy , Top 100 US furniture store by sale , 18 January 2011 http://www.apartmenttherapy.com/top-100-us-furniture-stores-by-137079 ( visited 13 April 2015)

Arlene Hirst ,How IKEA became America´s furniture-selling powerhouse, 8 October 2014 http://curbed.com/archives/2014/10/08/how-ikea-became-americas-furnitureselling-powerhouse.php ( visited 13 April 2015)

New York Magazine ,24 September 1990 , page 41 https://books.google.es/books?id=ZmeBLxJqbN8C&printsec=frontcover&dq=september+24+1990+usa+new+york+magazine&hl=es&sa=X&ei=w8JUVYqtFIbgsASX_4GIDg&ved=0CCMQ6AEwAA#v=onepage&q=september%2024%201990%20usa%20new%20york%20magazine&f=fals ( visited 13 April 2015)

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