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IKEA is a privately owned multinational company, which specializes in designing and selling furniture for home use. Originally from Sweden, IKEA has strategically grown its business to global levels. As stipulated in the company’s vision and motto, this is “to create a better everyday life for many people”. Right from its inception, the company started to produce innovative furniture that satisfies the needs of many people around the world. IKEA was founded by Ingvar Kampar in 1943 at the age of seventeen. The firm name “IKEA” was coined from the initials of the founder’s name Ingvar Kampard, his home town Elmtaryd and his home parish Agunnaryd. The company at first was small and it mostly engaged in selling home appliances such as plates, wallets, watches, jewellery and picture frames. Currently, the company comprises of two entities, namely INGKA Holding B.V, the parent company, and Sweedgwood, which deals in production of IKEA’s house fixtures and fittings. Edging INGKA Foundation exclusively owns INGKA Holding BV, which facilities are mostly concentrated in the Netherlands. Presently, IKEA owns over 186 outlets in over 31countries. According to Graham, and Nigel (2008), the majority of these outlets are owned by the IKEA Group. The rest are owned through franchises and other partnerships. However, it should be noted that IKEA Group is a private enterprise encompassing several corporations managed by a charitable foundation based in Denmark, IKEA International. This paper focuses on IKEA’s business strategy and other factors that have led to the company’s growth.
Jonathan (1995) says that IKEA prides itself in being the number one choice by consumers when it comes to purchasing home furniture and accessories. It also can boast to produce a wide range of quality and affordable merchandise. The company aims at making these goods available in all its outlets to maintain a steady flow of products to customers, to put the customers’ interest at heart by welcoming complains, offering feedback and taking in suggestions. The company encourages a co-worker culture to maintain liveliness in service provision, to take care of the environment as part of the company’s corporate social responsibility.
John and Thomas (2000) say that in an attempt to meet the ever-changing customer needs and tests, IKEA offers customers a memorable shopping experience through provision of fresh and innovative pieces of furniture. This has seen the company maintain old customers and successfully venture into new markets. The company has a very elaborate customer service that welcomes customers’ complaints and suggestions earnestly. Being a prominent brand with its acclaimed world class furniture, IKEA’s secret to success lies in offering products and services that are unparalleled in the market. The company offers quality and products that its competitors can not match. The company’s continued growth can be attributed to effective cost management, investment in research and product innovation. IKEA has continued to grow over the past decade. It has always concentrated on managing cost, specifications in operations and constant product development and design. This has resulted in effective pricing as a means to attract more customers and bolster its sales. The company totally realizes that consumers are accustomed to evaluating the benefits of a product or service before making a purchase decision. In this respect, the company has a state of the art quality control department that ensures that products meet required specifications before they are taken to the market.
In order to respond to the ever-changing consumer tests and preferences, IKEA has had to reposition itself in order to content the wishes of its clientele. IKEA conducts this by manufacturing a range of products such as furniture and home furnishings that reflect consumer status. It also ensures that goods are supplied to all its outlet stores globally to meet the ever-increasing consumer needs. Another IKEA’s success method is that it does not wait for consumers to come in and shop manually. It offers online shopping, whereby customers can make product requests through the company’s site. Online shopping enables IKEA to reach millions of its customers by the touch of a button. The site has a record of 12000 products and is frequented by over 470 million people. E-Closet products illustration embodies a close update of its products’ range by means of e-closest representation. IKEA advocates for maximum exploration of raw materials through its contractor to curb wastage and use of sustainable energy, which limits air pollution and cost reduction. IKEA has embraced the green campaign, encouraging the use of biodegradable products that are not hazardous to the environment. It considers business being successful only when its surroundings are taken care of properly. It is also the third largest user of wood behind The Home Depot and Lowe.
According to Adrian (1998), for a company to gain competitive advantage, it must aim at delivering merchandise that is uniquely different from its competitors’. The target group must always find it easy to distinguish the company’s products from those of its competitors’ on the market. The product must stand out through appropriate branding or pricing. Differentiating products ensures customer loyalty and builds confidence among clients. IKEA has managed to obtain a large customer base worldwide by paying attention to product development and execution. This way, the company ensures that its final product is unique. For example, IKEA’s furniture is known to have a touch of Scandinavian style. Consumers would settle for such a product because of its unique appeal and originality.
What really makes customers enter an IKEA outlet to make a purchase? First, the design of IKEA’s store stands out from the rest. The stores are expansive from the outset and are painted in blue and yellow accents with a few windows. A one way illustration guides the clients along the store facilitating easier selection of goods. Some of its stores have a glass design layout, which serves two purposes. Firstly, it makes the store look appealing; secondly, glass reflects light, thus the working environment is fresh in the long run boosting employees’ morale. Most of its outlets have portioned a place within the store, just before the cash register, where discounts are provided on damaged, returned and previous goods on display, at the same time emphasizing on no return policy. IKEA stores have maintained a culture of long operational hours with maintenance and restocking performed during the night. For example, in Saudi Arabia, IKEA stores are opened from 10am in the morning up to late midnight weekly. This has made the company a preferred choice for many shoppers (Adrian, 1998).
Aside from selling home appliances, many of its outlets have side restaurants, which serve traditional Swedish food, such as meatballs, cream sauce and loganberry jam, blended with local delicacies. This is part of the company’s strategy to relate its products with consumers. It is also a strategy to outdo competitors in the same industry. According to Patrick (2008), due to these innovations IKEA attracts millions of shoppers who always want to try new things. After shopping, one can always indulge in some local and Swedish delicacies. Restaurants are open before the rest of the stores daily, offering affordable breakfast. In IKEAs Germany outlet, breakfast consists of two bread rolls, a slice of smoked ammonia, a slice of cheese plus a slice of salami. It offers playgrounds where parents can drop off their kids to play as they engage in a stress-free shopping experience. Another different service that IKEA offers is its ready to assemble furniture which eases the company’s transport and packaging cost and customers’ satisfaction is achieved as they are spared the hassle of delivery cost and time. For first houses buyers, the buying price is cheaper because IKEA offers flat pack ones. The initiative, which was started in 1996, dubbed BoKlok in collaboration with Skanska. This venture has been successful in countries such as the UK and the Netherlands.
Patrick (2008) says that IKEAs products are known to have single names. This way, consumers can easily memorize them. Naming process is carried out by IKEA’s unique naming method. For example, fabrics have women’s names while chairs and desks possess male names. IKEA came up with a business family idea in some of its outlets, introducing loyalty cards, dubbed “IKEA family”, which are priceless and are utilized to acquire discounted range of products from its numerous stores. To crown it all, a magazine called IKEA Family Live is featured every four months and printed in thirteen languages. It is predicted that about half a million people will subscribe for the magazine.
Following the 1980s and 1992 formaldehyde outrage, IKEA has taken bold steps in conserving the environment. The company invited Karl Henrick, founder of The Natural Step, to advise its directors on better ways of enhancing the company’s environmental approach. Thereafter, IKEA took up Karl’s Natural Step framework by developing the Environmental Action Plan in 1992. It focused on full use of resources supply and less energy consumption, crucial to deal with cut off concern. IKEA planned to reduce the use of formaldehyde in its products such as textiles, launch bicycles, which consumers in Denmark could rent. The bicycles had trailers to curb fraudsters, to obtain wood for its home furniture from forests that are maintained through reforestation and aforestation, to package its products with reusable substance to promote recycling. IKEA latently ceased offering plastic packages to its clients. They replaced these with reusable bags for sale. Its restaurants also provide reusable plates and knifes.
Risk bearing, IKEA purchased Habitat – a high end company – to the tune of 78 million Euros. Its aim was to study the danger of selling a wide range of products at high or low prices. Being a low end brand means pricing products the way many can afford. The engagement was that consumers tend to buy cheaper goods when they face financial constraints and engage in expensive products in times of economic boom. In terms of financial economies IKEA, being a well-known world supplier of home furniture, has an upper hand when it comes to borrowing large amount of funds as compared to smaller companies. Financial institutions are willing to lend larger companies funds because they have confidence that such big companies will mange such loans because they have higher credit ratings. In regard to Learning or Training Economies, IKEA offers an expensive hiring procedure to those hoping to work with it; the process normally runs for two weeks. Prospective IKEA employees go through rigorous job training. They are taken through the company’s working and shopping experience. Rigorous training ensures that those hired are efficient in their duties by working under minimal supervision, increased work speed in the long run yielding positive results. Through bulk buying, IKEA reduces cost of raw materials. By securing long term agreements with its suppliers and contractors the company purchases averagely priced raw materials, thus transport and packaging costs are minimized in the long run.
Patrick (2008) says that for a company that originated in the 1960s, it commands a large consumer base not just in Sweden, but globally. Research indicates that about 10% of furniture purchases in the United Kingdom are IKEA brands. It also indicates that within the past three years, a third of families frequented IKEA stores. As reported by retail analyst Mintel, IKEA has a market share of 9.6%, which indicates that at least one of every ten pounds spent goes into its cash point. Even though the housing market economy had dwindled, the company’s shares rose up steadily in the furniture business fall.
It is difficult for businesses to maintaining a steady flow of satisfied clients constantly. Judging from IKEA’s aims and objectives, one can conclude that maintaining world class durable products is the key to acquiring brand loyalty. IKEA has shown this by being at par with the latest fashion styles that offer more satisfaction to consumers. Creativity and innovation is core to satisfying consumers, ever-changing challenges and preferences. All in all, a satisfied customer means a successful business.
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