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A study on Ikea’s strategy

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  1. Introduction
  2. Analysis of the Ikea's environment
    1. Primary activities
    2. Supporting activities
  3. Customers expectations
    1. Needs covered by Ikea
    2. Customer implication
  4. The service delivery system
    1. The services offered
    2. The service delivery system
    3. Ikea's physical support
    4. Contact point
  5. The service firm strategic orientation
    1. The marketing mix of IKEA
    2. Values provided by IKEA
  6. The service innovation model of the service concept
    1. Type of innovation
  7. The analyzation of the service experience
    1. The elements of the service delivery system
    2. The service relationship
    3. Knowing the consumers competency
    4. Integrated esthetism
    5. Leisure consumption
    6. Integration of experiential marketing tools
  8. Sources

The main Ikea's service is to provide all consumer design furniture at a low price. IKEA entails a qualitative change by making design and practical products at the same price than the basic one. IKEA creates something new by creating new processes through innovative design, production, distribution, and sales techniques.

The production of IKEA is innovative, for instance, through the use of wood coming from sustainable forests. IKEA works in partnership with the National Forest Office in order to support and improve rebuilding and protection of forests. The distribution process and sales techniques are also innovative. Indeed the innovation is the ?cash and carry? or ?self service? systems. People take products in the warehouse; assume the transportation and assemble the furniture. All these innovative processes raise the productivity of IKEA because IKEA needs less employees, less sales man, less deliveryman for the same amount of sales.

IKEA has developed some technological instruments like the IKEA Home Planner, which enable customers to plan the organization of their rooms with Ikea's products. But technical development is not the key point of Ikea's innovation. Technologies are not their comparative advantage but this is not an important point in their activity and in the furniture's market.

As IKEA fulfils the fifth criteria of the innovation's definition, we can say that IKEA developed a service innovation.

[...] IKEA is not in a strategy of differentiation in terms of product but in terms of process. On the contrary IKEA has a strategy of standardization of furniture. IKEA products furniture in huge quantity and standardizes the pieces (foot of tables, bed indeed a piece can be used for several models of furniture. This standardization of products allows them to play on cost. Costs are also reduced thanks to the low cost of transportation from the production place because as furniture is in kit, the place in boat and truck is saved. [...]

[...] Indeed it's very difficult to obtain help and advices form salesmen and even if a salesman is free, he can help only in his department and not on the whole process of purchase. I don't put IKEA in conflict area? because it's not like a monopole, customers can leave the shop and go in another one if they feel dominated. Cooperation Physical Intellectua Affective l IKEA High High Medium Medium Cooperation: The cooperation level of customer is very high because they have to be very active (take furniture in warehouse ) in order to provide the service. [...]

[...] The following flowchart shows the current environment of IKEA: We can now try to list the different competitive advantages of IKEA in a table, by detailing each step of the value chain: Activities Competitive advantages Primary Purchase & Internal - Management of the raw material resources (sustainable forest activities logistic management) Production - Mass production Quality test of products The share of developing countries in the production raised form Stockage & Distribution - Tight management of stocks warehouse within shops Low cost of transportation (flat package and huge quantity, and high ?taux de remplissage?) Logistic adapted to each country in order to reduce costs (way of transportation ) Marketing and Sales - Price : Low price Place: big surface, products presented in situation (rooms, living rooms restaurant, space for children, supermarket to buy what we ate Promotion : original TV spot and posters, adapted to countries and/or cities Sales: few salesman, autonomy of customers, self services Services - Before going to IKEA : availability of catalogues, products on web sites, software IKEA Home Planner During the shopping : installation of kitchen, advices, rent of vans for transportation, IKEA family cards with advantages, several modality for payment, kindergarten, restaurant After sales: map and advices to assemble the furniture, guarantees, and possibility of exchanges Supporting Infrastructure - Very good reputation (respect of environment, human right activities notoriety all over the world Sweden culture (Zen, well being culture ) supplier that they stop supplying IKEA, so IKEA start producing become aware of environment and forest destruction Research and - research of best and low price raw material development, design - research on functionality and design Human resources - High commitment with customers : IKEA family, guarantees of management quality, several services for the well being of customers during shopping Ikea's culture, Sweden culture, employees = members of IKEA family As I have shown in this table, IKEA has a lot of competitive advantages in each activity. [...]

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