This paper would look at the case analysis of Ingvar Kamprad and IKEA. The paper will begin by providing an outline of the overall situation and will then discuss how the company has reacted to the growing global concern for sustainability in its contact, shop, retailer, and product selection choices. The essay would also discuss the firm’s transnational practices and how it has continued to stay profitable in this intensely dynamic environment. The paper would illustrate IKEA’s approach to addressing growing environmental issues. IKEA’s marketing strategies will also be thoroughly examined. The article will discuss the IKEA production concept that comes to life in many different ways via the web and apps as well as a clear leadership and strategic plan. Finally, a decisive conclusion will be given. In this case study, the paper will use real examples of peer-reviewed sources to make the final recommendation.
Ingvar Kamprad and IKEA
Overview of the Case
The Swedish national Ingvar Kamprad has been at the helm of IKEA which is one of the biggest stores for more than seventy years. Ingvar Kamprad has an estimated net worth of 48.1 billion us dollars making him one of the richest man on earth. The business mogul remains to be incredibly wealthy, inherently simplistic and body innovative. As the firm approached the 1990s the managers faced some of the challenges. However, through the leadership of Ingvar Kamprad, the company transformed to build a profitable global network of furniture stores. Ingvar Kamprad faced numerous challenges in the 1990s in his pursuit to make IKEA a renowned institution all over the world. Some of the problems faced by the founder occurred in a situation which is best highlighted in a story that later turned this company into a reputable global business. The demographic factor almost ruined this company. With a turnover estimated to be 14.5 billion dollars with seventy-five outlets, IKEA has grown to become one of the largest furniture retailers around the globe (“History – IKEA,” 2017).
Ever since it was founded, the company has maintained its initial goals which are to provide better and quality products to the customers. The company has long held the concerns of the environment and the people. The vision of the company is ‘to create a better everyday life for the many people (“History – IKEA,” 2017).’ The company has responded to the rising global concern for sustainability in its choice of communication, stores, supplier, and product range. The company has transformed and proved beyond reasonable doubt that it is meant to stay in the wake of a highly competitive market.
Background and History
IKEA is a multinational corporation that has grown rapidly since inception in 1942. As at present it is one of the largest companies producing quality products to the customers. The founder Ingvar Kamprad began by selling watches, wallets, and pens by hawking them straight to the customers. When it started selling furniture, the rivaling firms did everything at their disposal to make sure that IKEA was not successful. In fact, the local suppliers were stopped from supplying the raw material, and the company was not allowed to advertise nor showcase its commodities (Torekull & Kamprad, 2005, p. 34). This was a turnaround for this company because of created its exhibitions brought its raw material from the suppliers who were located in Poland and designed its furniture. The company started its own retail business in China in 1998s. IKEA had to form partnerships with the local firms to comply with the local laws. As at present this is one of the leading furniture retail business in the world and has more than 300 stores that are spread in different countries.
IKEA chain of business includes cafes and restaurants that sell the local Swedish food. The company also has a small grocery in Sweden that is famous for selling everything from jam to meatballs. In 2010 the company’s stores received 699 million visitors. The company’s headquarters are located in Netherlands. The firm’s vision is the reason for its continued growth and existence. The main goal has been to ensure that it is accessible so that people can improve their homes using the quality products. The company re-invests most of the profit generated in both new and existing stores as well as lowering the prices of the products and generating suitable solutions (Torekull & Kamprad, 2005, p. 22). The IKEA production concept comes to life in many different ways via the web and apps, in the IKEA catalog, through worldwide stores and most essentially in the millions of homes that are spread through the world.
IKEA has adopted the standardization approach in its quest to establish the business in all sectors of the world. Most of the products that are sold in its stores are similar. The company has made sure all its store’s arrangement is similar; this gives customers an equal taste of the product irrespective of the regardless of the environment. All the stores are self-service a factor that gives customers the opportunity to pick and test different products before they buy them. The company has a central headquarters that is located in Netherlands where the decisions are made. All the store do not operate independently but rely on the decisions that are made in the central location. This gives the company uniformity across the globe. Another main benefit of this transnational strategy is that it reduces cost because similar methods that have been tested are applied in all units. The main objective of standardized production is that all customers will have an equal taste. Of the kids who do not want to shop together with their parent, they are allowed to play in a supervised area. All the visitors can reward themselves with reward themselves with the Swedish meals that are located in the exit section of the store.
The company has adopted a cost leadership strategy. Some of the targeted customers are the millennials who search for fashionable and stylish household accessories and furniture at a much more reduced price. For this category of customers, the company offers some of the best-designed commodities. Based on the company’s mission statement the low pricing is usually the top priority. Typically, the competitors in this market display a variety of products in different rooms; the customers can view sofas in one room and chairs in another room. In contrast, IKEA customers can view products in a single room for instance sofas complete with tables, sofas and so on. The setting removes the need for decorators and sales agents who could explain to the customer how a combination of different commodities could look like. This is a cost saving technique because it demands less personnel (Lechehab & Kamassi, 2016, p. 13). The company also requires that customers cater for their transportation; this has also kept the price low. The company has established in many countries because of the strong brand. IKEA has gone beyond the furniture because it sells lifestyles that clients around the world can embrace.
A typical IKEA store is large; this has enabled it to offer a comprehensive, and thorough range of commodities that customers can buy enjoy the same day. Visitors are allowed to take time before purchasing (Eshak, Zaher, Abd, & E. S. A. E.-H, 2013, p. 22). The sales agents are always available to give any guidance whenever it is possible. The goal of this strategy is to ensure that the customer enjoys the stay so that it gets more return customers. The strategy has worked positively for the company since profits have kept on increasing as the IKEA opens up new stores.
IKEA & the Environment
All the IKEA stores are energy efficient. Recycle bins are present so that customers can drop off used light bulbs, batteries and even the old packages that customer came with. While the company constructs large stores to cater for the needs of customers, it does so in a much more sustainable manner (Eshak, Zaher, Abd, & E. S. A. E.-H, 2013, p. 31). Some of the stores, for instance, one in Stoughton, Mass is covered with 6,968 square meters of plants on the roof to, these plants aid in the temperature regulation. Other measures that the company has put in place include using the energy efficient lighting, reusing more than seventy-five percent of the construction waste and recycling all the material that are used in construction, the environmental goals extend to the restaurants that it owns. The company’s main goal is to have all the food organically produced. The company also partners with other conservation organization such as WWF in the conservation exercise, for instance, planting trees. The company makes sure that all the commodities are tested for their environmental impact before they are sold. Each phase of the production is evaluated starting from the source of raw material, how these raw material are processed, and the final products; all must be environmentally efficient. The company agreement with suppliers or raw material outlines some basic requirements that must be met which include child labor and environmental conservation.
The company uses a wide variety of promotional techniques to acquire more customers and increase the marketing base. The company has created social media pages such as Facebook to showcase its commodes to the global consumers. This has helped the company gain a greater market share and build a strong brand. The main company target is are the middle-class consumers mainly because of the pricing technique that is used (Lechehab & Kamassi, 2016, p. 53). The company also sells stylish designs that are meant for the millennials. It complements its commodities with a friendly shopping experience. In a single store, there are more than 9500 products. The design of the store also acts as a marketing technique because a set of commodities that are used together are stored at a common location.
Since IKEA targets middle-class consumers it should extent this services to the developed country. The company should also increase the sourcing of raw material to obtain supplies from developing countries where there are characterized by a low cost of labor. This will make the company more competitive as it will reduce the prices even further, therefore, attracting more customers and daring away competitors. The success of the company lies in their wide collection of innovative and creative commodities. It, therefore, means that the firm should pursue this by coming up with better products that will meet the customer needs. IKEA’s case highlights that for any company to be successful in the global landscape proper planning, as well as strategies, are required. The transnational pressure has also created pressure for the enterprise. Customers in different countries have unique tests and preferences. Creating standardized furniture in all the stores has not worked in all regions. The company has had to adjust some of the furniture’s to meet the particular country’s customer tastes. For example in the United States customers prefer the longest wardrobes while in Italy customer prefer the longer hangers. IKEA has also had to make some local adjustments on its product marketing to suit the language of the locals.
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History – IKEA. (2017). Retrieved from http://www.ikea.com/ms/en_AU/about_ikea/the_ikea_way/history/
Lechehab, S., & Kamassi, A. (2016). The Benefits of Implementing Lean Management System at IKEA Malaysia Company, (16), 55-66. doi:10.12816/0034358
Torekull, B., & Kamprad, I. (2005). IKEA: The story of Ingvar Kamprad & IKEA, the world’s leading home furnishing company. New York: HarperCollins.