IKEA “To create a better everyday life for the many people. ”
IKEA Case Study ‘The Democratization of Style’
IKEA Executive Summary
Business model based on:- Affordability due to buying power, global design and resulting economies of scale
- Stylish and diverse products, not localized
- Past success: Costumers ‘buy in’ to the IKEA philosophy
- Invest more in quality, less in expansion
- Relax business structure for entry in new markets ‘Affordable and Pleasurable Living’
- Strategic Purpose & Core Features Identification
SERVICE: Reduced to a minimum, DIY for better prices.The IKEA Business Model in a Midlife Crisis External analysis General environment: PEST analysisPolitical: globally distinctive political regulatory
- Economics: changes in market conditions
- Social: demand for low-cost and ecofriendly products
- Technology: leading-edge, cost-saving Industry attractiveness
- Slow down in UK and US
- Emerging market: Asia, Eastern Europe Competitors
- Crate & Barrel - offers a furniture in a box which is subject in higher prices
- Ethan Allen - aimed at a more upscale market
- Wal-Mart – discount store, less design
- Has a network of 1,300 suppliers in 53 countries, Core competencies
- Design team - Leading-edge technology and creative
- Young, enthusiastic, passionate store managers Core competences
- Offers wide range of home furnishing items with good design and function at low and affordable prices
- IKEA has maintained long-term partnerships with its suppliers IKEA’s Weaknesses present Opportunities
- Cost efficient: low price for stylish Strengths design
- Strong long-term relationship with suppliers
- One-stop shopping
- With affluence comes demand for Opportunities quality
- Spread of eco-awareness
- Emerging markets in Asia and Eastern Europe.
- Prospect of on-line business model.
- Difficulty to maintain the standards and quality of products
- Sometimes cheapness outweighs cost saving for the consumer
- Bottlenecks of supply Threats
- Some consumers seek to avoid IKEA
- Economic recession: Rising living costs and decreasing disposable income in some countries
- IKEA’s rigid business model is a disadvantage in some emerging markets relative to competition.
Challenges are diversifying Emerging Issues for IKEA
- Allow for more flexible methods of entry as a way to overcome regulatory and knowledge barriers; e. g.
Joint Ventures Established markets:
- Invest more in quality rather than expansion
- Increase transparency: sourcing of raw materials and working conditions in production; improve if necessary.