IKEA Alexa McDaniel Rafael Garcia Bonnie Lee Allyson Hatz Molly Moseley
Humble Beginnings • Ingvar Kamprad was born on 1926, on a small farm called Elmtaryd, near the village of Aggunaryd, in the southern area of Sweden • In 1943, at the age of 17, Kamprad received a money reward from his father because of his success in the classroom, using the money to start IKEA • IKEA’sfirst furniture showroom, in Almhult, Sweden, in 1953
IKEA’s First Store • Pressure from competitors caused suppliers to boycott the firm, protesting against Kamprad’s low prices • In 1958, the first IKEA store was opened in Almhult, Sweden • largest furniture store in Scandinavia, at the time, with 6,700 square meters filled with home furnishings
IKEA • Innovations • Flat-packaging • Privat Sofa • Skopa Chair • Billy Bookcase
IKEA • IKEA arrives in Oslo, Norway, in 1963 • First store on foreign territory • In 1969, the Swedish company opened its first store in Copenhagen, Denmark • First IKEA store outside the Scandinavia, In Zurich, Switzerland, in 1973 • Shortly after that, IKEA arrived in Munich, Germany • IKEA’s largest market today
IKEA • 1980’s • The company arrived in several different countries • IKEA Family Card • In 1986, Ingvar Kamprad announced his retirement as CEO • 1990’s • IKEA created its first Environmental Policy • Continued its path of growth and expansion • Big Thank You event, on October 9th, 1999
IKEA • 2000’s • Initiates a broad community program in northern India, in co-operation with UNICEF to address the root causes of child labor • The IKEA Rail • In 2007 the IKEA Group and WWF start to co-operate on projects aimed at reducing emissions of greenhouse gases generated by IKEA operations
Competitors • Target • 97% of Americans recognize the target logo • Niche market tweaked the discounted model • Low cost stylish furniture • Loyal customers • Redcard credit card 5% discounts, 9% of sales • 2nd largest discounted retailer in the US • Grocery stores makes it a one-stop-shop
Competitors • Pier 1 • Home furnishing industry • Products imported from foreign suppliers • Long standing relationships with vendors and agents • Maintains sustainable inventory • Brand awareness advantage • Allows customers to return purchased merchandise within a reasonable time
Competitors • MASCO Corporation • Sells and makes building materials for homes and remodeling • Sell to large home buyers and home improvement stores • Largest player in construction services • . Upholstered furniture accounts for about 20% of sales and wooden cabinets for about 35%. In 2012 they were able to increase their net sales by 4% and had 78% of it sales in North America • Their operating profit improvement came from reducing cost structure, streaming their sources and accelerating their supply chain savings.
IKEA’s Competitive Advantages • Low-cost • low-cost materials like ply wood and metal in their products instead of materials like cast iron and expensive hardwoods like other furniture products • The in-house design of their furniture lines creates opportunity to save money by not having to pay large design commissions to designers that are out of their freelance network. • Strategic sourcing • established strong relationships with their producers and suppliers that provide them with long run parts and comply with IKEA’s standards for quality • IKEA considers their producers key stakeholders in their business and provide new technology that allows them to optimize their investments.
IKEA’s competitive advantages • Wide range of products • It produces every item you could possible need in a home from bedroom furniture all the way to gardening tools. • Packing innovation • The flat packages allows customers to transport the items themselves and assemble them at home on their own time. The packages customers take home are the same ones the items were originally shipped in which helps reduce cost by up to 80%. • The warehouse portion of the stores allows customers to find their products the day of shopping and take a hands-on approach to fetching the furniture themselves. This allows IKEA to dramatically reduce the number of employees needed to transport the furniture to customer’s home.
Value Added- Chain Component parts& Manufacturing FinalAssembly Retail- Distribution centers End Users (Customers) • Constructed by the processes of collection, conversion and distribution of raw materials and final products. • The back-end is responsible for the manufacturing of products, whereas the front-end is concentrated on the distribution of the manufactured final goods. Back End Front End
Support Activities • Firm infrastructure • IKEA is a privately held company owned by Stichting INGKA Foundation, a non-profit registered in Leiden in the Netherlands which is controlled by the Kamprad family. • The majority of stores are franchised through Inter IKEA Systems B.V. by INGKA Holding Group, which operates stores throughout Europe, North America and Australia • Human Resource Management • focuses on developing their staff by training them to achieve their organizational goals that lead them to grow, success and innovation. The organizational culture plays a crucial part in how the HRM operates. • Technology Development • home planner technology that lets customers place the dimensions of your personal rooms at home and arrange IKEA’S furniture in room to see what it would potentially look like. • IKEA also utilize RFID technology to achieve information about products quickly in the stores
IKEA’s Vision • To create a better everyday life for the many people. • Concern for people and the environment- better use of both raw materials and energy.
IKEA’s Success • It is evident by this graph the majority of profits that IKEA has in the furniture industry, and the amount of success they have gained in such a short period of time. • In 2010, IKEA's sales grew by 7.7% to €23.1 billion and net profit increased by 6.1% to €2.7 billion. Rivals of IKEA do not even come close to such astounding numbers.
IKEA’s Growth • At the end of 2009, there were 267 IKEA Group stores in 25 countries. • Last year, IKEA stores welcomed 590 million visitors in their stores. • The top five sales countries are Germany, USA, France, United Kingdom, and Italy as shown in the pie chart below.
Keys to Success • 28 distribution centers and 11 customer distribution centers in 16 countries. • Using flat packs, transporting goods were possible by rail and sea, and utilizing fuel-saving techniques allows them to be cost-effective (their main core competency) and environmentally friendly. • Use their catalog in order to gain new clientele and boost profits. • Last year 198 million copies of the catalog were printed in 56 editions and 27 languages.
Why Has IKEA Never Been Copied? • Organized its business around a job to be done: Furnishing a room or apartment that same day. • Organized and integrated in a different way than any other furniture retailer. • Nobody has tried to duplicate or undermine them. • This method is similar to Apple's. Apple depended on a clear job-to-be-done, design, carefully selected merchandise, and retailing as an experience. Similar to IKEA, Apple also became top of their industry.
Apple vs. IKEA • Unlike Apple, IKEA has grown much more slowly. IKEA’s first store was opened in 1958 and had 72,110 square feet. The first two Apple stores opened in May 2001. Since then the number of Apple stores grew significantly faster and surpassed the number of IKEA stores in 2010. • The other difference: sales growth. In 1954 IKEA’s revenue amounted to approximately $1 million but has grown steadily. In contrast, Apple has grown more rapidly and is also more profitable in terms of margin.
In 2011, IKEA had 655 million visitors in its store, more than twice as many compared to Apple. • In IKEA, each visitor spent about $27, while Apple's store visitors purchased for twice as much. • IKEA has three times the number of retail employees, but Apple’s revenue per employee is 1.5 times bigger than IKEA’s. • The largest difference: the efficiency of real estate. IKEA’s operations have more than 30 times the sales floor of Apple. By measure of sales per square foot, IKEA would not even make the top 20 list of US retailers. • One major thing that Apple and IKEA have in common: a clear formula for positioning retail operations. Both operations are positioned around a job-to-be-done that has a high priority in people’s life. Apple offers a place where people can discover and get answers about technology without the pressure of making a purchase. IKEA offers a place where people can get exactly what they need exactly when they need it.
SWOT Analysis: Strengths • A strong global brand which attracts key consumer groups in any region. It promises the same quality and range worldwide-consistency. • Offers a wide range of well designed, functional products at low prices. • A 'democratic design' reaching a perfect balance between function, quality, design, and price. Their 'Cost Consciousness' means that low prices are taken into account when each product is design from the outset.
SWOT Analysis: Weaknesses • The size and scale of its global business. This could make it hard to control standards and quality. Some countries where IKEA products are made do not implement the legislation to control working conditions. This could represent a weak link in IKEA's supply chain, affecting consumer views of IKEA's products. • The need for low cost products. This needs to be balanced against producing good quality. IKEA believes there is no compromise between being able to offer good quality products and low prices. • IKEA needs to keep good communication with its consumers and other stakeholders about its environmental activities. The scale of the business makes this a difficult task
SWOT Analysis: Opportunities • A growing demand for greener products. • A growing demand for low priced products. Trends in the current financial climate may result in consumers trading down from more expensive stores. • Demand for reduced water usage and lower carbon footprints.
SWOT Analysis: Threats • Social trends such as the slowdown in first time buyers entering the housing market (which is a core market segment for IKEA buyers). • Market forces more competitors entering the low price household and furnishings markets. • Economic factors: the recession slows down consumer spending and disposable income reduces.
Porter’s Five Forces: Competition Within the Industry • IKEA has high competition within the industry from Ashley Furniture, Galiform, Wal-Mart, John Lewis and Homebase. But the global brand name and trust in customers about product quality, cost effectiveness, and immensely popular design has given IKEA a competitive edge. • Growing markets made IKEA diversify its business empire into food and textile industry. • IKEA also went into the mobile industry by offering cheap and flexible non-contract mobile services for its customers, which is very unique and unheard of in this industry.
Porter’s Five Forces: Bargaining Power of Suppliers • The bargaining power of suppliers is low. • Suppliers have not gotten any major bargain power as IKEA is a well established brand in the market. • Suppliers tend to gain more by coming into a business relationship with such a high value retailer.
Porter’s Five Forces: Bargaining Power of Buyers • Buyers have a high power of bargaining. Most often, competition in retail market gives the buyer plenty of options to choose from based on price, services and design. • Recession has forced retailers to become more competitive in pricing to attract people who are reluctant to spend more for home improvements.
Porter’s Five Forces: Threat of New Entrants • The threat of new entrants is low since it is well established as a global icon. • Customer loyalty has helped in improving this competitive advantage in retail market. • IKEA has a huge market presence over Europe, US, Asia and Australia. It is virtually impossible for any new entrant to pose a threat to an already well connected business empire with geographic and product diversity.
Porter’s Five Forces: Threat of Substitutes • The threat of substitutes is medium. Though there are a number of substitutes in home furnishing industry, the low-to-medium income customers tend to stick with IKEA due to the cost effectiveness. • IKEA has been criticized for poor customer service, stock availability, product guarantee and lesser variety. • The all-in-one-shop concept in IKEA is not available in substitutes like B&Q, DFS and Wickes (all large UK retailers).
Corporate Social Responsibility • Kamprad promised to keep prices low, but not at the expense of the environment • “To us it’s about taking care of people and the planet – from tackling the problem of children living in poverty to creating renewable energy. Our co-workers, suppliers and partners have been working on these issues and more for a while. You can see evidence of this work through innovative IKEA products and solutions, and through the way we do business. If we all take small actions, we can all contribute to big results.” (IKEA.com)
Corporate Social Responsibility • LED Lighting • LED lights: use 85% less energy, last 20 times longer • By 2016, all LED lighting • Recycling • Throughout the company • Selling products for consumers to recycle • 90% of waste at IKEA is recycled or used for energy production • Wood • Do not use more than is being produced • Long-term goal: use 100% FSC-certified wood. • Renewable Energy • 50% of energy used at IKEA is renewable energy • Long-term goal: 100% renewable energy
Corporate Social Responsibility • Other ways IKEA is helping the environment • Socially responsible cotton • Promote public transportation for employees • Cautious with water consumption • The IKEA Foundation • IKEA believes that children are the most important people in the world. • Nonprofit organization that specifically focuses on aiding children who live in poverty • Over $106,821,400.00 donated in 2012
IKEA Related to Blue Ocean Strategy • Constantly lowering prices • Adjust to different environments (globalization) • Continuous innovation • “Flat-packing” • Furniture can be sent home with consumer • Lower transportation costs • The IKEA Experience • Children play area • Unique store layout and services • IKEA Restaurant
Corporate Culture • Corporate culture based on shared values • People that they hire are unique • Values: • Togetherness • Cost-consciousness • Respect • Simplicity • Thriftiness