Retail Presentation on

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By: Sourabh Gupta: 28 Deepankar Sehgal:63 Amarendra Hota:32 Sanjay Singh:71 Amrita Dhaliwal :17 Tanya Shingal:66

What it is
• IKEA is a privately-held, international home products retailer .

• It sells low-price products, including furniture,, bathrooms and kitchen accessories. • The customer has to assemble many of the products. • 265 stores in 36 countries (mostly Europe) only 30 stores are run by franchisees outside of the Ingka Holding. • Ikea website contains about 12000 products & in 2006 their were 260 million visitors to its website • Employs 1,04,000 people(2006).

• Business Idea: To offer a wide range of well designed, functional products at low prices.
• Vision: “To create a better everyday life for the many people”. • Ikea wants to create product with minimum impact on environment, so products are manufactured in a socially responsible way. • Organizational structure is flat with words like sameness and team-work given weight age. • Analogy based on simplicity and cost consciousness.

History n Facts
Founded : 1943 in Älmhult, Småland, Sweden Headquarters : Leiden, The Netherlands Founder : Ingvar Kamprad, founded at the age of 17. Resigned as CEO in 1986. Ownership : Stichting INGKA Foundation . Mix of profit, non-profit organisations. • Originally, IKEA sold pens, wallets, picture frames, watches, jewellery. • First store outside Sweden was opened in 1963 in Oslo. • IKEA contributed 1 euro to UNICEF from each soft toy sold during the 2006 holiday season, raising a total of €1.75 million.

Store Format • Designed around a "one-way" layout which leads customers along "the long natural way ”. first store.bmp store. • Many stores include food market specializing in Swedish food. Furniture Showrooms House wares Warehouse Cashier. • “Bargain Corner”.bmp .

Sales • 20.6 billion euro (Rs 1187 crore) • Financial year 2007 (1 Sept 2006–31 Aug 2007) • 17% sales increase from last year .

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Stores IKEA STORES • 220 IKEA stores in 33 countries/territories: • 19 new openings FY07 • 24 stores in 15 countries/territories run by franchisees outside the IKEA Group .

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1 million visitors every day • Average customers are Middle class professionals.Visitors OUR VISITORS • 583 million visitors in year 06-07 • 1. ages 25 – 44 – Enjoy self assembling and saving money • • Average sale is $ 90 200 million visitors on our web site .

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Catalogues IKEA CATALOGUE • Most important marketing channel • 175 million copies • 52 editions • 25 languages .

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INITIALLY… • Kamprad sold his goods out of his home and by mail order but eventually a store was opened in the nearby town of Älmhult. • Furniture was first added to the IKEA product range in 1947 -The furniture was produced by local manufacturers in the forests close to his home. IKEA sold pens. It was also the location for the first IKEA "warehouse" store which came to serve as a model for IKEA establishments elsewhere •Originally. . jewelry and nylon stockings or practically anything Kamprad found a need for that he could fill with a product at a reduced price. watches. He soon made decision to discontinue all other products and focus directly on low-priced furniture. picture frames. •In 1951. In 1955. Ingvar saw the opportunity of becoming a furniture provider on a larger scale. table runners.pressure from competitors caused suppliers to boycott IKEA which responded by beginning to design their own furnitures. wallets.

flat packed furniture cuts costs on transportation and assembly. The right quality -the quality of a product is appropriate for the intended use. (excellent relationship with suppliers) . IKEA design means products that are attractive. Cost advantage -low price and yet good value for money. practical and easy to use. Function -products are based on a functional approach to design. . -no fringes attached. -they give genuine solutions for specific home furnishing needs and are made of the most suitable materials for their purpose.What's so special about IKEA products? Product range is extensive enough -to have something that appeals to everyone -to cover all functions in the home -the products are modern not trendy so they are practical enough for everyday use.

• Winter collection •Storage furniture •TV solutions • Small storage & Clothes storage •Sofas & armchairs • Tables & desks • Lighting • Floors Chairs Decoration & mirrors •Textiles & rugs & Beds & mattresses •Cooking & eating •Furniture care & hardware • Kitchen cabinets & appliances •Bathroom furniture • For your pets •Children's IKEA .

PRODUCT NAMES •IKEA products are identified by single word names. Most of the names are either Swedish. most product names are based on a special naming system developed by IKEA. Danish. rather than a product code. . who is dyslexic. Finnish or Norwegian in origin. found that naming the furniture with proper names and words. •Although there are some notable exceptions. made the names easier to remember •Since IKEA is a world-wide company working in several countries. •Company founder Ingvar Kamprad.sometimes the Nordic naming leads to problems where the word means something completely different to the product in different languages.

. Sweden. • First published in Swedish in 1951 •The catalogue is now published in 17 languages for 28 countries. and is the main marketing tool. •Most of the catalogue is produced by IKEA Catalogue Services AB in IKEA's hometown of Älmhult.CATALOGUE •IKEA publishes an annual catalogue. •The catalogue is distributed both in stores and by mail. •The catalogue itself is printed on chlorine-free paper of •10-15% post-consumer waste. consuming 70% of the company's annual marketing budget.

This is where IKEA is able to make a real difference. • The Price a company charges will be somewhere between one that is too low to attain profitability and one that is too high to create any demand. • Low Price is not appealing unless it represents good value for money. IKEA is committed to having a good relationship with our suppliers and so we are able to purchase good quality. • The Business Idea of IKEA is “To create good design that works and has a price that everybody can afford to pay”. By making all our furniture flat packed we cut down on transportation and assembly costs.Price Strategies • Price is defined as the amount of money charged for a product or service. In addition price is a flexible element since it can be changed quickly. . economically produced designs that are bought in bulk to keep costs down.

. competition and other environmental factors represent external factors.Environmental Factors Affecting Pricing • Costs. merchandising and marketing mix strategy are example of internal factors • The nature of the market and demand. marketing objectives.

• The products in the price group A are more aggressively merchandised and positioned out in the stores than products belonging to the other price groups. . all articles are divided into sixteen different categories considering their style and price. B. • Four styles are Style1. Style2.Price-Style Matrix • At IKEA. Style3 and Style4 whereas the four price groups are referred to as A. C and D.

Example of a price-style matrix • Price D C B × × × Style1 × × × Style2 × Style3 A × × Style4 .

• An introduction of a new article often results in price adjustments for related products.Pricing new products • When Management decides on developing a new product they examine if there is a market demand for the product. in order to retain the price balance within the matrix. . • Thereafter the position in the price style matrix and the absolute price-tag are established. • When placing a product group into the matrix its target groups’ ability to pay is taken into consideration.

This enables them to develop close relationships with their 1. Raw materials are secured considering the following things: 1 Plantation are identified which are more then 4000 hec. . 2 FSC is a certification which is must in consumer markets. •China is IKEA's main purchasing market and 15 per cent of all home furniture sold by IKEA is made from materials purchased in China.The IKEA Group has 31 distribution centres in 16 countries.SUPPLY CHAIN With more than 220 store in 33 countries and 12000 articles the supply chain has to be impeccable to create differential advantage. and 45 trading service offices in 31 countries. 3 They give active support to farmers.500 suppliers in 50 countries. 4 They still support supplying from small scale plantations and farmers. supplying goods to IKEA stores.

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No wood from intact natural forests or high conservation value forests unless certified according to a “level 4 standard” recognised by IKEA .Compliance with forest legislation .Not from protected areas unless certified according to “level 4 standard” or felled in accordance with management prescriptions .THE STAIRCASE MODEL FOR WOODEN MERCHANDISE Supplier entry level and action plan to achieve level 2 requirements Compliance with the IKEA Way of Purchasing home furnishing Products and quality assurance IKEA standard Official standard Level 4 Well-managed forests Level 3 4Wood Forest management in Verified by compliance with official standard recognised by IKEA Level 2 Acceptable wood sources Transition towards level 4 Approved according to IKEA’s Forest Standard “4Wood” Level 1 .Not from plantations established after Nov.Known origin – region within country . 1994 by replacing intact natural forests .

with the manufacture and delivery of goods being triggered by orders • Once a supplier is able to achieve this they explore the possibilities of cutting the distribution link out of the chain so that retail stores deal directly with factories (Vendor Managed Inventory or VMI) perhaps with goods bypassing the distribution centres altogether and going direct to retail stores . IKEA’s suppliers are categorised according to the lead time that they work on. IKEA’s policy is to try to shorten lead times gradually.Lead times • Great emphasis is put on the ordering and distribution methods. • A supplier may start to supply goods on either a long warning fixed time delivery basis or a call-off. IKEA staff refer to the supplier ladder. from weeks down to days. Call offs are time based methods and once the supply chain is functioning smoothly the supplier will progress to an order driven method: Order Point Distribution Centre (OPDC) at progressively shorter lead times.

This allows the supplier to develop distinctive competences • • . IKEA tries to keep product life cycles as long as possible. IT. Investment. The supplier will be linked to ECIS. Product Life Cycles. If he has an opportunity to generate extra capacity that will allow him to manufacture products more cheaply for IKEA they may assist with credits . Technical advice.The Supplier’s Perspective • The degree of support is impressive. This includes: • • • Contractual Trust. The manufacturer acknowledges that the margins he earns from the products he sells to IKEA are far lower than from other customers but the support he receives and the nature of the relationship he has with IKEA far outweigh this disadvantage. IKEA staff are on hand to give advice on a number of aspects of the business from the layout and flow on the factory floor to the design of packaging. This will allow him to have total transparency of the supply chain so that he can see IKEA sales forecasts and view inventory levels in distribution centres and stores. He knows that he will always be paid within 30 days. IKEA’s own system.

The essential difference is that transport deals with the present and logistics deals with the future. Damage in transit is kept to a minimum by strict guidelines and templates for loading. It is possible for a carton. In TA Poland there is a clear structural distinction between transport and logistics. to be despatched from the factory to the distribution centre where loads are then consolidated before being transmitted as containers to destinations around the globe. Smart logistics at IKEA also includes a very rigorous analysis of the way products are packaged – in the famous flat-pack boxes – and then loaded into containers. The Logistics Manager focuses on continuous improvement and the progression of suppliers up the supplier ladder. rather than a pallet or a container.The Logistics Perspective The Logistics Manager and the Transport Manager run logistics audits of their suppliers together to identify bottlenecks and improve processes. Photographs of damage incidents are taken and lessons learnt and disseminated. It is not uncommon to see video cameras at IKEA suppliers’ factories monitoring the loading of containers (and ensuring that there is no smuggling of illegal cargoes out of Poland). The development of highly organised hub-and-spoke distribution systems allows minimum order quantities to be kept low. Road Rail €19/m3 to Sweden Faster Less Reliable Eco-unfriendly 80 m3 capacity per lorry €9/m3 to Sweden Slower More Reliable Eco-friendly 200 m3 capacity per waggon . He will search for new ideas to smooth the flow of goods through hub and spoke systems using best sources of rail or road options.

Deliver a very aggressive sales target (the number is confidential). intelligent) and its product range (quality home furnishings for the entire home). Provide a strong sense of connection between IKEA and the local community. – Effectively communicate IKEA's personality (fun.000 visitors to the store during the four-day opening period. empathetic. Deliver 60. .Objectives and Future plans • • • • Position IKEA as the leader in the home furnishings market.

000 .IKEA Acacia business in South East Asia 2010 • Annual Business value 2006: • Acacia timber 2006: 100 Million USD 200.

Concerns if to reach 100 million USD Secure Raw material/FSC certification •Identify plantation bigger than 4000 ha. •FSC is a must in the consumer markets! •Promote supplying from small scale plantations and farmers Production efficiency/competence at supplier/quality on product •Efficiency and technological level still too low. •Increased wood and production prices can jeopardize the competitiveness . •Inconsistent wood supply prevents development of competitive suppliers Wood Price •Wood prices on Acacia is the highest in South East Asia (World).

October 2007 Novosibirsk. Ohio U.Future Expansion plans Upcoming openings • • • • • • • • • • • • • • • • • Rostov. Turkey . France .November 2007 Malaga.December 2007 Coventry. . Germany . U.March 2008 Cincinnati. .K. .S.A.April 2008 . China .March 2008 Shenzhen.November 2007 Istanbul II. U.February 2008 Brest. Germany . Norway . Japan .A.A. France .S. Russia .S. U.November 2007 Orlando. . U.December 2007 Samara.December 2007 Rostock.October 2007 Grenoble. Russia Belfast. Spain . .April 2008 Slependen.December 2007 Oldenburg.October 2007 Sunrise Florida.K.March 2008 Kobe. Russia .

Expansion plans in Asia ( China) • Ikea to speed up the expansion in China from its 2007 fiscal year. • • • Ian Duffy. • IKEA plans a new distribution center in Shanghai . Following a three-phase strategy in China – – – A period of landing Setting up standard stores Increasing the rate of opening of new outlets. IKEA's president for Asia Pacific. . largest in Asia Pacific region and seven new stores in China in the next five years at cost of US$82 million • Able to handle 60 containers of merchandise a day — twice the capacity of a distribution center in Malaysia that is currently the largest in the region. stated Ikea achieved an increase of 38% in sales. Only four stores in China in spite of nine years of existence.

5%). . its catalogs are sold by street hawkers and bookstores in many major cities. – The furniture sector in India only makes a marginal contribution to the formation of GDP. The furniture industry in India is considered as a "non organized" sector. – Handicraft production accounts for about 85% of the furniture production in India. The company has no plans to open a store anytime soon in India. representing just a small percentage (about 0. Locally made knockoffs of Ikea furniture are ubiquitous in the homes of professionals in India's rapidly modernizing cities. in part because the nation's licensing laws for foreign-owned businesses which make it difficult.Expansion plans in India • • • • Although Ikea stores have yet to arrive in India.

Social Responsibility • Low price but not at any price • IKEA wants to create products with a minimum impact on the environment and make sure they are manufactured in a socially responsible way .

S. to plant trees to restore forests and offset CO2 emissions. • • • . Every plastic bag at every IKEA store in the U.) • IKEA home furnishing stores may be the first major company in the country to take a stand against the ubiquitous waste. and to influence customer habits in an environmentally responsible direction. The proceeds from the campaign will go to American Forests. which has a net worth of approximately $33 billion. from a dollar. will cost five cents. As an alternative. IKEA is reducing the cost of its reusable 'Big Blue Bag' to 59 cents.. With an estimated net worth of $36 billion. The Swedish manufacturer will no longer be offering customers free plastic bags. The INGKA Foundation is officially dedicated to promoting ―innovations in architecture and interior design". the nation's oldest nonprofit citizens conservation organization.Social Responsibility (contd. the foundation is unofficially the world’s largest charitable organization. beating out the much better known Bill and Melinda Gates Foundation.

• .Trivia • • • IKEA stores are designed around a "one-way" layout which leads customers along "the long natural way". IKEA is actually owned and operated by a complicated array of not-for-profit and for-profit corporations of which Stichting INGKA Foundation located in Leiden in the Netherlands is the ultimate owner. Many stores include restaurants serving typically Swedish food. and beverages Despite its Swedish roots. a few varieties of the local cuisine. The IKEA corporate structure is divided into two main parts: – Operations – Franchising.

Inter IKEA Systems. By funneling its profits through a nonprofit foundation.) • The IKEA trademark and concept is owned by an entirely separate Dutch company. Every IKEA store.Trivia (contd. including those run by Ingka Holding.. IKEA drastically reduces the tax burden . The foundation's nonprofit status also means that the Kamprad family cannot reap these profits directly. but the Kamprads do collect a portion of IKEA sales profits through the franchising relationship between INGKA Holding and Inter IKEA Systems • • . pays a 3% franchising fee to Inter IKEA Systems The central purpose of IKEA’s intricate corporate structure appears to be tax avoidance.

Summary • • • IKEA provides a functional. beautiful and affordable home IKEA attempts to reach good results with small means IKEA is ―not for the rich one but for the wise one‖ .

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