Case study (IKEA)

Questions
What are the some of the things IKEA is doing right to reach consumers in different
markets? What else could it be doing?
 They are following different things to reach consumers in different markets. Always
they are try to doing a right & accurate things. They are following global trends.

 In today's global society, we don't live in isolated communities. In a single location,

people of all backgrounds, cultures and languages interact in a single space all the
time. People are never free of culture. They have their own customs, language, food,
beliefs and way of life. This phenomenon is in almost all communities and
organizations, like IKEA, thus confirming the idea of a multicultural society.

 This phenomenon is connected with globalization, which are connected with the
development in technology, communication and transportation. What happens in
one part of the world will consequently affect another part faster than ever before.
Traditional borders are almost out-of-date as people are able to easily move from
one place to another.
Globalization is a very positive trend for IKEA because it spreads the popularity of the
company around the world. If IKEA is popular in some continent, like it is in Europe,
that popularity will probably spread to another continent, like America and the
emergent markets -the BRICS countries. It gives an opportunity to IKEA to expand to
new countries.
In this globalized economy and in this multicultural society, culture is constantly
present. As a consequence, the significance of culture should never be disregarded
because it is able to act as an entrance into understanding humanity. For example,
by analyzing different social groups, an understanding of employee's behavior,
thought, and perception at the company may increase individual performance as
well as IKEA output.

 Summarizing they are doing like that steps. They doing unique value proposition
which is leading Scandinavian design at extremely law prices. Reduce their prices 2%
to 3% and then 10% margin annually. And also they have source materials from
different countries. They location of outlets that lower rental costs. They are used
energy saving lightings.

 And also they give long operating hours. They consider about the local adaptation.

 They are following many objectives by using reduce prices

They are:
 Many people think that it's because the furniture is made cheaply, which isn't
exactly true.  Read on to find out about some of IKEA's less obvious cost-saving
strategies. 

1.Recycling

The Recovery Department (of which, the AS-IS room is part) is responsible for sorting and
recycling all recyclable materials, including packaging broken down in-store as well as
materials collected from customers at recycling donation bins where available.

2.Waste Reduction

IKEA's designers and engineers strive to reduce the amount of material used and wasted in
production.  Additionally, many waste products are then used to make new products,
further reducing overall costs both to the pocketbook as well as to the environment.

3.Automatic selling

Despite the showrooms showcasing IKEA furniture in real living arrangements (typically
located upstairs), IKEA is a warehouse store designed to maximize customer self-sufficiency
with minimal reliance on staff assistance. Cost savings stem from reduced wages, training
costs and lower design, maintenance and outfitting costs associated with the marketplace
and warehouse areas of the stores.
4.Thriftiness

Frugality is a value highly prized by IKEA's founder, Ingvar Kamprad. Though listed as one of
the world's richest men, he continues to fly economy as do IKEA's top-level managers when
on business travel. Stores encourage employees to turn out lights in offices, turn off
computers and reduce overall energy consumption by using compact fluorescent lightbulbs.

5.In-house design

Virtually all of IKEA's products are designed by IKEA's staff of in-house designers who are
well versed in creating trend-setting designs while working from a set pricepoint.  In-house
design also means there are no large design commissions to be paid.
6.Economies of Scale

IKEA utilizes it's massive economies of scale to secure long-term contracts with
manufacturers and to reduce costs of raw materials through bulk-buying. Because of their
sheer size, they can demand lower prices for materials which suppliers can afford to give if
they have a steady income.

7.Transportation

All transportation of IKEA products is by cargo container - either via cargo carrier for
overseas transportation or via tractor-trailer for ground transport rather than by more
expensive air transport. Transportation costs are also minimized by carefully locating
distribution centers and stores for optimum travel efficiency (see below).

8.Strategic Placement

IKEA Stores are strategically placed in high-density areas to guarantee store traffic and along
highway/interstate routes to maximize visibility.  Expansion plans take into account not only
the proximity to a highway, but also the distance from a distribution warehouse - this
minimizes the expenses associated with stocking the warehouses. 

9.Minimal packaging

The ubiquitous plain brown corrugated cardboard is the packaging material of choice for a
reason - it's cheap, easy to recycle and can be made to fit around almost any product.  Small
labels on the boxes identify the products within.  Printing wordless instruction materials also
saves money by eliminating the need to translate the written word to the native languages
of the many nations in which IKEA retails. 

IKEA is constantly seeking ways to reduce costs as it is in integral part of the corporate
culture.  With IKEA, you're not getting reduced prices on previously overpriced products,
you're getting real honest to goodness value.  And that's something worthwhile.

IKEA has essentially changed the way people shop for furniture. Discuss the
pros & cons of this strategy.
Pros:
Because of the wide variety of item displayed and the layout of the shop designed in
a one way format results in customers seeing everything available. They might therefore
end up buying even something that they hadn’t thought about convenience for the
customers because everything is boxed and they do their own assembling. It easy to
transport(on buying and when people move) Also saving shelf spaces for other IKEA
products and reducing transport costs for their products that people can easily
remember(belief is that people remember names better than they do codes).

Cons:
The size and scale of IKEA sometimes affects the quality standards of their products
and therefore negatively affect the view that customer has of them. As such customers will
have to pay more attention to the products they are buying the format of the shop can be
too overwhelming for the customers such that they may not even know where to start from
not maximizing on the growing technology available for marketing and advertising, so
consumers might end up going elsewhere the fact that people have to assemble their own
items can be problematic for people who are not good at fixing or assembling items.

Recommendations:
IKEA needs to find more local suppliers to keep price lower. To understand local
culture and purchasing habit, the company should carry out extensive market research. To
attract more middleclass consumer huge adaption is necessary. Extensive training for the
employees and better supply chain management will solve customer service and out-of-
stock problems for IKEA.

Conclusion:
Therefore it is apparent that IKEA has managed to both capitalize on its cost
leadership and ensure they meet local demands through differentiation of products thus
using transnational strategy. IKEA has chosen to mostly enter markets through wholly-
owned subsidiaries in order to maintain their brand image, although when compelled, other
methods such as joint ventures and franchising has been made use of. This strategic
decision has enable IKEA to maintain a competitive advantage, and earn above average
returns due to leadership in the market.