IKEA invades America

VISION To create a better everyday life for the many people.

To offer a wide range of well-designed, functional

home furnishing products at prices so low that as many MISSION
people as possible will be able to afford them.
Company History- Elizabet
1926 – The founder of IKEA, Ingvar Kamprad, is born

1943 – IKEA is founded by Kamprad

1947 – Furniture is introduced into the IKEA product range

1951 – The first IKEA furniture catalog is published

1953 – The furniture showroom is opened in Almhult

1955 – IKEA begins designing its own furniture

1956 – IKEA begins testing flat packages

1958 – The first IKEA store is inaugurated in Almhult

1965 – The IKEA store in Stockholm is opened with a circular design, inspired by New York’s Guggenheim Museum

2002 – IKEA was the world’s most prominent furniture retailer with revenues approaching $12 billion and its brand was considered to be one of the
most valuable in the world.
Product Mix & Target Market - Elizabet
Product: Low cost, self-assembled home furniture and household products
● IKEA’s Product/Price Matrix
○ The matrix consists three basic price ranges (high, medium, low) and four basic styles (Scandinavian,
Modern, Country, and Young Swede)
○ There is a separate matrix for each product type IKEA sold - that is, a price matrix for sofas, kitchen
tables, and so on.
○ The matrix is used to identify gaps in the company’s product lineup. This helps product managers
readily identify market opportunities.
Target Market: Price sensitive consumers that prefer sleek/minimalist designs
● Age group: 18-35 (relatively young)
● Both male and female
● Middle and low income
● Education: High school graduate or higher
Critical Issues - Justin
● Niche Scandanavian style does not relate to all customers tastes/buying preferences
● Company’s self-serving ethos does not translate to all cultures
● Lack of customer service in-store.
● Current strategy for growth works but is very broad
 SWOT Analysis
Strengths:
● Strong brand recognition globally
● Positive in-store experience for customers (“modern theme parks”)
● Unique/defined business model
● Design perspective (minimalist/sleek/European)
● Packaging makes transportation easy
● Low cost furniture and household products
● Committed relationship with suppliers
● Good to its employees
Opportunities:
● Increasing popularity in American markets
● Appealing to suburban customers with minimalist design
● Price sensitive markets (college students)
● Online shopping
● Grocery store/ specialty food market
● Expanding to more countries
Weaknesses:
● Understanding of american preferences
● Products and designs are limited (matrix selection)
● Self-assembly is not appealing to all customers
● Customer service (less sales people)
● No delivery option
● Furniture durability
● Number of store locations
Threats:
● Other low cost furniture retailers with more credibility in American
markets (Wal-Mart, Costco, Target)
● Packaging concept is being replicated
● Consumers moving to higher income
● Bad press/ lawsuits from low quality products
 VRIO Analysis
Yes - The resources and capabilities held by IKEA are considered valuable by our analysis because they allow the organization to
combat external threats with:
Valuable - Differentiated business model that gives IKEA uniqueness in the market
- Flexible business model and supply chain that allows for innovation and implementation of new product designs

Yes - IKEA has established a rare combination of distinguishing factors. There have not been any other furniture retailers that are
able to offer customers the “experience” that IKEA does. The rarity of the business derives from the combination of:

Rare - Distinct cultural influence - Unique shopping experience - Minimal & modern designs
- Low prices - Dining / culinary offerings - Joint store & warehouse

No - Though IKEA could be imitated in its product’s price point and aesthetic features, IKEA’s business model and value chain would
Imitable be difficult and costly for a competitor to imitate due to the company’s distinct culture and infrastructure.

Yes - IKEA has a strong market presence and is a recognizable brand. This has helped the company to be successful in multiple
countries. Their dynamic value chain has proven to give IKEA a competitive advantage. Additionally, IKEA’s ownership structure
Organization helps to ensure independence, and encourages a long-term approach by members of the organization.
Analysis - Sarah/ Ashley
Cultural Analysis - Power Distance
Business Structures:

● Scandinavia:
○ Contracts are easy to negotiate
○ Business deals are more transparent
○ Taking legal action is not fearful
○ Lack of corruption, taxes money are used for the right purposes
○ The lack of hierarchy makes it easier for low level employees to contact top executives.
○ Everybody does well
● America:
○ Hierarchy is high which makes it difficult for staff to contact executive members
○ The wealthy stay wealthy, while the poor gets more poor
○ Only the billionaires and middle class does well
Cultural Analysis - Individualism vs Collectivism
● Scandinavia:
○ Everyone is equal
○ Law of Jante, also known as janteloven
● America:
○ Everyone is different
■ One can be better than the other person
○ Free to pursue career/dream of choice
Cultural Analysis - Masculine vs Feminine
Scandinavia:
● High Femininity:
○ Believe women should be paid equally as men
○ Women added value to the workforce
○ Women sit in high government roles like parliament and prime minister chair
○ Both parents are encouraged to take paid parental leave during the child first year of life
America:
● High Masculinity:
○ Government is mostly ran by men
○ Women must choose between underpaid jobs or caring for sick child
○ Women have to fight for equal rights
■ Civil rights
■ Healthcare
Cultural Analysis - Uncertainty Avoidance
Scandinavia:
● Low uncertainty avoidance:
○ Government serves its people
○ People are secure about their job, health, and education
○ Work-life balance is encouraged
America:
● High uncertainty avoidance:
○ Not mandatory for employers to provide paid vacation to employees
○ Work-life balance is low
Cultural Analysis - Long Term Orientation
Scandinavia:
● Short-term orientation:
○ Hard to build wealth because of tax system
■ Capitalism is meant to make everyone equal
○ Spend time doing hobbies and enjoying family
○ Work 37 hours or less weekly

America
● Long term orientation:
○ Save for the future
■ Capitalism makes it difficult
○ Small businesses are encouraged
○ Often works 40+ hours weekly
Alternative Solutions
Option 1: Create a more user friendly online shopping experience.

Option 2: Launch a Kaizen Blitz improvement process to simply self assembly for
the consumer.

Option 3: Partner with American designers to create a limited line of select pieces
catered to the taste of american people.
Enhance the online shopping experience
What would this entail?
● To scale with changes in technology, IKEA can improve the online shopping experience with
the use of virtual chat rooms, enhanced searchability, one-click options, and detailed return
policies.

Pro’s Con’s
● Customers are able to receive guidance ● Implementation costs
from knowledgeable sales representatives
in real time.
● Potential to grow existing online market
will increase.
● IKEA can help shift their self -serving
perception.
Process Improvement
What would this entail?
● Formulating a process that will simplify assembly for the customer. The new process could
start in the US and would require;
○ Modifying existing products for certain parts to be pre-assembled, reducing the amount
assembly time.
○ Working with suppliers to re-define product structure.
○ New products would come with written instructions that help outline steps more clearly.

Pro’s Con’s
● Customer satisfaction would ● Increased costs to existing
increase. supplier relationships.
● If beneficial, this can be
implemented globally
Partner with American Designers
IKEA is a unique furniture store because of its selection of Scandivian furniture that can be
purchased in four different select product styles. However, they could increase the American
market share if more product styles were created beyond the existing types.

● Create a pilot program with a limited product line in the US that is developed by
american designers.

Pro’s
● Will create a larger platform for ikea to
test consumer responsiveness and
determine if existing model should stay
in tact.
Con’s
● Disruption of current supply
chain model
● Inherent risk of investing capital
in a new product. In the worst
case, IKEA may have to absorb
costs if it doesn’t perform as
expected.
Recommendations - Chris/Tiffany
1. Shift percentage of business to online

i. Online shopping experience - make it too easy for them

ii. Virtual tour/photos

iii. Point out how bad their online experience is

iv. Increase offerings online

2. Pilot: Have IKEA Partner with a local, famous American designer

3. Launch Kaizen Blitz project to streamline assembly process and add words

to the
Questions- Chris/ Tiffany

1. How should the American workers be trained to understand about the Scandivian culture?

2. Who would lead the Kaizen Blitz project?

3. How can IKEA become more innovative for the American taste when it comes to furniture shopping?

4. What is the most cost effective recommendation?

5. How can America adopt some of the Scandinavians practices such as practicing work-life balance for everyone?