KITEA

EXECUTIVE SUMMARY

Overview - The Quick Pitch

KITEA is a Moroccan based company which specializes in furniture and decorations

focusing on the Moroccan consumer tastes and preferences.

The Problem

KITEA has come to the realization that the Swedish furniture giant, IKEA, is looking to

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enter the Moroccan market and capture market share from KITEA. Specializing in ready-to-

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make furniture, IKEA is a major threat to KITEA in the Moroccan space and KITEA must adjust

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in order to maintain current market share.
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The Solution and Keys to Success
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KITEA must become more adaptable by focusing and improving their marketing for their
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target customers. KITEA can achieve this by focusing on the purchasing power of middle-class

consumers while also providing sophisticated options to higher class consumers. KITEA can also
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focus on adding value to the customer experience. This must be greater than the value offered by

IKEA. Specifically, KITEA must continue in their adaptability to the Moroccan consumers tastes
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and preferences while also providing superior quality of furniture and customer service. Finally,
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it will be necessary for KITEA to remain steadfast in their signature practices surrounding
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KITEA’s belief in the company’s three pillars of good price, good quality, and good service.

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 To the Attention of: KITEA CEO Amine Benkirane,

In response to rumors regarding IKEA entering the Moroccan furniture market, KITEA

implemented a few key tactics to maintain their share of market. These actions included adding

to their overall inventory selection, the opening of new store locations in the Democratic

Republic of the Congo, and shortening the timeline on opening KITEA’s Geant stores. The

following is our evaluation on the actions taken by KITEA.

Inventory Selection

The first action KITEA implemented was expanding their inventory selection. We viewed

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this as a positive response to the new competition. According to Exhibit 6 in the case, one of the

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key differences between KITEA and IKEA is that KITEA outsources their designs and uses a

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variety of suppliers while IKEA designs their furniture in-house. This makes it easier for KITEA
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to acquire a larger variety of inventory, 16,000 products compared to IKEA’s 12,000 (Exhibit 6).

Therefore, we believe that this increase in inventory diversification helps appeal more to the
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wide range of tastes and preferences that Moroccan consumers have.

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Expansion into the Democratic Republic of the Congo

The second action KITEA made in response to IKEA’s expansion was opening new
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locations in the Democratic Republic of the Congo. Exhibits 3 and 4 in the case address the

current economic conditions in Morocco and describe an unstable furniture market. This is
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shown in Exhibit 4 where one can see the international tourism expenditures peak in 2011 at
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2.26, decreases to 2.10 in 2012, and decreases once again to 2.00 in 2013. Morocco also saw an

increase in the unemployment rate which grew from 8.9% in 2011 to 9.2% by 2013. On the
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surface, expanding KITEA to the Democratic of the Congo is a large foreign investment and

subjects KITEA to a significant degree of uncertainty. Overall, however, we believe it to be both

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 a positive and negative response. The positives is that this action provides KITEA with a more

diversified set of store locations. These locations will inherently protect the company from

fluctuating economic conditions while simultaneously increasing the company’s global reach.

However, the focus on new markets may take away focus from established markets.

Shortening the Timeline on Opening

The final action KITEA took to maintain market share was shortening the timeline on

opening the geant stores. This action is seen as a negative response because it has prevented

KITEA from operating as lean as possible and created the opportunity in having unforeseen

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errors. KITEA’s profits suffered due to the following: 1. overspending on land acquisitions and

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construction, 2. stores being understaffed, 3. overall performance suffering and, 4. overhead

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increasing since stores failed to open on time. In determining how best to move forward with
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your company, it is necessary to look at both the strengths and weaknesses that have contributed
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to KITEA’s history. KITEA identifies a need and fulfills it for many consumers. However,
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KITEA disregarded the changing tastes and preferences as time evolved. What has powered your

success are your competitive prices, attention to the Moroccan people, and the generous services
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offered. KITEA’s areas of growth surround your product offerings, limited supply chain, and lack
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of in-store inventory.

KITEA’s Strengths and Weaknesses

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With founding KITEA, the target market is identified expertly. The appeal KITEA has to

urban customers in middle-income households is consistent and the company’s prices have
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remained aligned with what their consumers are willing to pay. KITEA does not jeopardize on

quality and is still able to compete with artisan furniture companies. KITEA’s design model,

while lacking a dedicated team, remains attentive and on trend with its customers. Due to

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 KITEA’s established relationships with suppliers, KITEA has been able to incorporate new

designs influenced by Moroccan culture and hand select items that will do best with stores.

The offered free delivery and assembly are unique pillars to the KITEA brand. Unlike

IKEA who offers no complementary services, KITEA works with your customers to establish a

delivery date while maintaining and controlling a similar level of customer service all the way

through. While we commend KITEA on their factor of convenience, not incorporating in-store

inventory has KITEA operating less efficiently. Without in-store inventory and the necessary

back office software to maintain synchronized inventory levels in stores and wholesale,

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deliveries will continue to be inconsistent. Comparatively, the warehouses in every IKEA store

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allow for inventory to be tracked in a streamlined manner, with customers leaving IKEA with the

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products that they selected during their visit.
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KITEA’s product offerings ignore certain rooms of a customer’s home. There are no

offerings on bathroom or kitchen products and KITEA only offers 20% of accessories compared
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to IKEA’s 70%. In a living room, a sofa is an important furniture piece, however, it is not the
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only piece of furniture that completes a living room. KITEA must consider the floors, the walls,

and tabletops, as these are all necessary pieces of a living room environment. Part of the issue
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KITEA faces now is due to becoming too comfortable in the growth that was experienced over

the past 20 years. KITEA did not reach past current suppliers and did not explore the possibilities
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of customized designs and KITEA-specific items.

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Recommendations for KITEA

The recommendations we provide to KITEA, specifically to you as the founder and CEO,
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is to build a more solid foundation in the cities KITEA is currently operating in rather than

focusing on quick growth in new cities. This will allow the current customer base to become

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 even more entrenched with KITEA before IKEA enters the market. To build a more solid

foundation within the current cities KITEA operates in, KITEA should refocus their target

customer, maximize their value, and continue with their signature practices.

Regarding KITEA’s Target Customers

Traditionally, KITEA aimed at both high- and low-income groups, but it mainly focused

on middle aged, middle class, urban area households. Compared to other classes, customers in

the middle class are considered to have the most potential for an increase in purchasing power

after living expenses and taxes. Moving forward, the middle class should still be the focal point

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of KITEA’s success. Lower income customers are less likely to be large purchasers of furniture

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at a price point that is profitable for KITEA. High-income customers will most likely favor

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handmade and expensive furniture. However, marketing to high-income customers fond of
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having more modern, sophisticated furniture would open a new revenue stream for KITEA. This
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new, modern furniture campaign should highlight the differences between KITEA and traditional
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Moroccan market furniture.

Regarding KITEA’s Value Proposition

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As Moroccan consumers are starting to have multiple options across the non-traditional

furniture market, it is imperative that they feel like they are making strong value purchases. This
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is true in almost any industry. In the past, Moroccan consumers had the choice of expensive,
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handmade furniture or KITEA. Moving forward, there are multiple players in the pre-made,
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assembly-required, cheap furniture market. In order to highlight their value, KITEA should

showcase the following: 1. their adjustment to current trends based upon their ability to adapt

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 quickly to market knowledge, 2. their overall high quality service and, 3. their furniture is high

quality and comes with a warranty.

Regarding KITEA’s Signature Practices

KITEA has multiple signature practices that separate it from current competition and a

potential IKEA location. It is imperative KITEA continue with these practices. First, KITEA

provides free delivery and free assembly for all the purchases. KITEA is structured around the

three pillars of good prices, good quality and good service. These pillars must remain as the

Moroccan people will continue to demand this level of service. Second, KITEA purchases from

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various suppliers based upon instant feedback from customers. This method allows KITEA to

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have low inventory risk, be adaptable about what the consumer is buying, and have the ability to

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adjust quickly. Third, KITEA keeps no inventory in its store. KITEA has a central warehouse
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which handles the delivery and assembly for the customers. Items are delivered within 6 days of
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purchase. Our final recommendation is to keep high turnover items, such as accessories and
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decorations, in stock in each store for the consumer to instantly take home. Larger, lower

turnover, items should still be stored and shipped from the central warehouses.
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To summarize, KITEA needs to stop focusing on expanding and start focusing on

strengthening their hold in current markets. To do this, KITEA needs to improve their marketing
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to focus on the value they provide and the sophistication/modernization of their furniture. KITEA
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should also start keeping high turnover and smaller items in store for customers who want to take

home items immediately. Lastly, KITEA should continue with their signature practices that have
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been successful for decades. When IKEA or another competitor enters that market, they will not

have the market knowledge, high quality service, or customer loyalty that KITEA has

established.

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