EA: Managing Cultural Divers

Group Members: Archana kumari Soumya Shilpa Pawan Lawi Anupam Sonal Sharma

GITAM INSTITUTE OF INTERNATIONAL BUSINESS VISAKHAPATNAM

INTRODUCTION
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Founded by Ingvar Kamprad in 1943 IKEA owned by IKEA Group includes IKEA of Sweden, Swedwood, the sales companies that operate IKEA stores, and all purchasing and supply chain functions IKEA Group owned by INGKA Holding BV, which is itself owned by the Stichting INGKA FOUNDATION of the Netherlands Ranked 96 in Fortune's 100 Best Companies to Work For in 2006 and in October 2008 International home products retailer that sells flat pack furniture, accessories, and bathroom and kitchen items in their retail stores around the world. IKEA Business Idea is to offer a wide range of well designed, functional products at prices so low that as many people as possible will be able to afford them Its vision - To create a better everyday life for the many people

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• Low costs • Long production lines • Self-assembly at home • Self-transport • Convenient boxes • Catalogues • Remaining Swedish (design, management) • Modern ideals (durable, easy to live with, natural and free style, color,

The IKEA Wa y

World Map showing locations of IKEA stores in 2007. Green represents countries with stores in operation and blue shows proposed locations.

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More than 226 IKEA stores in 33 countries with 200 stores belonging to IKEA Group Rest are owned and operated by franchisees Currently 28 U.S. stores plans to open 50 more stores by 2010

Sales for the IKEA Group for the financial year 2008 were up by 7 per cent to a total of 21.1 billion euros

Top five sales countries Germany 15%, USA 10%, France 9%, UK 7% and Sweden 6%.

2006 Sales, by Region

Works with more than 1600 suppliers in more than 55 countries Top five supplier countries China 21%, Poland 17%, Italy 8%, Sweden 6% and Germany 6%.

2006 Supplier, by Region

IKEA Modified Value Chain
Michael Porter argues that an organization can enhance its competitive positioning by performing key internal activities in the value chain at a lower cost and better than its competitors. The value chain approach identifies two major activities- primary and secondary. Primary actives include production, marketing, logistics and after-sale functions. Secondary activities, on the other hand, are identified as support processes to primary activities.

MARKETING
4 focal areas

Product design Catalogs Advertising Public relations/sales promotions

CATALOGS AND ADVERTISING

Company spends 70% of its annual marketing budget to print catalogs Catalogs produced in 38 different editions in 17 languages for 28 different countries in 2006 and in 55 editions, in 27 languages for 36 countries

in 2009

Also uses T.V., radio, internet and phones Mainly rely on word-of-mouth Use promotional stunts and games

PRODUCT DESIGN
Clean line  Frugal styling  Cachet and inexpensive  Innovation in designs

A completed IKEA flat pack bookshelf

PRODUCT

INNOVATIVE LINE:EXAMPLES

eNook
Elegant design Can hold 45 lbs Space efficient Highly functional

The Mobiletech Mobile Desk
 Can fit in most rooms and offices  Mobile  Scratch & stain resist

Wall Desk
Weighs only 30.5 lbs. Strong Lift top compartment

INNOVATIVE EXAMPLES

Counselor's desk Elegant design Foldable top Two pigeon holes Two secret pencil drawers

Drop Lid Desk Highly functional High quality Work surface drop lid

INNOVATIVE EXAMPLES

a reading chair is an actual chair with cushions that turn, like the pages in a book:

This room divider was meant to look like a stand of trees at the edge of a forest:

INNOVATIVE EXAMPLES

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image of a dandelion--in fact the shadows it throws were meant to look like dandelion petals scattered in the wind

A new invention entirely, comprised of bamboo sheets glued together. The bowl keeps its shape, but it's slightly floppy as well--somewhere between wood and fabric

INNOVATIVE EXAMPLES

enormous bowl--20 inches wide--resembles a huge hat misplaced by some giant

Inspired by a park bench, this chair actually uses cutting-edge fabrics and fabrication. The top is soft and cushy, though it looks like painted wood

INNOVATIVE EXAMPLES

This rug draws from those designed by North African nomads, who weave rugs to different lengths each season, to mark how plentiful a passing harvest has been

A 15-inch-tall pepper mill that was meant to look like a king's scepter

IKea’s growth and popularity
Major reasons for IKEA’s growth and popularity are :  Democratic Design • Offers a wide range of home furnishings of good design and functionality • Low cost, modular , ready –to-assemble furniture  Overall low cost leadership in the industry  Modified value chain  Convenient shopping

STRATEGY TO SUSTAIN GROWTH
Focus on customer service • Add more services to enhance customer ‘s experience ( eg .home delivery) •Implement a Customer Relationship Management system to track current customers and communicate with them. Focus on correct placement of stores • Concentrate stores in metropolitan areas , where apartments are smaller • Concentrate stores in college areas • Continue clever advertising to create demand.  Clever advertising and promotion • Your furniture says something about you. And like fashion , your style changes.

PUBLIC RELATIONS / SALES PROMOTIONS
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Works to build customer relationships and maintain employee morale It provides its customers with pencils, paper, tape measures, store guides, catalogs, strollers and shopping bags Offer delivery for bulky items and rents carracks for convenience to customers Stores are designed around a "one-way" layout and aisles are wide to reduce traffic in the stores Offer gifts and certificates IKEA's furniture is designed to be assembled by the consumer IKEA holds “Antibureaucracy Weeks” on regular basis Executives work on shop floor or stockroom, operate cash registers, even load trucks and cars for customers IKEA does not accept cheques – only cash and credit cards

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KEY REASONS FOR SUCCESS
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The IKEA brand is associated with simple, low cost, stylish products. did not customize its products to local markets, but kept to standardized products and operations worldwide. IKEA developed a model for the business, where it was able to keep costs low. IKEA had excellent international procurement. It had excellent supply chain management and utilized the latest IT infrastructure. Anticipating the needs and wants of customers.

ACTIONS
Focus on customer service. PROS- Identify trend in customers. Benefit from in-depth knowledge. Avoid problem in future. CONS- CRM is costly.

Focus on correct placement of stores. PROS-Correct placement is key to IKEA’s future growth. CONS- Too narrow.

Expand product lines. PROS-Helps IKEA penetrate a new market. CONS- Its own name and promotion campaign, which is cost prohibitive.  “pull” marketing strategy. PROS- encourage consumers to make the purchase. CONS- difficult to implement.

IKEA had to change the model of operating, giving greater ownership to its target country subsidiary, to become polycentric - stores

CHALLENGES IN US MARKET

Reluctance to change furniture: mind set of Americans. Value added in high-end furniture retailer. Consumer preferences.

Managing sustainable growth for the future IN USA
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market leader strategy. find new users. IKEA Club IKEA should endure IKEA brand.

IKEA’S TRADE-OFF IN US
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US customers are very demanding. Free delivery service should be continued. Customisation should be done in tune with local suppliers. Franchisees should be given to local people . Promotional strategy should be in accordance of the tastes of local people.

SWOT Analysis
Strengths – Cost efficiency – Special perks (café) – Store layout – Variety of products – Assembly service offered – Brand name equity – Large inventory – Value priced furniture – Scale of economies – Large supplier chain – 1800 located in 50 different countries – Delivery service – Infrastructure system place
Weaknesses – Limited number of styles (not everyone likes contemporary-modern) Customer has to – assemble the product Product may not be as – durable depending on who assembled it Low customer service – available on retail store floor Customer has to pick – furniture up from store Self-Serve shopping – experience 28% of people below – poverty line Per capita income – substantially low

SWOT Analysis

Opportunities – Joint ventures – Collaboration with other companies – Collaboration with Unicef – Huge market potential – Western ideas and products valued by Indians – More apartments and housing leases– especially among younger generation

Threats

– Language barriers – Counterfeit and substitute products – Competitors – Copycats (many local carpenters can make and sell the product cheaper) – High import taxes – Risk of economic instability or war

Joint Venture

Alliance with local partner advantages: – Can provide valuable input into the opportunities and threats of local market – Will reduce strategic risk that may result from political, legal, and financial issues. – The venture will increase market coverage – IKEA could further expand into other market segments in which the strategic partner is already established Alliance with local partner disadvantages: – Loss of control over some business functions – The partner may eventually become a competitor to IKEA

Any questio n s? ? ?

Thank you for your attention!