IKEA CASE STUDY

IKEA Case Study

Executive Summary

Dear CEO:

I would like to inform you about the business strategy of IKEA, a company that makes fashionable, cheap and disposable furniture. It has made a significant effort to include Scandinavian design and culture into all of its merchandises, which reinforces what IKEA stands for. The introduction of this paper includes a brief review of IKEA's history. The discussion includes IKEA's recipe for success, its corporate level and business level strategies. It also discusses briefly why IKEA failed to capture the US market and how it plans to capture the Chinese market through its cost leadership and differentiation strategies and achieve competitive advantage. Later it discusses the political, economical, social/cultural and technological environment affecting the organization and the strengths, weaknesses, opportunities and threats faced by IKEA. The paper also includes some strategic models such as Balanced score card, BCG matrix and Ansoff matrix and the strategies for expansion and growth in the Asian region. The paper is concluded with reference to the Chinese and other Asian markets that IKEA will be able to capture in the near future.

Table of Contents

EXECUTIVE SUMMARY2

CHAPTER 15

INTRODUCTION5

1. IMPRESSIVE GROWTH OF IKEA6

1.1 BUSINESS LEVEL STRATEGY6

1.2 CORPORATE LEVEL STRATEGY7

1.3 THE COMPETITIVE ADVANTAGE OF IKEA8

Cost leadership8

Differentiation9

Focus10

1.4 THE COMPETITIVE ADVANTAGE MODEL OF IKEA11

1.5 PEST ANALYSIS13

Political Factors13

Economic Factors14

Social Factors14

Technological Factors15

External Opportunities and Threats15

1.6 S.W.O.T ANALYSIS15

Strengths16

Weaknesses17

Opportunities18

Threats18

CHAPTER 219

INTRODUCTION19

2.0 COMPANY BACKGROUND20

Industry and company background20

2.1 Mission21

2.2 Company product and services21

2.3 Corporate and current business strategies22

2.4 Reasons for failure of IKEA in US market24

2.5 IKEA's growth potential in China27

2.6 Balanced Score Card (BSC)28

Strategy Translation29

2.7 BCG Portfolio Analysis29

2.8 Ansoff Matrix30

2.9 Selecting a Product-Market Growth Strategy31

CHAPTER 334

CONCLUSION34

APPENDIX40



Chapter 1

Introduction

IKEA is the world's most triumphant global enterprise. According to the statistics, in 2007, IKEA had established around 300 home decorating retail stores in 35 countries. It has been visited by around 583 million customers. IKEA's inexpensive, smartly designed products, exhibited in huge depot stores, made sales of €21.2 billion only in the year 2008 compared to €4.4 billion in the year 1994. Although IKEA has refused to issue statistics of its profitability, the net profit margins of IKEA were believed to be around 10% higher than an average retailer. Ingvar Kamprad, the founder of IKEA, is believed to be one of the richest men in the world.

IKEA was founded in 1943 in Sweden by Kamprad when he was only 17 years old. The young organisation sold Christmas magazines, fish, and seeds of his family ranch. His primary business was trading matches. The IKEA is an acronym: I and K are the initials of Ingvar Kamprad; E is for Elmtaryd, which is the name of his family ranch and A is for Agunnaryd, which is the name of his home town. Shortly, Kamprad added ballpoint pens to his product range and innovated the way of selling through mail. His depot was a shack on his family ranch.

IKEA only has five-10 percent market share, but its awareness levels are incredibly high for a business of its size, which speaks to the high affinity for ...