IKEA Invades America

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IKEA Invades America

Section 1:

IKEA is considered as one of the leading top furniture retailers in the world. The company’s sales are to the tune of twelve billion dollars. The furniture retailer boasts of having one hundred and fifty four stores in twenty-two countries. Statistics indicate that the chain store services over two hundred. The growth of the company has led to its entry into the United States’ market. The entry can be termed as revolutionary as it was widely accepted across the nation rising above the competition of other major chain stores. In the United States’ market, the company had fourteen stores with plans of opening nine more stores by the end of 2003 (Krugman, 2009).

The company’s strategy is deemed as rather conservative over the years. The company’s goal is to have fifty stores in the United States alone by the year 2013. The company’s strategy is embedded on the four P’s namely; product, price, place and promotion. The company mainly deals in low priced products. The company’s products are unique as they are mostly produced using Scandinavian designs. The products are packaged using the flat design making portability easy for customers. The products are made in wide varieties offering customers the advantage of choice (Wessels, 2000).

On the pricing concept strategy, the company has ensured all its furniture are low-priced. The low prices also tend to pass the cost savings to the customers. The flat packaging not only enhances portability but minimizes on shipping costs. This cost benefit is later passed on to the consumer. In the beginning, the company erred by lowering the prices at the cost of quality. However, has been able to ensure good designs are reasonable designs. This is communicated by the slogan, “low price with meaning”. The low pricing is enhanced by employing different matrices each of the product that the company deals in. The low price has made it a desirable destination site for the price conscious customers.

On the place strategy, the company the various stores that the company has, which are spread all over the country indicate on the company’s success in terms of location. Location is a very significant strategy as it affects how the company is accessible to its customers. The company has strategically located most of its outlets in places of large population. The popularity of the business enables the business to have a many customers on the first day when a new outlet is opened. The company has also strategically opened up low-priced furniture stores in Scandinavia. This has been followed by other places like Asia and North America. In accordance with the percentage sales, it is evident on the market potential of the northern America and Asian regions.

The fourth strategic aspect is promotion. The company has invested heavily in advertising through the available media outlets. Apart from this, customer visits at the store outlets is part of the company’s promotion strategy. Store visits enable customers to have a concise view and experience of the item of purchase and enable them to have a look at other products that could also be acquired. The stores have company staffs who guide the customers through the predetermined path that is well furnished with well-decorated bedrooms, washrooms and other home aspects. The management has ensured a favorable atmosphere that is bright and inviting in the stores, where customers are encouraged to walk freely and even lounge on the splendid furniture. Every commodity has a price tag to enable the customer have an idea of the price range of the products and enhance the customer’s budgeting activities. The stores are designed in the form of modern theme parks that have childcare centers, and lounges. The customers are also served with exotic delicacies mostly from Swedish cuisines.

The strengths of the company are mainly ingrained in the cheap and affordable pricing of the items that the company deals in. The economic crisis currently gripping the world economy has shaped the people’s mentality on minimizing on expenses by purchasing cheaper products. The company also ensures that the products are of reliable quality thereby the customer gets the best of both worlds. The powerful brand image that the company has developed over the years is because of their efficiency in service works a lot in making the company a world leader in furniture products. The hip Swedish designs are a major strength for the company attracting most of the customers as they offer unique designs. Strength for the company is the availability of a wide range of products and styles. This enables the customer to have a wide variety to chose from and in essence satisfy the customer’s requirements.

However, the company is plagued by several inherent weaknesses. Since the company assembles the furniture themselves, it tends to be un-appealing to some of the customers. Although there are several stores in the market, the immense size of the American market renders the company to have invested in relatively few locations. Another weakness is that the Swedish designs may not be appealing to some of the American customers. Those who want a specific product may find the design of the store a hassle in locating what they want.

Section 2:

One feasible strategic option for IKEA is to invest heavily in customer education. The Swedish culture is not very popular with the citizens of the United States of America. This renders most the company’s designs unpleasant to some American groups who could be potential customers in the future. The company should tap into this group by educating them as an effort of transforming them to appreciate and embrace the unique Scandinavian designs. The high profile advertising campaigns have proved to be an effective means of creating awareness. The company should therefore, utilize its effective and influential campaigns and may end up transforming the perception’s of most Americans who expect furniture to last a lifetime. This is a more feasible strategy and an essential one in having the company to acquire direct global preferences aligned to its predominantly Scandinavian designs. This can be attained through investment in a massive advertising campaign.

This strategy has the following advantages in that it may lead into a global inclination towards Scandinavian designs. Most the word’s cultures emulate the current trends in the United States of America. By having the American market incline towards the Scandinavian designs, the global culture may end up adopting this trend and in the process creating a global market for the company’s products. Another advantage to this strategy is that the advertising strategy will end up empowering the company’s brand as the broadcasting forces its brand on to the consumers. The creation of a global market can enable the company reap the benefits of economies of scale. This will work a lot in enabling the company to continue providing products at extremely low prices. This will work in making the company even more appealing to more customers who are price-conscious. However, this strategy has the underlying disadvantage of incurring the company huge costs. However, these costs may be termed as investments since the company will reap enormous benefits in the near future from this strategy (Winer, 2000).

The second feasible strategic option is to localize the designs to appeal to most of the American population. The company has been successful in its global expansion by engaging in the supply of a wide range of products that are offered at relatively low prices. One of the company’s goals is to have fifty stores running in the United States’ market by the year 2015. In order for the company to meet these aggressive goals, the company has to modify their mode of conducting business so as to appeal to the broader market. The American market is mostly multi-cultured, with no affiliation to any particular culture. This means that if a company specializes on a particular culture, it may up losing a greater part of this potential market. The company can employ careful and minor service adaptations to have an appeal to a majority of the American public. The company can therefore, tap into the larger American market without losing its original vision.

However, most effective strategy is engaging in the best of both worlds. The main issue plaguing the company is clear; the company’s product is narrow in relation to the market the company is intending to tap fully. In order to meet the company’s radical expansion goals, the company can modify or redesign its portfolio and make adaptations to its products in accordance with the location the store is based. The reasoning is that a company cannot produce a certain commodity and market it in any market it so wishes. If this is to be successful, the product has to be modified in accordance with each of the market’s requirements.

Section 3:

The critical priorities for IKEA currently is to strike a balance between providing products that have unique Swedish designs and having the market appreciate the same products. Sweden is not a very popular country and thus most of the people especially those comprising the American market are not conversant with the culture. In order to satisfy this key priority, the company should employ the strategy of conducting customer education. The company can utilize its efficient and influential advertising strategies to educate the public and make them conversant with the Scandinavian culture. This will work a lot in enabling the company to provide products that appeal to the public.

Another critical priority for the company is to ensure that its products are both relatively cheap and off reliable quality. By employing the strategy of conducting awareness campaigns and a focused expansion into new designs and styles that better suit particular locations, the company can end up tapping into larger markets and thereby increasing the sales. This would enable the company enjoy the economies of scale and thereby enable it provide products that are relatively cheap and of reliable quality (Reitman, 1994).

Section 4:

One of the activities the company should engage in is to conduct research on some of the cultures of the locations that the company is the program of launching its products. This will work a lot in enabling the company to understand the needed changes in its service delivery. The company should also investigate on future trends of the American shoppers. Since the goals are rather long term, the designs being made should therefore, be created in such a way that they appeal to the public not just in the current but also in the future market (Kotler, 2000).

The company should also research and develop an effective awareness campaign to enable the majority of the American consumers become aware of the Scandinavian culture. The company should mainly focus on the simplicity and functionality aspects of the furniture products. This should be coupled with the underlying virtue in the aesthetic beauty of the Scandinavian products. The advertisement programs should include the sense of “chicness” and sensibility, as these are attainable aspects at relatively low prices. The main objective however, is to educate the consumer. The company should embark on the hiring of American designers who can incorporate some of the American stylistic affiliations into the products. This would work a lot in making the products more popular with the American market. This activity is also very achievable since it saves on the cost of importing Scandinavian designers (Lazer, 1990).

References:

Lazer, W. (1990). Marketing 2000 and beyond. Chicago, Ill: American Marketing Association.

Kotler, P. (2000). Marketing management. UpperSaddleRiver, N.J: Prentice Hall.

Reitman, J. I. (1994). Beyond 2000: The future of direct marketing. Lincolnwood, Ill: NTC Business Books.

Winer, R. S. (2000). Marketing management. UpperSaddleRiver, N.J: Prentice Hall.

Wessels, W. J. (2000). Economics. Hauppauge, NY: Barron’s.

Krugman, P. R. (2009). The return of depression economics and the crisis of 2008. New York: W.W. Norton.