Chapter 7: Business Marketing

Disintermediation
IKEA is doing disintermediation. They do not outsource designing their furniture but they hire designers as their employee and design by themselves. By doing this, IKEA is able to cut cost of the design and also increase coherency among their products.

 

Business marketing

IKEA is famous for home furnishing retailers, which means business to consumer marketing. However, they are also doing business marketing and have a website specialized for business marketing. (Here is the website)

In this website, they are suggesting that their products make your restaurants look better and more spacious. (There are videos)

The following picture shows how their products look good in restaurant.

 

Moreover, IKEA is showing that their furniture like bed and sofa are smart choices in hotel room.

 In addition, their products are good to go as office furniture. For example, they are describing how supportive their chair is. Also, they are selling plants by saying that plants make office more fresh and you feel comfortable in your office.

 

Chapter 8: Segmenting and Targeting Markets

Multisegment targeting strategy

IKEA is doing multisegmenting strategy. They are segmenting their products into a lot of different income-levels. Their mission statement is to offer products affordable to as many people as possible. This strategy is totally related to their mission statement. Business usually segments their products into three or four income level like lower, middle, and higher income level. However, the world is not so simple. There are a lot of people who are in between lower and middle income level and middle and higher. Also, we do not buy furniture frequently so we think and discuss a lot about which products we should buy. IKEA’s wide price range of product helps us to decide which one is appropriate to buy. For example, following table is name and the price of IKEA’s one-person-chair product line. They have 20 different products with 13 levels of price.

One problem is cannibalization. However, they are doing customer management called IKEA Family, which helps efficient inventory management. Also, as our textbook mentions, “In many cases, however, companies prefer to steal sales from their own brands rather than lose sales to a competitor.” As long as inventory management is good, cannibalization is not necessarily bad thing.

 

Chapter 11: Developing and Managing Products

IKEA habe been creating so many products but they never stop creating new products consistently. Because of their wide procuct line mix, it is almost impossible for them to add new product lines. However, they are focusing on deepening their product lines. Thus, their new products are usually additions to existing product lines.

Additions to existing product lines

IKEA recently added steed bed named DUKEN to their bed product lines. Most of their beds are made of woods so IKEA deepened their bed product lines by adding affordable steel bed.

In addition, they added new floor lamp called IKEA PS 2012 and new table lamp called LYRIK to their floor lamp and table lamp product lines. IKEA PS 2012 is girlish and beautiful. They added these products because they probably found out that they did not have products specifically for female.

Moreover, IKEA keeps producing new strange lamps. They are trying to offer something new to living room.  However, those products are so difficult to coordinate, and deepening product lines is not always good choice.  I'm not sure if people actually want these new products.



 

Chapter 16: Integrated Marketing Communications

IKEA is using combination of advertising, public relationship, promotion, and personal selling promotional mix in order to reach target market.

Advertising

This tv commercial tells us that we can design our own kitchen and how tough IKEA's kitchen is by shooting "a kitchen party." It says the kitchen are guranteed lasting for 25 years. In addition, the tv advertising is trying to induce viewers to go to web page at the endo of the advertising. The web page(http://www.ikea.com/gb/en/catalog/categories/departments/kitchen/) explains details. 

Public Relations
IKEA is trying to earn public acceptance and understanding by showing on the web page that they are doing something good for the environment. They have put a lot of solar panels on their retail stores and it cuts use of electricity. In 2010, IKEA started putting solar panels on 7 stores in California, a store in Arizona and Southeast, and 2 stores in East coast. These 11 systems contains about 30,000 solar panels and generate 6,800kw electricity. 

Also, they made yearly summary video which explains what IKEA is doing.

Sales Promotion

During upcoming Thanksgiving holiday, they are doing discounts in order to increase motivation of customers to come to IKEA retail stores.

Personal Selling
IKEA's employees working in their retail stores are so helpful. If we tell them what we are looking for, they will make and print item lists of the products. After payment, we can easily arrange for home delivery at delivery area.


By using those product mix, IKEA is trying to reach target market efficiently.

Chapter 10: Product Concept

IKEA's ProductsIKEA's products are consumer products because their products are designated to satisfy consumer's wants. IKEA's main products are obviously furniture, utensil, and everything we need in our house. In addition, their store is also their product since product does not need to be tangible. People can have a lot of fun just looking around IKEA store with their friends and family. Not only after buying their products but before buying the products, IKEA is offering products for customers. IKEA's store is like an furniture amusement park. There are many different kinds of model rooms that people can actually see and feel. Also, customers can enjoy Swedish meal in IKEA restaurant in their stores so restaurant service is also IKEA's important product.

IKEA's product mix width is very wide. Their products include chair, table, bed, lamps, tree, kitchen, Swedish restaurant, and so on.
Moreover, IKEA's product line depth is very deep. For example, their arm chairs product line includes over 50 different kinds of arm chairs.

In addition, IKEA has high brand equity because most of people know what IKEA is doing and they have high brand loyalty. Since IKEA's products are affordable and cheap for the quality of products, people tend to buy many IKEA's products at onece.

Also, IKEA's products are all private brand. They design, produce, and sell all by themselvs. They do not let other company to design their products. Thus, IKEA's products have high coherency and credibility. All products are tough and easy to assemble. Those are why people keep buying IKEA's products and the stores are always crowded.

Chapter 18 Sales Promotion and Personal Selling

IKEA's loyal marketing program "IKEA FAMILY"
IKEA is doing loyalty marketing programs in order to make their customers to buy several times. They are issuing free IKEA FAMILY card. Altough we have to give them our information used for IKEA's marketing starategy, we can get many benefits for free by joining IKEA FAMILY. If we join IKEA FAMILY, we can get discount on some products and in their in-store restaurant. In addition, they offer the members a chance to win $100 IKEA gift card every time we visit IKEA store for free. Movere, IKEA is offereing premiums for the members. Every time we visit, we can have a free cup of coffee or tea so we can drink while walking around the store. Also, as an incentive to join, they offer a free frozen yogurt for the first time to vist as an IKEA FAMILY member.

Discount
IKEA is also doing special discount offers in order to encourage customers to buy more or to make  opportunity to buy something a litlle too expensive to buy at regular price. Right now, they are offering 15% discount on $4,500 or more kitchen and 10% discount on $3,500 or more kitchen.



 In-store Promotion   Point-of-Purchase Promotion
In addition, they are doing not only online promotion but Point-of Purchase Promotion inside their store. If we are walking around the store, we can see some posters and it offers discounts. For example, a chest in a picture below is discounted by $50. Since those discout is promoted inside the store, it can induce impulse of customer to buy.

 

IKEA is doing those mixed promotional strategies in order to offer incentives for customers. They are very good at making incentives by sales promotion.

Chapter 17 Advertising and Public Relations

Advertising

IKEA’s advertising strategy is categorized as institutional advertising. They are making their image better by advertising. For example, IKEA’s tv commercial that I attached above is doing very well. The commercial shows that IKEA is supporting customer’s long and happy home life. 
Moreover, this magazine advertising below is very good to show how important to get good bed. Interestingly, those ads are focusing on how customers are expericing their lives with IKEA's products while other home-furnishing companies tend to focus on price or how good the quality of their products are.

Public Relations

IKEA is focusing more on public relations than advertising. They uploaded this video on Youtube and their website. This video is indicating that IKEA is professional about home-furnishing by showing that they are considering not only products but also customers. Altough space is the one of the biggest problems when it comes to home-furnishing, few home-furnishing stores do not consider it or actually do cosider it but fail to tell customers about it. IKEA focused on this problem. And, they considered a solution to it and are telling it to customers through public relations so that customers know that IKEA is actually considering society and customers in addition to making money.
In addition, they are using IKEA website to publisize themselves. On the website, they are showing what they are selling, who they are, and what they are doing for society.

IKEA's advertising and public relations strategies are both institutional. They succeeded creating and maintaining their good image for society.

Chapter 15: Retailing

IKEA is a home-furnishing company and has a lot of retailing stores around the world. All IKEA’s retailing stores are classified as destination stores which mean that customers visit IKEA as their main destination. Their stores are located in isolated place but accessible from urban area. This cuts the cost of the land. Also, there are few competitors.
Destination stores are usually a little bit difficult to go because they are a little away from urban area. Customers have to drive a car or pay more money for trains. However, IKEA Brooklyn store that I visited is very easy to go because they are doing free ferry transportation service on weekends. It took about only 15 minutes and also we were able to see nice view of Manhattan Wall Street and Statue of Liberty!



Free Ferry

In addition, IKEA has their original Swedish restaurant. Because of isolated location, there is no restaurant around it in order to prevent customers to back to restaurants in Manhattan.

Inside the store, I found out that IKEA is doing Trading Up strategy which persuades customers to buy more expensive products than ones they intended to buy before coming. IKEA put high quality and expensive products and cheaper products together in the same place. Because of this, customers are tempted to buy higher quality products because they can easily find out the differences of those products. (example in following picture: Left Shelve $29.99 : Right Shelve $69.99) In addition, customers can compare and contrast products on in IKEA. They do not have to go to other stores to look for cheaper products or higher quality products because IKEA’s products are so wide in price range.

 

IKEA's retailing stores are designated to make customers happly while shopping.



Chapter6: Consumer Decision Making

Psychological factors are affecting consumers’ decision-making a lot. One of the psychological influencers is consumers’ motivation that drives consumers to want products. Without motivation to buy, no business can succeed no matter how their products are good. One theory called Maslow’s hierarchy of needs shows that there are five levels of needs, and that when people satisfy one need, higher-level of needs become important. All levels are following.

1. Physiological needs

People at this most basic needs-level expect basic function. This means that those people do not want high quality but tend to focus on price since basic function is enough to satisfy them. For example, a student who just transferred needs a bed they can have a good night sleeping on. He or she wants to buy a cheap bed that has decent quality. Thus, those people tend to focus more on price. IKEA is offering at least one cheap product in each product lines in order to appeal to them.

2. Safety needs

At this second level, people want security. IKEA’s products are very strong and well designed. For example, they use thick strong board for their desks so that customers cannot happen to break it.

3. Social needs

At this their level Social needs, people want love and sense of belongings. IKEA is especially doing well at this stage. They put model rooms in their stores and pictures that show family with their furniture in their catalog so that customers can easily imagine how their life is going to be with their family if they buy IKEA’s products. This stimulates customers’ needs for love and sense of belongings.

4. Esteem needs

Unfortunately, I do not think IKEA is doing well in terms of esteem level. At this level, people want self-esteem, recognition, and status. One thing IKEA is doing for this level is to make their products easy to assembly so that most of people can assembly by themselves in order to make them to feel accomplishments. However, I think this is not enough in order to satisfy esteem-needs.

5. Self-actualization needs

At this final level, people want self-fulfillment and self-expression. In order to satisfy this need, IKEA offers diverse products in order to give the customers many choices. Since the number of possible combinations of IKEA’s products is infinity, customers can express themselves by purchasing IKEA’s furniture.

As you can see, this is how IKEA stimulates customer's motivation to want and buy their products.

Chapter 5: Developing a Global Vision

IKEA is doing global marketing. They have customers all over the world. However, they do not alter their products depending on countries or region. Their products and Websites are globally standardized.
For example, IKEA's lether armchair called SKOGABY is sold all over the world without any change. Because of that, they do not have to re-design and re-create new products. They just globally standardize their products and sell them. Of course, this means less design and marketing costs because they already have the design and know how to make it.

Also, IKEA's Websites are standadized all over the world. Let's compare American and Japanese Websites.
America: http://www.ikea.com/us/en/catalog/categories/departments/bedroom/
Japan: http://www.ikea.com/jp/ja/catalog/categories/departments/bedroom/
Those websites are almost same except the languages. This also means less cost of establishing Websites because all they have to do is translating. They do not have to change the structure.
Most importantly, their standardizations are accepted all over the world. If it failed, IKEA's business would be disastrous.

Chapter 4: The Marketing Environment

The environment surrounding IKEA furniture store is diverse because everybody need (or want) their own furniture. Thus, IKEA is taking it into account in order to satisfy different needs and wants.

Social Factors

One of external environmental factors business has to consider is social factors because it is unchangeable and affects customer’s lifestyle, preferences, and expectations. IKEA is taking component lifestyle into account. They understand that people have their own tastes. IKEA’s products are wide in their design and style. For example, they have 83 designs for only fabric sofas and 50 designs for only leather. Some of the products are very simple in design while some are fancy. There are many options for customers who have own lifestyle and tastes.

Demographic Factors

Demographic factors are also very important to think about. We have to know what kind of race and how old our customers are in order to satisfy them because there are differences depending on their demographics. IKEA is selling products for baby’s and kids as well as teenagers and adults.

Ethnicity Factors

Also, it is very important to consider ethnicity. I’m from Japan and have met a lot of people from all over the world. One of the things that I have noticed is that different ethnicity has its own preference. However, I do not see that IKEA differentiates its products according to ethnicity. Nevertheless, every product lines have some simple but modern products so that they fit into almost all lifestyles. Also, customers can assemble parts and create their own products

Economic Factors
IKEA’s one of the missions is to produce products affordable to as many people as possible. Thus, their product price range is wide so that from people with high purchasing power to ones with low purchasing power can buy their products.

Technological Factors
IKEA’s another mission is to make energy they use 100% renewable so they have made solar energy and wind turbine teams to cover up the energy they use. Also, they keep producing environment friendly products (i.e. bottom of my Chapter 3 blog). In addition, they hire their own designers rather than outsourcing so that they can improve their techniques and design.

Political and Legal Factors
IKEA has a lot of lawyers all over the world so that their products or their business do not violate the laws. However, some IKEA’s tv commercials are controversial and banned.  

 

 

Competitive Factors

So far, IKEA is the top in affordable global furniture store segment. Their competitor includes Bed Bath & Beyond. The reasons why IKEA is the leading company are that they have competitive advantages that I wrote in my Chapter 2 blog. Along with the fact that their products are good, just walking their store is fun because their stores are designed to entertain the customers. They have a lot of model rooms, children-play-area, and even restaurant where the customers can try Swedish foods. There is no doubt that many people visit IKEA.

Chapter 3: Ethics and Social Responsibility

Along with making money and producing creative products, IKEA truly think about Corporate Social Responsibility because they care a lot about the planet and people.

 

A Soft Toys Campaign Helping Children

From mid-nineties, IKEA has held a soft toys campaign during holiday season at the end of each year. During the campaign, one dollar of each soft toy sold in all IKEA stores in the world goes to UNICEF and Save the Children in order to improve education for children in Africa, Asia, and Europe. So far, this campaign has made 47.5 million euro ($62,443,500) of donation and helped 8,000,000 children have a good education in about 40 countries.

 

Green Marketing

                IKEA is also environmentally responsible. As a furniture store company, they have to use woods a lot. However, they plant a new tree for a tree they have used. The FSC(Forest Stewardship Council) has awarded IKEA a certificate which shows IKEA is balancing economic, environmental, and social interests.

                In addition, IKEA has invested in installing 250,000 solar panels and 60 operational Wind turbines in countries without good sunshine. Their 9 wind turbines in central Sweden generates renewable electricity that covers 75% of the power needed for all IKEA stores in Sweden. Moreover, IKEA applied sustainability to their products. For example, their LED lamp called SOLVINDEN generates light by using solar and wind power. You can see how it works in this video.

 

Chapter 2: Strategic Planning for Competitive Advantage

The key reason why many people have chosen IKEA's products is that IKEA has competitive advantages.

Cost Competitive Advantage
IKEA products are affordable for most of people to buy. A year ago, I was looking for cheap desk and found out that IKEA's desk was the cheapest but also durable. Its top panel was so sick and wide that I could study with two books, a desk top computer, a cup of coffee, and ice cream. Also, it was stable. I could not believe that it was only $39.99. 
 The biggest reason of its affordable price is because IKEA decides retail price of product at first. After that, it designes and makes product that fits the price. In addition, its designers and developers directly communicate with suppliers in order to reduce the price at factory level. They make adjustments on factory systems to maximize efficiency and use of raw materials. Moreover, one of the most famous IKEA characteristics, the flat package also helps to decrease the cost and price because transporters are able to convey more products at one time with flat packages, and , in addition, IKEA can store more products efficiently with less space.


Product/Service Differenciation Competitive Advantage

One of the most distinct product differenciation competitive advantages is its wide range of products. At first, IKEA products are wide in function. IKEA offers everything we need at home from basics like beds, desks, chairs, curtains, and cabinet, to something we do not usually see in furniture store like plants, toys, and whole kitchens. Also, its products are wide in style. For example, IKEA offers simple carpet as well as colorful or romantic ones. Customers can choose furnitures that fit their house and their preferences.

In addition, IKEA has competitive advantage about its package. As I explained earlier, IKEA's flat-pack allows its customers and transporters bring products home easily. Additionally, IKEA products are designed for most of customers to easily build the products by themselves. Personally, I have ordered a lot of IKEA products and built them all by myself. It usually takes about 30 minutes at most with no difficulty. When I assemble non-IKEA products, I usually need some help from my friends or family, but IKEA products are so easy to assemble that I do not need help at all.

Those IKEA's competitive advantages are attributed to its vision. According to IKEA home page:

At IKEA our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.

Setting clear vision is very important but more importantly, applying the vision to every products is the key to succeed.



Chapter 1: Mission Statement

According to IKEA's concept

 

The IKEA Concept is based on offering a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. Rather than selling expensive home furnishings that only a few can buy, the IKEA Concept makes it possible to serve the many by providing low-priced products that contribute to helping more people live a better life at home.
The IKEA Concept guides the way IKEA products are designed, manufactured, transported, sold and assembled. All of these factors contribute to transforming the IKEA Concept into a reality.

Here is IKEA's History.

Chapter 1: History

In 1943 in Sweden, Ingvar Kamprad started IKEA whose IK stands for his initials of his name and E for the name of his family's farm and A for the name of the village(Agunnaryd).
At first, IKEA did not sell furniture but ballpoint pens which were stored in his family farm and delivered by the family's milk van.
In 1948, it began to make stylish and modern furnitures that is main products IKEA sells now. Later, IKEA Catalog was destributed and its first IKEA store was open in Almhult, Sweden. IKEA restaurant was added in the store after two years.
After that, IKEA started to emphasize its affordable price and quality which is one of IKEA's biggest strengths right now. Also, it has began to design and sell its products by itself so its products have become more coherent, and its cheap price was maintained despite of increase in price of materials. In addition, as IKEA's noted another characteristics, its products have become easily removable and washable.

Nowadays, IKEA has opend over 300 stores in more than 35 counties. Some stores have up to 10,000 different products available to sell. Undoubtedly, IKEA is the most popular furniture store company in the world.

Here is IKEA's Mission Statement.