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IKEA was established in 1943 by its founder, Ingvar Kampard when he was just 17 years old. During its early days, the company mainly supplied fish, Christmas magazines and a variety of farm seeds. In 1948, Kampard started to sell household furniture (Back 2). During this era, elegant furniture was expensive.
Therefore, young individuals usually inherited old furniture from their relatives since it was expensive to buy new ones given their minimal salaries. As a result, Kampard focused on selling high quality furniture that meets the needs, desires, and expectations of his target market at an affordable price. This strategy proved to be effective in the business operations as IKEA increased its market share in Sweden.
Due to the viability of the business, the firm expanded its operations in Western Europe, America, and Asia (Back 2). At the present moment, IKEA is the leading furniture retailer in the world. It has over 300 outlets in 35 countries in the world.
However, to achieve all this success, the company’s operations have been based on basic plans and strategies that have ensured that its operations are sustainable and profitable in the short run and in the long run.
IKEA’s operations are based on its basic principle that aims at producing high quality furniture at the lowest price possible (Back 3). With this strategy, IKEA has been able to stand at a competitive edge over rival firms in almost every market that it enters into the world. In the USA for example, IKEA faced stiff competition from companies such as Wal-Mart and Costco that had low quality that were sold at low prices.
On the other hand, companies such as Ethan Allen that sold high quality products at a high price (Back 3). To stand at a competitive edge, IKEA sold high quality products that meet the needs and desires of its target market at a low price. This strategy enabled the company to maintain its loyal and satisfied customers hence increasing its market share as well as its profitability.
Success of IKEA Strategies
IKEA success was also determined through its market analysis strategies. The company had a clear understanding of its target market, its purchasing power, and its tastes and preferences. Throughout its operation, IKEA has always been targeting young individuals who are between their 20s and 30s. This target group has a taste of elegance.
However, it lacks the purchasing power to achieve this dream. Therefore, to meet the needs of this target group, IKEA has an effective pricing strategy that ensures that the final product is priced at the lowest price possible. The company sources its products from the cheapest manufactures within and outside their target markets. In its early years, the products that were sold in the Swedish market were manufactured in Poland (Back 5).
To reduce the operating costs in the US market, IKEA sourced its products from local suppliers to cut on transportation costs. This move ensures that the final product is not only sold at the lowest price possible but it is also of a superior quality, hence meeting the tastes and preferences of its target market.
Modification of IKEA Strategies
In the course of its operations, IKEA has modified its strategies to meet the requirements of its target market. For instance, IKEA’s location strategy has changed over time. All IKEA stores are located outside the city enhancing the shopping experience of customers. At the same time, the stores have been divided into different sections with each section containing a range of goods that can meet the specific needs of different customers.
With the home assembly strategy, customers can easily carry their products and assemble them at the comfort of their homes. Most importantly, the stores are run by highly qualified, skilled, and dedicated individuals (Back 4). It has been the tradition of IKEA to employ young individuals who have the passion of the company rather than experienced individuals from other firms.
Through extra-role performance and high quality service delivery, IKEA employees always meet the needs and desires of their customer. As a result, the customers are always satisfied with IKEA products, as well as the services they receive from the company. This has increased the global success that the company is enjoying.
IKEA’s Current Strategy
The operations of IKEA are based on the transnational strategy (Hill 402). To ensure that its operations are sustainable and profitable in the long run, IKEA has come up with strategies modified its store layout, store location and product line to suit the local market while entering the Chinese market (Back 3).
In the process, the firm has greatly reduced its production hence selling its products at lower prices as compared to its competitors. This move was successful and by 2008, IKEA had 4 stores in China alone. Given the current market conditions, this strategy is effective since it has greatly increased the number of units sold hence increasing its global market share as well as its profitability.
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All businesses operate in a dynamic environment. Therefore, IKEA will have to modify its operations to keep up with market trends. For instance, the firm needs to enhance the application of internet technology to enhance its internal and external operations. IT will enable the firm to monitor its inventory and staff in an effective and effective and efficient manner. IT will also increase its profitability through online sales.
With the help of social media, the firm can enhance its relationship with its customers hence having a better understanding of their tastes and preferences. Through research and development, the firm can come up with better products, effective marketing and pricing mechanisms and better management systems.
Back, Alison. IKEA: Furniture Retailer to the World. PDF file. Web.
Hill, Charles. Global Business Today. New York: McGraw-Hill, 2011. Print.