marketing case study
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MARKETING MANAGEMENT
CASE STUDY
IKEA
Members
Ikram Zohar Mohamed B0250KDKD0213
Feifei Ji B0243VLVL0213
Ilham El Mhadder B0266FAFA0213
Saumen Adhikary B0253RBRB0213
Marin Ivanov Mihaylov B0247MAMA0213
Seth Fielle Fearon B0262KDKD0213
Yuksel Cam B0244KGKG0213
Maryam Khurshid B0263KKKK0213
Contents
1. Introduction…………………………………………………………………..…1
1.1 IKEA’s Growth………………………………………………………..……1
2. Question 1………………………………………………………………….......2
2.1External Factors........................................................................................2
2.2External factors Analysis (Porters Analysis)............................................4
3 Question 2………………………………………………………………………6
3.1 SWOT
Analysis...............................................................................................6
3.2 TOWS Analysis...........................................................................................7-
8
4 Question 3……………………………………………………………………..10
4.1 How IKEA reduce Carbon Footprint? ...................................................10-13
5 Question 4…………………………………………………………………......14
5.1 Social Responsibility……………………………………………...……14-15
6 References………………………………………………………….………16-17
1.0 Introduction
IKEA is an international well recognized Swedish home furnishing retailer. Established on
1943, its core product is wide range of self-assembling well designed low priced products, which
reduce the packaging and transport cost. They are concerned as well by the actual environmental
problems which push them to find new ecological ideas to reduce the pollution, raw materials
and natural resources. Those made IKEA the biggest furniture retailer in the word with more
than 253 stores dispersed in at least 24 countries, in addition of more than 32 owned and run by
franchises. It success consequence is the number of visitors that reached by 2008 more than 250
millions in stores and more that 450 millions on there own online website and sales in total
heated a pick of 21.2 billion Euros.
1.1 IKEA’s Growth
Marketing Management: Group Course Work Page 1
Design of Furnishing and Introduction of
FLAT-PACKAGING
Flagship store in Stockholm and Birth of Self-
Serve Furniture Shopping.
First store outside
Scandinavia in Switzerland then
Germany, Holland and
Eastern Europe expansion and first US store
outside Philadelphia then Washington and
Baltimore.
12 Stores in the US, then Asia,
Russia, China and Iceland.
154 Stores in 22 Countries at the
end of 2002.
1950
1950
1960
1960
1970
1970
1980
1980
1990
1990
2000
2000
2.0 Question 1
The company is affected and faced by many different complex variables, some are internal to the
organization, and hence, they are controlled by this later. Others are external, uncontrollable
forces that present challenges and opportunities, IKEA need to learn how to take advantage from
them to keep it s position in the market. The external factors to the organization may be analyzed
using “PESTEL Analysis”
2.1 External Factors
Political and legal influences
are variables that appear to change very slowly, thus, it still important policies that may affect
the company heavily, the marketing system is usually influenced by political and legal forces
such as the government monetary policies, import and export laws, anti-pollution roles … until
now there is no data registered against IKEA, the political situation remain steady and the parties
respect the agreement. Moreover, IKEA’s strategy “environment protection” in order to reduce
the pollution, the raw material used and the energy reinforce its position and seem to be
respecting legal and political policies.
Social and cultural environment
The marketing program needs to be adjusted according to, first of all the cultural differences that
consist on the complex societal elements such as values, beliefs and preferences. Equally the
demographic and behavioral study need to deal with the quantitative elements for instance age,
sex,, religious, geographical concentration and dispersion and income … and the qualitative
aspects for example motivation, attitude and perception.
As a Scandinavian company, IKEA beliefs that the perfection and the suitable design for
everyone that may last longer is the best product to offer, in contrast and because of cultural
differences such us the American preference for functional ability of the product. Even that, the
USA stills its second biggest market in the word
Marketing Management: Group Course Work Page 2
Economic forces
Is a huge complete system where people, material and energy are converted to a product or a
service and distributed for a final use? It represents an obvious common factor for all companies
and plays an important role in the marketing system.
The financial recession is by far the greatest issues IKEA faced starting from 2008 until
nowadays, it reduce the population purchase power, by consequence, IKEA need to reanalyze its
marketing strategy , pricing and promotion methods to make sure it would survive this difficult
period,
Its projects to open 21 new stores in 11 different countries in order to be close to the customer
need a huge budget, it is important for IKEA to reconsider those plans.
Also over time the Swedish kronor got a stronger value against some other money which made
the importing cost of materials more expensive.
Technological influences
Technology is an important part of today and everyday lifestyle for the modern customer, it
is important also to highlight that technology is a wider driving force for change. The major
factor that makes IKEA uniqueness is that modular products are ready to self-assembly, easy
to transport in flat-packs which reduce damage risk, packaging costs and transport and
technical assistance. It is benefic in the first position to the costumer because it reduce his
charges, also it reinforce his trust on the brand which is IKEA goal.
Marketing Management: Group Course Work Page 3
Figure 1: Author
In addition to the intern and external factors, the competitive environment influence the company
performance even the marketing strategy is considered reaction against the competition. This
later level is affected by four forces.
2.2 External Factors Analyzing (PORTERS FIVE FORCE MODEL)
Bargaining power of suppliers
All over the word, IKEA had a well established relationship with its suppliers. It own as well
manufacturing companies. It means that IKEA is able to manipulate other retailers’ prices.
Bargaining power of costumers
Many companies are directly competing against each other. Retailers are importing from china,
which means that similar products are present in the market and the customer is free to choose
the product that suit him easily. IKEA needs to keep unique and its innovative spirit, which
attract millions of customers to its stores instead of others.
Marketing Management: Group Course Work Page 4
Technological Ecological
Political Legal
Economical Social
PESTEL Analysis
The threat of new entrants
the intensity of competition may be difficult and scary for new entrants, it require to invest a big
amount of money, establishment of contract and relationship with suppliers, a suitable location
and a perfect product to launch into the market. IKEA is again a well established company, it
isn’t easy to get powerful as they are especially experienced and present in the market for
decades.
Threat of substitutes
The image of IKEA brand is well recognized and respected especially due to it s green program,
reduced carbon foot-print, recycled materials and reduced use of row materials. The competition
is giving slogan to go green but there basic ways of work still the same. This means that IKEA is
safe.
In order to improve its performance, IKEA need to revise its standardization strategy to cope
with the competitive environment and face the complex external factors that are specially the
cultural different markets that are a result of the expansion goals of IKEA and its need to be
successful internationally.
IKEA have to satisfy the customers’ needs, but adapting its marketing strategy with the
population way of living, values, preferences and design products and services suitable to each
market
IKEA have to opt of customization and leave the standardisation concept.
Marketing Management: Group Course Work Page 5
3.0 Question 2
3.1 SWOT analysis
IKEA’s success in business depend on it s knowledge of itself. Use of the SWOT Analysis helps
the company to identify its strengths, weaknesses, opportunities and threats. This will focus
essentially on environmental, social and economic issues to take the company through the actual
financial crisis.
Strengths and weaknesses are controllable internal aspects which include machinery, employees,
money and management. Those opponents differentiate the company from competitors and
represent the areas where the company does very well. The later are the areas that the company
needs to capitalize on them, to improve, in order to survive.
Opportunities and threats are both external uncontrollable factors such us the economic climate,
technology, competitive forces and ecology…, the first represent everything that may increase
the company benefit, when the second are the things that are open to competitors that may hurt
the company.
INTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT
EXTERNAL ENVIRONMENT INTERNAL ENVIRONMENT
Figure 2: Author
Marketing Management: Group Course Work Page 6
3.2 TOWS Analysis
Marketing Management: Group Course Work Page 7
Opportunities
Go green: reduction of carbon footprint and water use.
Programs against wastewater and a sustainable use of resources.
The huge demand for low priced product: consumers are more likely to purchase from low
priced shops especially cause of the current financial crisis.
Online ideas: to maintain order in stores, make easy to current customers the possibility to
be updated without being oblige to move.
Social responsibility: IKEA’s goals include a charity programs to support underprivileged
and people with special needs all over the word
Communication: being open with suppliers, customers and co-workers in order to build a
sustainable trust.
Long term partnerships: with suppliers by selling a huge volume of products over the years,
it benefits suppliers who get guaranteed orders.
Economies of scales: buying a huge mass at cheaper unit cost.
Lower carbon footprint: reducing transport cost by sourcing materials from suppliers directly to IKEA stores.
Threats
Competitors: are proposing low priced product: IKEA is obliged to reinforce its qualities and
maintain its green and charity projects to differentiate itself from the others
The financial crisis: is slowing down the consumer budget.
The consumer behavior: IKEA have to know how to attract new customers and retain old
ones. Social responsibility: IKEA’s goals include a charity programs to support
underprivileged and people with special needs all over the word
Communication: being open with suppliers, customers and co-workers in order to build a
sustainable trust.
Long term partnerships: with suppliers by selling a huge volume of products over the years,
it benefits suppliers who get guaranteed orders.
Economies of scales: buying a huge mass at cheaper unit cost.
Lower carbon footprint: reducing transport cost by sourcing materials from suppliers directly to IKEA stores.
Marketing Management: Group Course Work Page 8
Strengths
Strong brand: clear, promise the same quality services in stores and products all over the world
Low priced products: a good price/quality ratio which is the customer mean research.
Well designed products: a wide range offered to suit all ages and every lifestyle.
Functional: modular product, easy to use and to transport.
Increased use of renewable and recyclable materials.
Reduction of the amount of the raw materials by the use of new technologies.
Long term partnerships: with suppliers by selling a huge volume of products over the years, it
benefits suppliers who get orders.
Economies of scales: buying a huge mass at cheaper unit cost.
Lower carbon footprint: reducing transport cost by sourcing materials from suppliers directly to IKEA stores.
Weaknesses
Image: the consumer view is affected by the work conditions in some countries where the
legislation, legal work policies and human rights aren’t respected.
Product low cost: the financial crisis and Swedish kronor force may alter IKEAs project for a
good price/quality products, IKEA need to balance this in order to be different from
competitors.
Communication: IKEA need to keep updated its publication about its environmental activities
and its charity project which push people to purchase from its stores rather than others who get
a guaranteed order.
Economies of scales: buying a huge mass at cheaper unit cost.
Lower carbon footprint: reducing transport cost by sourcing materials from suppliers directly to IKEA stores.
the same basics are comprehended in the TOWS analysis, the manager study at first the external
factors which are the opportunities and threats to minimize, this study is translated in actions
planed to make the company progress. Strengths and weaknesses are studied at the end.
OPPPORTUNITIES THREATS
STRENGH
WEAKNESS
Figure 3: Author
SO: the attack strategy which is translated by using the strengths in order to take profit from the
advantages
WO: minimise weaknesses by taking advantage of the opportunities which is the attack strategy
by building the strengths
WT: avoid threats by minimising the weaknesses which is a defensive strategy
ST: avoid threats by using strengths whish is a defensive strategy
IKEA is a well recognized brand established over the word that have many opportunities to take
advantage of them and create marketing strategies to improve its weaknesses defend threats.
Its pricing targets is essentially customers with a low spending force, they have to keep its prices
as low as possible. especially, its a huge company that enjoy very well the economy of scale that
allow them to introduce to the market a low priced products which help to keep customers
loyalty and create a bigger difficulties to the small companies to enter the market. They can as
well help its customers online with ideas for their interior decoration and also provide them with
online assistance to reduce their impact on the environment and save their money.
Marketing Management: Group Course Work Page 9
SOSO STST
WOWO WTWT
4.0 Question 3
4.1 How IKEA reduce carbon footprint?
IKEA is a reputed organization in the market for its high quality furniture. IKEA’s concern for
people and the environment can be seen from its day-to-day activities.
IKEA is an environment friendly organization. IKEA’s better use of raw materials and energy
has made the company to use fewer resources as possible without wasting it. When using
resources for their production IKEA follow a procedure where they try to reduce and reuse
resources in production and also recycle their waste to use it as a raw material.
REDUCE
RECYCLE REUSE
Figure 4: Author
IKEA is based on some core principles toward the environment. They are;
How IKEA use renewable energy
How to protect natural resources
How to treat the people in and around the company
How to help customers live a more sustainable life
Marketing Management: Group Course Work Page 10
From its core principals we can see
that IKEA has given a huge
important to its environment and for
its safety. IKEA light up their
building using LED bulbs which
uses 85% less energy than old
incandescent bulbs. These lights
can
last for around 20 years. They use
led lights in their products too.
IKEA’s delivery trucks are at
least 60 to 70 percent full, and
replace 1.2 million light
sources in stores with LEDs,
following from IKEA
announcement earlier in
2012m, it would sell only LED
lights in store from 2016.This will give a chance for their customers to involve in their
environment friendly approach (Guardian, 2012).
In 2008 the total emission of CO2 has increased from its operations, however when we look at its
total emission of CO2 in 2005 we can see a positive improvement.
Figure 5: IKEA sustainability report, 2008
IKEA has a concern for its environment. We can see that through their products. ‘’NORDEEN’’
tables and ‘’OGLA’’ chairs are a very good examples of how IKEA produce environment
friendly by using resources more efficiently. Less use of water, zero waste for landfill is even
some methods where they follow an environment friendly method to reduce carbon foot print.
Being a responsible organization in the market it’s a responsibility of the furniture giant to
educate or to inform their customers about its contribution towards saving the environment.
Marketing Management: Group Course Work Page 11
IKEA’s online help and guides for its customers to help reduce the impact on environment from
its products has developed rapidly with a great result, this has resulted their sales as now
customers prefer greener products rather than products that destroy our mother nature.
IKEA has been in so many projects which help them to reduce their carbon footprint, the great
example for that would be Green Gas Protocol by road testing a new global framework for
measuring Greenhouse gas emission. IKEA is planning to reduce its carbon footprint in every
possible way, A pilot programme which is in place helps the organization to reduce its carbon
footprint by 30% or more by 2011 (environment leader, 2010). China is a very good example,
which has already reduced their carbon footprint by 40%.
IKEA has reduced its CO2 emission by 5% and CO2 emission from good transport by 10% in
2009 (environment leader, 2010). IKEA’s store in Dublin plays a huge role in reducing carbon
emission as they provide free home delivery to all the orders done from their store, as there in no
public transport to get in to the store and people have to come from their own vehicle, which
might end up in a huge emission of CO2 to the air (The Irish Independent, 2007). IKEA is
looking for any possibility to move towards a more regional rather than global production. This
might lead the business to shorter lead times, low transportation costs, less exposure to currency
fluctuations and less incremental economic of scale advantage. Relocating the production closer
to the sales market would allow the company to reduce its impact on the environment. The
following figure shows the impact on climate from IKEA’s transport.
Figure 6: IKEA
sustainability
report, 2008
Another great
success from
IKEA is that it
has moved from
regular power
source to solar
power. Eight
Marketing Management: Group Course Work Page 12
stores in California are currently using solar panels to light up their building and it has reduced
their use of power by 66% in 2010(Kim, 2010). According to Steve Howard, chief sustainability
officer at IKEA Group, IKEA is set to invest €1.5bn in solar and wind energy projects through to
2015, in order to help the company to meet its new targets (Guardian, 2012).
IKEA is an example for other companies in the market. Mark Kenber, chief executive of The
Climate Group, promote other companies to follow the lead.
"To accelerate the scale up of clean energy and move to a low carbon economy we need
businesses to take decisive and proactive leadership that translates into transformative change,"
he said. "We urge other businesses to follow IKEA's lead and place sustainability at the heart of
business planning’’ (Guardian, 2012).
IKEA has a solution for every problem it faces. We mentioned that it uses solar power to light up
their buildings, but it’s not possible to use solar panels in every country. So do they have a
solution for that? Yes they do
They also invest in wind turbines in countries where the sun doesn’t shine so much. Today,
more than half of the energy used in IKEA buildings comes from renewable sources. Its goal is
100% renewable energy. The company’s focus to use alternative energy has achieved them to
use energy sources for heating such as ground source heat pumps, air heat pumps, biomass
boilers and is progressing on its alternative fuel project for transport their goods to stores and for
customers.
Marketing Management: Group Course Work Page 13
5.0 Question 4
5.1 Social Responsibility
Accountability
Accountability as explained by Milton Friedman, is to increase profit(Friedman.M, 1970).The
accountability will help the company itself to make proper decision with reference to the past
years performance, and this will help shareholders to understand the day to day running of the
company!
Ethical behavior
According to business dictionary the ethical behavior is "acting in ways with what society and
individuals typically think are good values, it tend to be good for business and involves
demonstrating respect for key moral principles that include equality, dignity, diversity and so
on."(Business Dictionary.2013) IKEA is known to be concerned about the children right, that is
not to use children labor, but for internal IKEA helped in following the forest standardship
council and also a good partner to UNICEF (Arrigo.E, 2005) IKEA tried to conduct business by
providing low or considerable prices for their customers. (IKEA, 2005)
Human rights
Human rights are rights inherent to all human beings; it can be as the natural rights or as legal
rights. (Wikipedia, 2013. United Nations Human Rights, 2013)
The IKEA eliminated PVC from its product because it posed a potential threat to human health,
also they don’t use the children labor. The company protects the natural rights and legal rights to
the customer. (Perderse.E.R,Andesem.M, 2006) Thus the society has got the human right to be
safe with the products they purchase or use.
Marketing Management: Group Course Work Page 14
Respect for stakeholders
Respect for stakeholders interest opinions and influence is very essential when running a
company, “stakeholders are those who may be affected by or have an effect on an effort of a
company” (Rabinowitz.P.2013).
In 1981, the aim of the public company in Denmark about high levels of formaldehyde in
particleboards, they were sued and lost 20% of the Danish market. This was done by the aid of
the stakeholders influence. (Marlon.E.J.M, 2006)
Respect for internal norms and principles
According to the Mitsubishi corporation code of conduct (Mitsubishi Corporation.2013) “All
officer and employees must comply with all applicable laws, rules and regulations they operate”
when employees abide the norms of the company it helps them to work in a way that portrays a
positive image to the environment.
Transparency
Transparency in business is openness, communication and being accountable to the parties
involved, transparency is the gallantness of running a company for other to see what is going on
in the company. For example, it is required by law to publish their accounts at the end of every
financial year (Wikipedia, 2013)
Environment:
IKEA engages in the production of eco-friendly or eco-saving of products. Also with the help of
local recycles, IKEA takes the initiative of recycling of furniture ( IKEA,2009).
IKEA also takes into considering the materials for its products. About 80% of IKEA’s supplier
from Easter Europe and South Asia practice low environmental practices and IKEA educates its
suppliers about the Western Europe environmental regulations and advice on “Suitable technical
solutions to reduce bad environment impact (Marlon.E.J.M, 2006).
Marketing Management: Group Course Work Page 15
6.0 References
Environmental leader, 2010 [online] available at: http://www.environmentleader.com/2010/05/19ikea-reduces-co2-emissions-by-5.html [Accessed 17 march 2013]
Guardian, 2012 [online] available at: http://www.guardian.co.uk/environment/2012/oct/23/ikea-clean-energy [Accessed 19 march 2013]
IKEA sustainability report, 2008 [online] available at: http://www.unglobalcompact.org/system/attachments/1292/original/COP.pdf [Accessed 19 march 2013]
Irish Independent, 2007 [online] available at: <http://www.independent.ie/irish-news/ikea-set-to-subsidise-homedelivery-service-26271873.html> [Accessed 17 march 2013]
Kim, E, 2010, IKEA goes Green with solar panels, Dayton business journal, [online] available at: http://www.bizjournals.com/dayton/stories/2010/10/11/daily29.html [Accessed 17 march 2013]
riedman.M.1970. ‘The Social Responsibility of Business is to Increase its Profits.’ The New York Times Magazine, [online] available at:
http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html
Business Dictionary.2013. ‘Ethical behavior’, [online] available at:
http://www.businessdictionary.com/definition/ethical-behavior.html
Arigo.E.2005. ‘Corporate Responsibility and Hypercompetition. , The IKEA Case’. SYMPHONYA Emerging Issues in Management. ISTEI - University of Milan-Bicocca. p37-57
Wikipedia,2013. ‘Human rights’, [online] available at:http://en.wikipedia.org/wiki/Human_rights
United Nations Human Rights,2013. ‘What are human rights’, [online] available at:
http://www.ohchr.org/en/issues/Pages/WhatareHumanRights.aspx)
Marketing Management: Group Course Work Page 16
Pedersen. E.R, Andesen.M. 2006. ‘Safeguarding corporate social responsibility (CSR) in global supply chains: how codes of conduct are managed in buyer-supplier relationships’. Journal of Public Affairs. WUey InterScience Vol.6 PP.228-240
Rabinowitz.P.2013. ‘Identifying and Analyzing Stakeholders and Their Interests’.The Community Tool Box, [online] available at:
http://ctb.ku.edu/en/tablecontents/chapter7_section8_main.aspx
Marlon.E.J.M, (2006). ‘Juggling with three balls: An exploratory study on how IKEA,Philips, and Unilever implement and communicate corporate social responsibility’
Mitsubishi Corporation.2013. ‘Mitsubishi Corporation Conduct of Conduct’, [online] available at: http://www.mitsubishicorp.com/jp/en/about/philosophy/code.html
Wikipedia,2013.‘Transparency(behavior)’ , [online] available at: http://en.wikipedia.org/wiki/Transparency_%28behavior%29
Marketing Management: Group Course Work Page 17
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