Ikea

IKEA: Furniture for the Masses: Strategies for the Future

IKEA and H&M:

IKEA and H&M are taking similar approaches to two different markets. IKEA sells relatively inexpensive, trendy furniture. H&M specializes in inexpensive designer knockoff clothing. Both companies market their products to young, hip consumers who want a fun shopping experience that won’t leave them broke. The first similarity between the two companies is their approaches to opening a store. It’s all about hype, hype, and more hype. IKEA’s Atlanta opening inspired potential customers to camp out for nearly a week (Capell, 2005) in hopes of getting their hands on $4,000 in gift certificates.  H&M promoted its L.A. opening for months beforehand. According to the L.A. Times article, H&M, “ran a multimillion-dollar advertising campaign featuring Madonna and, in early August, splashed her image across the west face of Hollywood’s Roosevelt Hotel.”

Once the customers are in the store, both IKEA and H;M use the layout of the stores to keep the customers interested. IKEA is set up in a circular design, where customers can browse from the starting point, walk around, and end up back where they started. While they’re shopping, they will find furniture set up in rooms that one might be tempted to move into – they’re that realistic. H;M sets up its clothing by color.

The two stores have something else in common, and it’s not necessarily a plus – offering customers lower prices comes at a price. For IKEA, it means that all furniture is sold in a flat box which the customer will take home, open, and from which they will extract parts to assemble. Two years ago, an episode of CBS’s “The Amazing Race” featured a challenge in which contestants had to choose between two tasks: counting items or assembling an IKEA computer desk. Those who chose to assemble the computer desk did not find it to be an easy task – regardless of their construction or assembly experience. Many were confused by the directions and the explanation of the different parts. The benefit to customers is that IKEA is dedicated to cutting costs in order to pass those savings down to the consumer.  “’We look at the competition, take their price, and then slash it in half,’ says Mark McCaslin, manager of Ikea Long Island, in Hicksville, N.Y.” (Caswell, 2005). As for H;M, they face the same limitations as other stores of its ilk, such as Forever 21 and Bebe: the clothes are trendy, but aren’t meant to last a lifetime. With styles barely surviving a few months, the clothes don’t have to last any longer than the current trend.

Low prices don’t always lend themselves to huge profits, which is why customers need to buy in bulk. At IKEA, furniture is displayed in intricately-designed rooms, which encourage customers not only to buy the bed, but the sheets, the comforter, pillows, and dresser. Customers come in looking for one item and leave with a carload. At H;M, many items don’t last long. Lagerfeld’s limited editions will fly off of the shelves based on the name brand rather than the item’s potential to fit into the customer’s wardrobe or lifestyle.

IKEA and Hofstede

    IKEA’s approach to store management is much like a carnival. Shoppers are expected to be able to come into the store and have fun. Wide aisles mean easier browsing, and the circular design allows customers to stop without holding up traffic. Hofstede’s five dimensions of management can be applied to IKEA’s management style:

1. Power Distance: This involves the degree of inequality among a population. IKEA deals with this distance by positioning its products so that the lower middle classes can afford them, and the upper classes will want them because they’re trendy.
2. Individualism: This is the degree to which people prefer to act as individuals rather than members of groups. IKEA’s customers feel as if they’re getting one-of-a kind items, and occasionally, they are. According to Caswell, “IKEA replaces one third of its product line every year.” For those consumers who enjoy being part of a group, they’re members of a large, worldwide group – IKEA shoppers.
3. Masculinity/Femininity: IKEA’s products are androgynous. The same item that will find its way into a bachelor pad might also appear in a family home or a woman’s place.
4. Uncertainty Avoidance: This is the degree to which people prefer structured to unstructured situations. The beauty of IKEA is that it offers both. Structure comes in the design of the store and the setup. The unstructured part is due to the turnover in available products.
5. Long/Short Term Orientation: This involves whether IKEA is geared towards those who are thinking long-term (saving money, getting good value in their purchases) or short-term (fulfilling social obligations). In this respect, IKEA doesn’t have much to offer. Furniture isn’t going to be a long-term prospect because it isn’t designed to last that long. Consumers meet their own needs with their purchases, not that of anyone else.

IKEA and Porter:

Michael Porter’s article, “Competitiveness in a Globalised World…,” deals with the research about how companies compete globally. Porter enjoys using the term “competitiveness”, but doesn’t enjoy defining it for the business layman, so IKEA will be analyzed using other aspects of Porter’s article. He discusses the idea of clusters, wherein firms are interconnected. IKEA practices clustering first through their Klippan brand of furniture, which is sold at their stores. This brand is much sturdier and designed to be “kidproof”. IKEA has also begun offering prefabricated homes in which to put all the new IKEA furniture.

Porter mentions the U.S. as a global power. For that reason, IKEA entered the United States market in the mid-1990’s. Its first attempt to enter and compete in the U.S. was a disaster, an anathema in a country where most of its products are imported. The problem was that of poor research. Stores were placed in poor areas and items were significantly overpriced for that particular market. One such store was located in a city called Fontana, California (IKEA website). The steelworkers of Fontana and immigrants of the surrounding areas did not take well to the expensive, brightly-colored furniture. As IKEA found out in 2004, Hipics require larger dining room tables with more chairs, as well as larger sofas. Eventually, IKEA redesigned its products to be compatible with every country in which they intended to compete.

In conclusion, IKEA’s various marketing strategies and company norms have led to its position as a leader of trendy, inexpensive furniture. Its plans to have such well known individuals such as Martha Stewart lend their names to its products will only ensure its success, as Stewart did for Kmart and Isaac Mizrahi did for Target. The only question left is this: what can IKEA possibly have left to accomplish?

IKEA and The Stuga:

Swedes are, by nature, a rational and logical people. Due to their nature and their belief in common sense, Swedes rarely have arguments during business transactions. The “stuga” is the Swedish summer home, and it is the dream of most Swedes to spend their summers there. The stuga, like the Swede, is simplistic and based on common sense. If it is not necessary, it is not built into the stuga.

How can one relate the stuga to IKEA?  IKEA has become the ideal store from which to purchase furniture. The furniture is basic, simple, inexpensive and relatively simple to assemble (not counting the “Amazing Race” experience, of course).  The regular turnover means that a customer can shop with the masses and decorate as an individual. The stuga is a metaphor for Swedish values in that it represents the love of tradition, individualism through self-expression.  Therefore, IKEA can also be considered a metaphor of Swedish values.

IKEA IN BRAZIL IKEA’s vision is to create a better everyday life for the many people. The 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. The IKEA product range focuses on good design and function at a low price. It offers home furnishing solutions for every room in the home. It is co-ordinated so that no matter which style you prefer our designers and product developers work hard to ensure that our products meet your day-to-day needs and eliminates the unnecessary.

This business could be successful in Brazil? Brazil is among the ten leading world economic powers. He entered a mild recession in 2009 (-0. 2%), Brazil’s economy has regained growth momentum in 2010, boosted by the revival of trade and supported by various recovery measures. Estimated at 7. 5% of GDP, the highest growth in Latin America. In recent years, Brazil has become one of the major powers of economic growth, thanks to reforms to stabilize the economy through the promotion of investment, boost and oil industry consolidation in the world with its exports.

Lula’s government brought the institutional stability and currently Brazil Dilma Rousseff, the new president, elected in October 2010, pledged to continue the policies of former President Lula. Despite the good economic performance, social issues are important. The country remains one of the most unequal, there are strong regional disparities. IKEA for Brazil represent a window to the outside, as the Brazilian consumer is very attracted to foreign products, especially if we talk about Europe.

Since the Brazilian consumer IKEA offers a wide range of practical and high quality products at low prices. The four cities chosen for introduction are: Sao Paolo, Brasilia, Salvador de Bahia and Rio de Janeiro. These cities are chosen because they are the most populated in Brazil. With this information, we will perform an analysis to see if IKEA is possible in the Brazilian market. Besides being the gateway to South America and continue the IKEA expansions.