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Table of Contents
Executive summary............................................................................................... 3
Introduction........................................................................................................... 4
Company overview................................................................................................ 4
Strategic business concept.................................................................................... 5
Business Environment Overview............................................................................6
PESTEL of IKEA....................................................................................................... 6
Porters five forces.............................................................................................. 7
SWOT analysis of IKEA........................................................................................ 8
Product Overview................................................................................................... 9
Marketing information requirement.......................................................................9
Segmentation strategy........................................................................................ 10
Global Market entry strategy............................................................................... 10
Global marketing mix strategy............................................................................ 11
Conclusion........................................................................................................... 11
References........................................................................................................... 12

Executive summary
The report provides case study on global marketing by examining the market
entry considered for IKEA garden furniture. The aim of the report is to investigate
the considerations in global marketing i.e. target market, segmentation criteria,

pg. 2

branding strategy, pricing considerations, new market entry considerations etc.

in depth to analyze the marketing strategy of IKEA in the global markets. By
considering garden furniture which do have a wider market appeal across the
countries but may change in shapes and pricing is helpful in this regard to study
the global marketing concepts. The report discusses on the existing market
condition of the furniture industry for better understanding of the furniture
business and these are evaluated for effective global marketing of IKEAs new
garden furniture products.

Introduction
The report provides case study on global marketing by examining the market
entry considered for IKEA garden furniture. The aim of the report is to investigate
the considerations in global marketing i.e. target market, segmentation criteria,
branding strategy, pricing considerations, new market entry considerations etc.

pg. 3

in depth to analyze the marketing strategy of IKEA in the global markets. By

considering a particular product line i.e. garden furniture which do have a wider
market appeal across the countries but may change in shapes and pricing is
helpful in this regard to study the global marketing concepts. The report provides
a brief description on the company and its products and services, then move on
to the segmentation and target market positioning analysis. The particular issues
such as the market entry strategy, branding consideration, pricing criteria etc.
are also identified for the global market entry. Along this the over4view of the
environment where the company operates is also identified which is analyzed
through the use of PESTEL, Porters five forces and the SWOT analysis (Reading,
2004). Finally the consideration for the new product line which is the IKEA garden
furniture line is introduced and appropriate marketing mix strategy has been
proposed to effectively launch this in the proposed market segments. While
analyzing this the overall approach for the market entry would be evaluated for
assessment of the success of the strategic marketing purpose.

Company overview
IKEA is a well-known brand in home furnishing and concentrates on the furniture
retailing market. The company operates on global scale in Europe, Middle East,
Caribbean, North America, and Asia pacific and aims to cater for affordable
solutions for better living of its customers. The company started its business
from Sweden in 1943 and expanded its business to over 37 countries with
competitive pricing and innovative design solutions customized for local markets
(IKEA, 2014a). Right now the company has 361 stores worldwide operated on
franchise basis. With 164,000 employees and global sales of 30.1 billion euro the
company is estimated to be a consumer of approximately 1% of woods every
year (Marketsize, 2014). The innovative design and the variety of furniture made
by the company puts the company in a unique competitive position as a leading
furniture manufacturing and marketing company in the world.

The product lines of the company includes all types of home furnishing that
distinguishes itself in terms kitchen furniture, office furniture, bedroom furniture,
living room furniture, childrens furniture etc. the outdoor furniture consists of
wide range of furniture including party furniture, garden furniture, urban living
furniture etc. (IKEA, 2014d) The company sales through its stores as well as
through online which has been experiencing a boom over the last few years,
currently the annual visits to the companys stores is around 821 million which is
lower than the web site visit of 1.6 billion, almost double thanks to the
convenience of online buying and delivery facilities (IKEA Factsheet, 2014). The
following figure highlights the growth of online presence and marketing channel
contribution for the company over the last four years from 2010 to 2013.

pg. 4

Visits to IKEA (in Millions)

1350
1060
699
700

900
734

776

775

2010

2011

2012

2013

store visit

web visit

Figure 1: Visits to IKEA

Strategic business concept

The company aims to do business by providing better designed products to all
groups of customers at a reasonable prices which should be value oriented as
should be innovative (Fleisher, 2008). The business model of the company
emphasizes on a concept called demographic design which is a combination of
function, form, sustainability and quality that is considered attractive for every
groups of customers. The company also has value proposition which are three
folded (IKEA, 2014b):

Delivering good quality products at an economically value based price

Considering sustainability of the environment and the people surrounding
it while collecting wood resources
Empowering the employees through training and self-motivating programs
for future leadership

quality
at low
price

people
and
planet
consciou
s

employe
es
growth

growth
areas for
IKEA

Figure 2: Value Proposition of IKEA

The company is operated under a trust which finances the business capital. This
makes the organization privately operated and being less conscious for short
term profits for the owners of the company rather concentrate on the long term
profitability of the products and services provided to the target customers and
thereby increasing the market position of the business effectively. The franchises

pg. 5

operated worldwide follow the companys standard manufacturing procedures

and operate by enhanced customization to enable environmental adoptability
and meet the expectations of customers of different groups. As a consequence
the company has been able to sustain in the competitive environment of local
and international market place. International competitors of IKEA include Herman
Miller Corp., Masco Corp., Searss holdings Corp., Knoll Inc., Haworth Inc.,
Steelcase Inc., Kimball International, HNI Corp., KOKUYO Furniture Co. Ltd., and
Ashley Furniture Industries Ltd. etc. (Cloud-computing, 2014).

Business Environment Overview

The business environment of IKEA consists of its internal and external forces that
combine to shape the business strategy for the company (Kew and Stredwick,
2005). These can be evaluated by using some well-established tools such as the
PESTEL, porters five forces and SWOT analysis. These are discussed in this
section.

PESTEL of IKEA
The external environment can be effectively analyzed with the help of PESTEL
analysis. This is a combination of the political, economic and other important
factors which can have significant impact on the business environment (PESTLE
Analysis, 2014). These are pointed out in the following:
Political and legal environment: the political and legal environmental
variables affecting the company and furniture business include the limitation in
entering any particular country or region, the regulations confining the wood
consuming companies with forced plantation, the willingness of the government
to impose tax or charge levy on the imported furniture products. The market
control in the European region is also a concern from legal perspective as market
monopoly is highly discouraged in the European continent (Bifma, 2014). The
restriction in franchising and limitation on the foreign direct investment is
another concern for the companies like IKEA in the emerging markets (IKEA,
2014c).

Economic environment: this environment consists of the opportunity cost

consideration for wood resources and replenishment of it for future
manufacturing. The pricing of the wooden furniture is another key issue as wood
is not a cheap material whereas the substitutes like plastic, particles, steel and
other forms of processed material are available with comparatively cheaper
price. The concern for the willingness of the government to impose tax or charge
levy on the imported furniture products can also increase the prices of the
wooden furniture. The market control in the European region is also a concern
from legal perspective as market monopoly is highly discouraged in the
European continent. The restriction in franchising and limitation on the foreign
direct investment is another concern for the companies like IKEA in the emerging
markets (Franchisor, 2014).

pg. 6

Social environment: this environment may also affect the business of the
company as the innovativeness in the product design and the adaptation to the
local market cultures and customs may significantly affect the product types to
be considered attractive by the customers. The trends on newer forms with
fashionable look and selection of sustainable materials are also important for the
business of furniture manufactures.
Technological environment: this is important for the manufacturing process
from designing to marketing in all steps. The graphical image of the furniture in
the product development phase is as vital as it is for the customers to visualize
this before they bring those at home. The online marketing with increased access
is another element of the business process which requires higher investment in
the technology part by the businesses.

Environment: this element is vital for the furniture business as this is one of the
key areas which causes the ethical use of the resources acquired from the nature
and may lead to customers concern in purchasing the goods. Considering
sustainability of the environment and the people surrounding it while collecting
wood resources is critical for the furniture business. The commitment for
adopting to renewable resources is very important and relying to organic
resources is another area which demands higher focus to position the branding in
effect for the companies (Furniture, 2014).

Porters five forces

The industry analysis is important to understand the profitability of the furniture
industry and how businesses like IKEA can benefit from the existing market
interaction between the five forces of the industry (Porters Five Forces, 2014).
These are described in the following:

Suppliers
bargaining power
low

Buyers
bargaining power
medium

New entrants
threat high

Substitutes threat
low
Existing
Rivalry of
companies
Medium

Figure 3: Porter's Model for Furniture Industry

pg. 7

Threat of new entry: the furniture is very vast with over $500 billion gross as
of 2013 with a cumulative growth of 3.8% since 2009 (Datamonitor, 2014). This
has made the global furniture market very lucrative as local companies can
easily operate along with global brands and foreign designs. As such the capital
investment requirement in the furniture business varies from small to medium to
large capital investment and smaller companies can fit in the gaps easily. This is
why the furniture market has very high risk of new market entrants.

Threat of substitutes: although people can live without furniture, there are
less intention of doing such thing. The furniture consumption is considered to be
universal and the level of luxury varies from economic class to class (Furniture,
2014). Thus this variable is very low from the furniture industry. Although the
market may not suffer from outside there is high risk of internal competition in
terms of materials uses as wooden furniture has substitutes of plastic furniture or
metal furniture or leather furniture etc.
Bargaining power of suppliers: the suppliers of the furniture market do not
possess any significant power to cause any serious damage to the industry
balance and affect the profitability. Normally furniture can be made of a lot of
alternatives which makes any particular resources suppliers weak compared to
the overall furniture manufacturing companies.
Bargaining power of buyers: the buyers of the furniture market are
individuals as well as corporations and even the government spending in public
interest projects. Thus the demands and expectations of the customers vary from
one group to another making it very difficult to cater for all groups of customers
at the same time by most of the companies. The customers have decent
bargaining power with regard to the choice and selection of furniture and can opt
for different products of different materials. On the other hand the customers
should find affordable furniture from the available products as there are less
substitutes apart from other companies. Thus the bargaining power of the
customers are considered to be medium.
Intra-industry rivalry: the competition of the existing companies within the
industry is a major factor for the industry and should be emphasized as this leads
to the competitive advantage of the individual companies and businesses for the
furniture makers. The size of the market and competitive nature makes the intraindustry rivalry to be of medium threat for the profitability of the companies.

SWOT analysis of IKEA

The internal capabilities and weak points of IKEA is important to understand so
that the global marketing strategy can be effectively discussed. This is proved in
the following:
Strength: the company operates on global scale in Europe, Middle East,
Caribbean, North America, and Asia pacific and aims to cater for affordable
solutions for better living of its customers. The company started its business

pg. 8

from Sweden in 1943 and expanded its business to over 37 countries with
competitive pricing and innovative design solutions customized for local markets.
Right now the company has 361 stores worldwide operated on franchise basis.
With 164,000 employees and global sales of 30.1 billion euro (IKEA, 2014d).
Weakness: the company does not operate in the luxury market which has
higher markup per sales unit and considered a lucrative market niche. The
company is not available in the most of the emerging markets across Asia where
the economic pricing is considered a key marketing strategy.
Opportunity: the company should be focusing on the global markets at highly
concentrated target market areas especially in the USA which is the largest
market for furniture. The company can focus on the increased use of organic
materials and reduce its dependency on the wooden materials.
Threat: the company faces increased threat from the local and global
competitors and the concentration of products from physical stores may also
become obsolete due to the rise of online furniture selling businesses. The
restriction in wood resource consumption may be considered as a threat too in
this regard.

Product Overview
Based on the evaluation of the furniture markets environment and IKEAs
position within the industry the product development process can be considered.
As mentioned in the introduction the new product line considered for IKEAs
international markets business is the IKEA garden furniture. This line of products
are sophisticated and require comfort and innovativeness both at the same time.
This product line has been marketed under the outdoor furniture segment by the
company earlier, however, the new segmentation under the garden furniture
segment is strategic to highlight the positioning of the furniture in a particular
area. By encouraging and focusing on a particular area should be an advantage
for the company as it will be able to redesign its existing products to serve the
purpose of the outdoor purpose and specifically concentrate on the furniture
which are explicitly used in the gardens by the people namely chairs and
relaxing seats, dining tables to wine catering furniture, game playing tables to
folding sleeping beds etc.

The demand for garden furniture has a decent market appeal and with lower
pricing of the goods and convenience of setting the furniture will enable more
customers to adopt to the IKEA furniture as the company has very good market
reputation in this regard. The pricing of the furniture should be well below the
luxury furniture range which should be distinguishing for the garden furniture
product range as it is not considered as a basic furniture segment but is
necessary for the well living considerations for the decent people who care for
spare time in the gardens or amusement parks with family and friends. Besides
the new product line should be a combination of the hybrid combination of
organic materials like multi-fiber and clothing reducing the dependency of the
wood materials.

pg. 9

Marketing information requirement

The required marketing information regarding the industry and the companys
capabilities and strategic position within the market is already overviewed in the
environmental analysis. This provides the platform for analyzing the viability of
the new product line to be launched by IKEA for the garden specific locations.
The other necessary marketing information with regard to the individual markets
include the following points which are important for the development process:

The cultural differences in the garden product consumption makes the

different countries slightly different in the selection of product uses. While
the European and American markets are well established for the garden
furniture lines, the demand and expectation for the garden furniture is not
much established in the Asian markets. Again the countries like China and
japan has cultural background of nurturing gardens along their homes
which is kind of a supplement for the American markets that spend less
time in the gardens.
The selection of material is also important in the global markets. The
preference for wood is expected from the American market while European
market appreciates more organic sourcing and less wood consumption due
to environment friendly concern. On the other hand the Asian markets are
more inclined to non-wood materials which are cheaper than the wooden
furniture. Thus the materials are also important.
The branding of the products in the global markets may also vary as the
developed countries prefer established brands as a symbol of quality
whereas the emerging markets consider the global brands as an indicator
of higher price compared to the local furniture manufacturers.
The pricing may also vary based on the currency conversion if the
products are shipped from Europe which has higher value for currency
compared to emerging markets and may be unproductive for profitability
of the new product line.

Segmentation strategy
The particular product line of garden furniture should follow an intended market
segment and its target customers while concentrating on a particular market
positioning according to the needs. These are described in this section.

Segmentation: the expected market segment for the garden furniture is the
high-end and medium budget people across the world who have usual spaces for
the gardening and prefer to spend time in there as part of the family gathering
and vacation time. These types of people are available in all the countries where
IKEA operates and can be marketed with ease.

Target market: based on the available market information the appropriate

target market segment for the garden furniture range should include the
following segments of the market:

pg. 10

American and European customers from developed markets

High end customers in the Asian markets

The reason for high end customers in the global market segmentation is that low
end customers would not be interested in considering this specialized products
as much as considered by the high end customers. On the other hand the
Americana and European customers generally have the tendency to consume for
products outside their living room.

Market positioning: the intended positioning for the garden furniture is that
the customers have specialized products with customized cultural focus for the
extra comfort they want while spending time with family and friends. This will be
positioned as an affordable product line which caters for budget friendly pricing
and convenient for moving along the garden spaces.

Global Market entry strategy

The IKEA international group operates on a franchise basis which is effective for
the group to focus on the local demands by customizing the products made at
different countries. This type of market entry should not be considered for the
garden furniture product line as it is a specialized product line. Rather direct
exporting the products to the existing franchises for distribution purpose will be
effective market entry strategy for the garden furniture and it will enable the
company to maintain its core features of garden furniture type and at the same
time focus on the high end customer groups who are affordable in that part.

Global marketing mix strategy

The marketing mix strategy at the global scale requires the unification of
individual strategies so that each of the market sub-segments can benefit from
the total planning. The following strategies regarding the marketing mix
elements are highlighted to provide such insight.

Product strategy: The demand for garden furniture has a decent market
appeal and with lower pricing of the goods and convenience of setting the
furniture will enable more customers to adopt to the IKEA furniture as the
company has very good market reputation in this regard. This furniture product
line should not be considered as a basic furniture segment but is necessary for
the well living considerations for the decent people who care for spare time in
the gardens or amusement parks with family and friends. Besides the new
product line should be a combination of the hybrid combination of organic
materials like multi-fiber and clothing reducing the dependency of the wood
materials.

pg. 11

Pricing strategy: as the products are to be marketed in the high end customers
the pricing need not be highly competitive rather the quality and innovative
features should be distinguishing for this types of products. The pricing would be
mainly based on comparative basis as it should be concentrated on the similar
product supplying companies products so that the market comparison is
maintained. The pricing of the furniture should be well below the luxury furniture
range which should be distinguishing for the garden furniture product range

Promotional strategy: the promotional strategy should follow a distinctive

branding of the products to be as comfortable yet unique, distinctive yet within
budget basis. The branding should highlight the specialized product consumption
benefits for the intended customers.

Placement strategy: although the products would be manufactured in the UK

factories, those would be shipped to the American and European markets and sol
through the existing stores available in Europe and USA. This will make sure that
this product line do not miss the leverage of existing customers but at the same
time enjoy a separate branding and sophisticated market niche in the high end
line of existing customer base. Products shall also be sold through online
platform.

Conclusion
The effectiveness of the new garden furniture line of products depend on the
success of the IKEAs existing brand value as well as on the loyal customers in
the selected markets. By highlighting on the selected market segment this is
possible and the garden furniture line should make a considerably effective
product line with better profit margin than other product segments.

References
1. Bifma, 2014. Historical industry growth data for furniture [online] available
at <https://www.bifma.org/?page=HistoricalData> [December 11, 2014]
2. Cloud Computing, 2014. Global Furniture Market Analysis by Size, Share,
Trends and Forecast to 2020 [online] available at <http://cloudcomputing.tmcnet.com/news/2014/10/30/8094957.htm> [December 11,
2014]
3. Data Monitor, 2014. Furniture floor coverings: global industry guide
[online] available at
<http://www.datamonitor.com/store/Product/furniture_floor_coverings_glob
al_industry_guide?productid=ML00016-155> [December 11, 2014]

pg. 12

4. Fleisher, C. S. 2008. Business and Competitive Analysis: Effective

Application of New and Classic Methods. New Delhi: Pearson Education
India (Pvt.) Ltd.
5. Franchisor, 2014. IKEA retailing facts and figures [online] available at
<http://franchisor.ikea.com/Whoweare/Pages/IKEA-retailing-facts-andfigures.aspx> [December 11, 2014]
6. Furniture, 2014. IKEA Furniture review [online] available at
<http://furniture.about.com/od/buyingfurniture/fr/Ikea-FurnitureReview.htm> [December 11, 2014]
7. IKEA, 2014a. About IKEA [online] available at <http://www.ikea.com>
[December 11, 2014]
8. IKEA, 2014b. Outdoor furniture of IKEA [online] available at
<http://www.ikea.com/aa/en/catalog/categories/departments/outdoor/>
[December 11, 2014]
9. IKEA, 2014c. Vision and Business idea of IKEA [online] available at
<http://www.ikea.com/ms/en_AA/this-is-ikea/about-the-ikeagroup/index.html> [December 11, 2014]
10.IKEA, 2014d. Democratic design of IKEA [online] available at
<http://www.ikea.com/ms/en_AA/this-is-ikea/democraticdesign/index.html> [December 11, 2014]
11.Kew, J. and Stredwick, J. 2005. Business Environment: Managing in a
Strategic Context. CIPD Publishing
12.Marketsize, 2014. Furniture market blog [online] available at <
http://www.marketsize.com/blog/index.php/category/furniture/>
[December 11, 2014]
13.PESTLE Analysis, 2014. All you Need to Know About Strategic Management
[online] http://www.strategicmanagementinsight.com/tools/pest-pestelanalysis.html available at [December 11, 2014]
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pg. 13