EA: Managing Cultural Divers

Group Members: Archana kumari

Soumya
Shilpa
Pawan
Lawi Anupam
Sonal Sharma
GITAM INSTITUTE OF INTERNATIONAL BUSINESS
VISAKHAPATNAM
 INTRODUCTION
 Founded by Ingvar Kamprad in 1943

 IKEA owned by IKEA Group includes IKEA of Sweden, Swedwood, the sales companies
that operate IKEA stores, and all purchasing and supply chain functions

 IKEA Group owned by INGKA Holding BV, which is itself owned by the Stichting INGKA
FOUNDATION of the Netherlands

 Ranked 96 in Fortune's 100 Best Companies to Work For in 2006 and in October 2008

 International home products retailer that sells flat pack furniture, accessories, and bathroom
and kitchen items in their retail stores around the world.

 IKEA Business Idea is to offer a wide range of well designed, functional products at prices so
low that as many people as possible will be able to afford them

 Its vision - To create a better everyday life for the many people
 The IKEA
Wa y
• Low costs
• Long production lines
• Self-assembly at home
• Self-transport
• Convenient boxes
• Catalogues
• Remaining Swedish (design,
management)
• Modern ideals (durable, easy to live
with, natural and free style, color,
 World Map showing locations of IKEA stores in 2007. Green represents
countries with stores in operation and blue shows proposed locations.

 More than 226 IKEA stores in 33 countries with 200 stores belonging to IKEA
Group
 Rest are owned and operated by franchisees
 Currently 28 U.S. stores plans to open 50 more stores by 2010
Sales for the IKEA Group for the financial
year 2008 were up by 7 per cent to a total of
21.1 billion euros
Top five sales countries

Germany 15%, USA 10%, France 9%, UK 7% and Sweden 6%.

2006 Sales, by Region

Works with more than 1600 suppliers in more than 55 countries

Top five supplier countries

China 21%, Poland 17%, Italy 8%, Sweden 6% and Germany 6%.

2006 Supplier, by Region

 IKEA Modified Value
Chain
Michael Porter argues that an
organization can enhance its
competitive positioning by performing
key internal activities in the value
chain at a lower cost and better than
its competitors.

The value chain approach identifies

two major activities- primary and
secondary. Primary actives include
production, marketing, logistics and
after-sale functions. Secondary
activities, on the other hand, are
identified as support processes to
primary activities.
 MARKETING
4 focal areas

 Product design

 Catalogs

 Advertising

 Public relations/sales promotions

CATALOGS AND
ADVERTISING

 Company spends 70% of its annual marketing budget to print catalogs

 Catalogs produced in 38 different editions in 17 languages for 28 different

countries in 2006 and in 55 editions, in 27 languages for 36 countries
in 2009

 Also uses T.V., radio, internet and phones

 Mainly rely on word-of-mouth

 Use promotional stunts and games

 PRODUCT DESIGN
 Clean line
 Frugal styling

 Cachet and inexpensive

 Innovation in designs

A completed IKEA flat pack

bookshelf
 INNOVATIVE
 PRODUCT LINE:EXAMPLES

eNook The Mobiletech Wall Desk

Mobile Desk
Elegant design  Can fit in most rooms Weighs only 30.5 lbs.
Can hold 45 lbs and offices Strong
Space efficient  Mobile Lift top compartment
Highly functional  Scratch & stain resist
 INNOVATIVE EXAMPLES

Counselor's desk Drop Lid Desk

Elegant design Highly functional
Foldable top High quality
Two pigeon holes Work surface drop lid
Two secret pencil drawers
 INNOVATIVE EXAMPLES

a reading chair is an actual chair with cushions

that turn, like the pages in a book:

This room divider was meant to look like a stand

of trees at the edge of a forest:
 INNOVATIVE EXAMPLES


 image of a dandelion--in fact the shadows it
throws were meant to look like dandelion
petals scattered in the wind

A new invention entirely, comprised of bamboo

sheets glued together. The bowl keeps its shape,
but it's slightly floppy as well--somewhere between
wood and fabric
 INNOVATIVE EXAMPLES

enormous bowl--20 inches wide--resembles a

huge hat misplaced by some giant

Inspired by a park bench, this chair actually uses

cutting-edge fabrics and fabrication. The top is
soft and cushy, though it looks like painted
wood
 INNOVATIVE EXAMPLES

This rug draws from those designed by North African

nomads, who weave rugs to different lengths each
season, to mark how plentiful a passing harvest
has been

A 15-inch-tall pepper mill that was meant to look

like a king's scepter
 IKea’s growth and popularity

Major reasons for IKEA’s growth and popularity are :

 Democratic Design

• Offers a wide range of home furnishings of good design and

functionality
• Low cost, modular , ready –to-assemble furniture

 Overall low cost leadership in the industry

 Modified value chain

 Convenient shopping
 STRATEGY TO
SUSTAIN GROWTH
Focus on customer service

• Add more services to enhance customer ‘s experience ( eg .home

delivery)
•Implement a Customer Relationship Management system to
track current customers and communicate with them.

Focus on correct placement of stores

• Concentrate stores in metropolitan areas , where apartments are

smaller
• Concentrate stores in college areas
• Continue clever advertising to create demand.

 Clever advertising and promotion

• Your furniture says something about you. And like fashion , your
style changes.
 PUBLIC RELATIONS / SALES
PROMOTIONS
 Works to build customer relationships and maintain employee morale

 It provides its customers with pencils, paper, tape measures, store guides, catalogs, strollers
and shopping bags

 Offer delivery for bulky items and rents carracks for convenience to customers

 Stores are designed around a "one-way" layout and aisles are wide to reduce traffic in the
stores

 Offer gifts and certificates

 IKEA's furniture is designed to be assembled by the consumer

 IKEA holds “Antibureaucracy Weeks” on regular basis

 Executives work on shop floor or stockroom, operate cash registers, even load trucks and cars
for customers

 IKEA does not accept cheques – only cash and credit cards
KEY REASONS FOR
SUCCESS
 The IKEA brand is associated with simple, low cost,
stylish products.
 did not customize its products to local markets, but
kept to standardized products and operations
worldwide.
 IKEA developed a model for the business, where it was
able to keep costs low.
 IKEA had excellent international procurement.
 It had excellent supply chain management and utilized
the latest IT infrastructure.
 Anticipating the needs and wants of customers.
ACTIONS
 Focus on customer service.
PROS- Identify trend in customers.
Benefit from in-depth knowledge.
Avoid problem in future.
CONS- CRM is costly.

 Focus on correct placement of stores.

PROS-Correct placement is key to IKEA’s future
growth.
CONS- Too narrow.
 Expand product lines.
PROS-Helps IKEA penetrate a new market.
CONS- Its own name and promotion
campaign, which is cost prohibitive.
 “pull” marketing strategy.

PROS- encourage consumers to make the

purchase.
CONS- difficult to implement.
 IKEA had to change the model of
operating, giving greater
ownership to its target country
subsidiary, to become polycentric
- stores
CHALLENGES IN US
MARKET
 Reluctance to change furniture:
mind set of Americans.
 Value added in high-end furniture
retailer.
 Consumer preferences.
Managing sustainable
growth for the future IN
USA
 market leader strategy.
 find new users.
 IKEA Club
 IKEA should endure IKEA brand.
IKEA’S TRADE-OFF IN
US
 US customers are very demanding.
 Free delivery service should be continued.
 Customisation should be done in tune with
local suppliers.
 Franchisees should be given to local people .
 Promotional strategy should be in
accordance of the tastes of local people.
SWOT Analysis
 Strengths
– Cost efficiency
– Special perks (café)
– Store layout
– assemble the product
Variety of products
– Assembly service
offered
– Brand name equity
– Large inventory
– Value priced furniture
– Scale of economies
– Large supplier chain –
1800 located in 50
different countries
– Delivery service –
Infrastructure system
place
 Weaknesses
– Limited number of styles
(not everyone likes
contemporary-modern)
– Customer has to
– Product may not be as
durable depending on who
assembled it
– Low customer service
available on retail store
floor
– Customer has to pick
furniture up from store
– Self-Serve shopping
experience
– 28% of people below
poverty line
– Per capita income
substantially low
SWOT Analysis

 Opportunities  Threats
– Joint ventures
– Language barriers
– Collaboration with
other companies – Counterfeit and
– Collaboration with substitute
Unicef products
– Huge market – Competitors
potential
– Western ideas and – Copycats (many
products valued by local carpenters
Indians can make and sell
– More apartments the product
and housing leases– cheaper)
especially among
younger generation – High import
taxes
– Risk of economic
instability or war
Joint Venture
 Alliance with local partner advantages:
– Can provide valuable input into the opportunities and
threats of local market
– Will reduce strategic risk that may result from political,
legal, and financial issues.
– The venture will increase market coverage
– IKEA could further expand into other market segments in
which the strategic partner is already established

 Alliance with local partner disadvantages:

– Loss of control over some business functions
– The partner may eventually become a competitor to IKEA
Any questio
n s? ? ?

Thank you for your

attention!