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Marketing Analysis
For



Democratic Design:
Low Price with Meaning






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Retail Management
Dr. Anshu Arora
September 30, 2012
WRITTEN BY:
Reginald G. Walker, Jr.



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Tables of Contents
I. Background Information... 4
II. Humongous Problem............. 5
III. Issues...................................................................................................... 5
IV. Knowledge......................................................................................... 6-8
a. SWOT analysis.................. 6-8
i. Strengths S..6
ii. Weaknesses W6-7
iii. Opportunities O..7
iv. Threats T.7-8
V. IKEAs Porters Five Forces Analysis....................................................................... 8-9
VI. Perspective......................................9-11
VII. Actions.......................................................................................................................11-12
VIII. References..................................................................................................................13












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Background Information
IKEA is a privately held company. IKEA is one of the worlds top furniture retailers, has
emerged as the fastest-growing furniture retailer in the US. IKEA sells home products and ready-
to-assemble furniture such as beds, desks and chairs. IKEA was founded in Sweden in 1943 by a
young man named Ingvar Kamprad. IKEA might sounds like a strange name to name a furniture
company but really the name is an acronym
of the founders name, the farm he grew up
on and his home town. The company started
as a small company but it soon became much
more. To become one of the leading furniture
retailers in such huge and promising market,
it has set an ambitious goal. IKEA started to
become larger and started opening new stores
across the world. IKEA has 4 branches in
China, Sweden, and Norway. At the end of
2009 IKEA had over 267 stores in 25
countries. With this expansion of course you
know that their revenue will increase and that
IKEA will bring in a bigger profit. The
expansion did not stop there in 2010 the first IKEA store open in Latin America in Santo
Domingo, Dominican Republic. However, IKEA is one of the top sellers in the furniture market
that have issues and they as well have to update their S.W.O.T analysis to continue to stay on
top. IKEA has been through a lot since when the company arrived in America in 1985.

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Humongous Problem
The huge problem that IKEA faced was the quality of their products and services. IKEA is
known for its modern architectural designs on various types of appliance and furniture, often
associated with a simplified eco-friendly interior design. This means IKEAs furniture is
somewhat cheap and usually falls apart in a few years. IKEAs slogan is Low price with
meaning and that being said IKEA sometimes sacrifice quality over price. This is a major
problem that they have because costumers do not really trust IKEAs products because they feel
like they might be cheap but would have consider how long stay in good condition. IKEA has a
various design, style, and color of products but some customer will accept a unique piece over
price.
Issues
Even though IKEA is so successful they do have issues in the company that they have to
overcome. One of the issues that IKEA has is their product strategy. Their product strategy
somewhat causes IKEA to lose money. IKEA was created by a product strategy council; the
purpose of the product strategy is to establish priorities for IKEAs lineup. The product
developer would create a matrix that consists of three basic price ranges and four basic styles.
IKEA will take this information and set a price point 30% to 50% lower than the competition, in
my opinion they are losing money.
Another issue that IKEA has is basically the loyalty of customers. This is an issue because
customers purchases are the major way that IKEA brings in profit. IKEAs customers started
getting frustrated because after they would buy a product they did not know how to assemble it.
So this causes many customers to become angry and reconsider their purchase.
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One issue that could be manageable is the consumers preference. IKEA originated in the
Scandinavia so IKEA have to modify their products to suit Americas furniture market. This
when having competitors come in handy because you can get an idea of what the market wants.
It took a while for IKEA to adapt to the American culture.
Knowledge
SWOT Analysis:

Strengths
Ikea has many assets that have made them become one of the largest furniture retailers. Some of
IKEA includes their leadership position in the global marketplace and strong brand recognition.
This is important because IKEA would be recognized across the world and since their brand is
unique it would a product made by IKEA. IKEA has an effective marketing strategy as well; the
marketing strategy promotes the company and its products very well. Even their slogan promotes
low price and since the economy is like it is consumers love to hear about low prices. Like I said
before IKEA offers its products for extremely high competitive prices and this strategy provides
strong competitive advantage for the company. Strengths could include a company's specialist
marketing expertise or its location. They are any aspect of the business that adds value to its
product or service. Another strength that IKEA has is that the relationship that the company have
with their employees. IKEA knew over 70,000 names of their employees name regardless of
their position.
Weaknesses
Even though IKEA is a successful company and have a numerous number of strengths, they do
have some weaknesses that their competitors could take advantage of. One weakness that IKEA
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has is its global size which makes it difficult to implement its business strategy to vastly
differentiated local market conditions. Another issue that IKEA has is their financial
performance; IKEAs financial performance is exposed to the
changes of prices of raw materials due to the company strategy
of low profit margin for each individual product.
Opportunities
IKEA does have some opportunities to become even better.
IKEA has opportunities for increasing revenues and achieving
long-term growth. Such opportunities include increasing the
focus on using recycled materials, engaging in further market
expansion and entering Indian, Central Asian and Eastern
European markets and increasing the company product ranges
to include more variety of technology products. IKEA does have its advantages for their
employees and consumers. As IKEA become more efficient with their product strategy and using
the matrix that allows for employers to be aware and able to identify gaps in the companys
product lineup will be huge for IKEA If you are an employee for IKEA you have the
opportunity to fly first class almost anywhere you want to go now thats employee appreciation.
IKEA also give aspiring designers to design their own potential product. This makes customers
feel like they are a part of the company and they can showcase their creativity.
Threats
With all the opportunities that IKEA have they do have threats that they have to take accountable
when the company is striving to stay on top of the furniture retail market. One threat that IKEA

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has is due to the changes in social trends consumers may prefer buying pieces of furniture
associated with high class in society. IKEAs brand image might suffer some damages as a result
of poor working conditions in IKEA contractor companies in developing countries revealed by
the media. As well With IKEA only creating four basic styles, customers may become exhausted
with that form of simplicity even if the cost is low and efficient. Another threat IKEA has is that
they have to be safe with the quality of their products. IKEAs products do not last long and this
cause discouragement in consumers. Discourage consumers cause purchases to decrease and this
cause IKEAs location to begin to lose money and force to shut down.
IKEAs Porters Five Forces Analysis Breakdown
Rivalry among existing firms is intense in the global market of discount furniture and the
major players in the industry include Euromarket
Designs Inc, Galiform plc, Wal-Mart Stores Inc,
Argos and others. However, currently IKEA is the
undisputed market leader in the industry of
discounted furniture in the global scale.
The threat of new entrants into the industry is
low, and the chances of emergence of new
competition for IKEA is insubstantial as the
current market is saturated and significant amount
of financial investments and expertise are required
to become a discounted furniture retailer in a global scale.

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The bargaining power of IKEA customers is strong, as the competition is intense and the
customers have a wide choice of alternative options offered by global furniture retailers,
as well as, local furniture producers.
However, the threat of substitute products and services is low as there are no too many
products and services available that can substitute the demand for furniture, home
appliances and a range of other products offered by IKEA.
IKEA suppliers do not possess substantial bargaining power as there are numerous
factories around the globe with the capabilities and resources to form partnership with
IKEA. At the same time, IKEA pursues the strategy of forming strategic long-term
relationships with its suppliers.
Perspective
IKEA---named derived from Kamprads (the founder) initials combined with the first letters of
the names of the family farm (Elmtaryd) and village (Agunnaryd) where Kamprad was raised---
has a ton of perspectives and viewpoints from various sources which lends a hand to the success
of the company even today. IKEA did not always receive praise and acclamations as a company;
however, they received plenty and plenty of constructive criticism. The reason this criticism was
constructive because it allowed for IKEA to construct better and better design for their product(s)
and service(s) that allows for it to be so profitable throughout the world and even allowed for
elevated profitability in the great country of the United States of America.
One perspective, in-house, came from the companys product lineup that consists of a group of
senior-level managers who established priorities based upon customer trends and target retail
price. Their perspectives were product priority (allowed for maximizing product creativity and
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credibility), simplicity (allowed for brand recognition and customer awareness of the distinction
of IKEA products) and low, low, low prices (customer satisfaction and elatedness).
A second perspective would be Lisa Margonellis quote about IKEAs product designs of the
past: If you look at the history of IKEA, in the early years their design was quite horrible
(Margonelli). This statement was keen for IKEA because it allowed IKEA to view what design
experts thought about them and this caused the company of IKEA to go back to the drawing
board and develop better, classy, more creative and innovative product designs. This helped
because Lisa Margonelli also stated that today if you go to IKEA, you always will find some
pieces which are good designs and very reasonable in pricingthey became more and more
interested in design (Margonelli).
IKEA engineers also sought after a certain perspective for the company. They were extremely
cost efficient when developing products and services to allow for IKEA to remain a low cost,
low price company for customer satisfaction. Another perspective of the engineers would be to
supply a variety of qualities for IKEAs product design to entice consumers and customers to
purchase their product and services.
IKEAs vision statement: Democratic Design: Low Price with Meaning is a huge perspective
and maybe the most vital perspective that IKEA has because with this statement it allows for the
company to remember their main goal and objective---satisfying the customer with low prices
but maximizing creativity via product design to indicate meaning to their product design.
IKEAs CEO Anders Dahlvig also gives great insight into the grand perspective of the company
stating: Not only does IKEA have monster stores and great prices, it has also created a unique
niche. Its the quintessential power retailer in AmericaThe more stores we build and the more
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we increase our market share, the more we have to find ways to appeal to a broader public.
Scandinavian design and style is a niche and it is not to everyones taste. But we dont want to be
just another supplier of traditional furniture. Scandinavian design is what makes us unique. We
have to find a balance (Dahlvig). This is a great perspective since IKEA was the seventh-largest
furniture retailer in the United States of America in 2003; however they were ranked #2 in 2009.
Actions
IKEA have indeed made unprecedented leaps to aggrandize their company globally and climb up
the ladder as one of the most profitable and likable multinational companies in the world through
actions and strategic hard work.
One of IKEAs many actions to make their company a global success is flat-pack shipping for
reduced, low prices which is something that IKEA prides itself on because one of their primary
goals is customer satisfaction and cost efficiency. Another one of their many strategies is
reassuring that customers have the absolute best furniture that will last them a lifetime and
extended warranties on their many products and services. They offer warranties from 5 year to
20 year to lifetime.
IKEA also now offers delivery, installment and assembly services to assist customers and to
attempt to offset their unassembled products and to minimize cost to remain a cost efficient and
cost effective company and profitable.
IKEA also begin to adapt to the culture of Americans so they could invade the U.S. and remain
as lucrative as they did in foreign areas of the world. They constructed a high-profile advertising
campaign designed and designated specifically for Americans.
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This prestigious and prominent company distributes and sells every possible form of furniture
including ALL household items which places them ahead of their competitors like Wal-Mart and
Target, of whom also sale furniture. IKEA truly gives its customers a broad number of household
items and appliances to establish a variety of options and choices.
IKEAs goal is to have 50 stores by the year 2013 in the United States of America; however,
they currently have 39 stores at this moment in time.

(Picture Above: this graph shows the number of stores IKEA has opened in the U.S. since 1958
but 2001 in comparison with Apple, whose first store was opened in the year 2001. Apple is a
worldwide leader in innovation so IKEA wants to capture that more IKEA stores have been
developed than that of Apple stores since 01.)

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References
Brown-Humes, Christopher, An Empire Built On a Flat-Pack, FT.com (London),
November 23, 2003, p.1.
Dahlvig, Anders, An Empire Built On a Flat-Pack, FT.com (London), November 23, 2003, p.1.
Davidowitz, Howard, How IKEA Designs Its Sexy Price Tags, Business 2.0, October 2002.
IKEA Web site: www.ikea-usa.com.
Leland, J ohn, How the Disposable Sofa Conquered America, New York Times,
December 1, 2002.
Margonelli, Lisa, How IKEA Designs Its Sexy Price Tags, Business 2.0, October 2002.
Mathieu, Christian, How the Disposable Sofa Conquered America, New York Times,
December 1, 2002.
Nemati, HR & Barko, CD, 2004, Organizational Data Mining: Leveraging Enterprise Data
Resources for Optimal Performance, IGI.
Nordin, Ken, How the Disposable Sofa Conquered America, New York Times,
December 1, 2002.
Raab, G, 2010, The Psychology of Marketing: Cross-Cultural Perspectives, Gower Publishing.
Rydberg-Dumont, J osephine, How the Disposable Sofa Conquered America,
The New York Times, December 1, 2002.
Sharma, B, 2006, Change Management, Tata McGraw-Hill International.
Tewary, Amrit, Household Durables, Standard & Poors Industry Surveys,
November 6, 2003.