Role of IKEA in Hyderabad

Introduction:
IKEA is a Swedish-founded multinational group that designs and sells ready-to-
assemble furniture, kitchen appliances and home accessories, among other useful
goods and occasionally home services. It has been the world's largest furniture
retailer since at least 2008. It was founded in 1943 by 17-year-old carpenter,
Ingvar Kamprad.

IKEA India, part of the IKEA Group, has been present in India for 30 years, sourcing
many different products for IKEA stores worldwide, engaging 45,000+ direct co-
workers and approximately 400,000 coworkers in extended supply chain.

Objectives:
 To study impact of IKEA in Hyderabad.
 To study consumer perspective and satisfactory levels for IKEA products.

Methodology:
Data is obtained by relying on both primary and secondary sources.

Scope:
The scope of the study is confined to analyze the perspectives and satisfactory
levels of consumers of IKEA-Hyderabad only.

Limitations: As the study is restricted to only one specific branch/city, the

information obtained and evaluation made may have a deviation. And the
primary data is obtained with population of 50 samples.
ABSTRACT
In today’s world of cutthroat fierce competition, it is very essential to not only
exist but also to excel in the market. Today’s market is enormously more complex.
Henceforth, to survive in the market, the company not only needs to maximize its
profit but also needs to satisfy its customers and should try to build upon from
there.
The project is the analysis of the customer satisfaction by products offered by
ikea. The survey was conducted so as to analyze the service level provided by the
ikea and the improvement that can be made upon it. The meaning of service and
service quality has been discussed elaborately. Market research study has been
conducted in order to know about the customers’ preferences and product line
that they want from the company. After this an analysis along with diagrams and
charts has been made to bring forward the overall picture of the market research.
Conclusions have been drawn keeping the detailed analysis of the findings in
mind.
 LITERATURE REVIEW

Leadership in the Digital and Social Era - A Theoretical Review and

Digital Gamification for Employee Development
Author: Aysegul Candan Balan

The aim of this paper is to explore which skills and mindsets are necessary for
successful leadership in the digital era. It is written for IKEA who are interested in
remaining at the forefront of their industry by understanding how digitalization
affects their business and how to make the most of the opportunities it brings,
one aspect of which is leadership. There is a gap in the existing knowledge on the
topic of leadership in the digital era despite the amount research on the topics of
digitalization and leadership individually. We intend for this paper to contribute
towards filling the gap by looking specifically at the intersection between the two
areas. The method we used to determine which skills are needed by leaders in the
digital age was a review of the existing academic literature together with non-
academic sources to gain an understanding from a real business context. We
faced challenges relating to a lack of sufficient empirical studies on the topic, as
well as the importance of context to leadership, which limit our ability to make
normative conclusions about leadership skills necessary in the digital age. The
outcome of the literature review demonstrated that the ideas on leadership in
the digital age are mostly homogenous, and while many sources lack empirical
backing, they are in agreement with the opinions of business leaders. We
identified four main categories of skills: communication, dealing with change,
learning and practical changes, as well as one mindset, the growth mindset. There
were two main themes throughout the review which we considered particularly
important - openness to learning, which comes from a growth mindset, and
empowerment of employees. We used this information as the basis of a game
design which aims to help IKEA employees reflect on the way they deal with some
of the challenges presented by digitalization. We produced two sets of questions
to be used as the starting point of a quiz game which can be expanded based on
new research or by adding new topics. The game is based on encouraging
reflection rather than scoring points due to the nature of our findings from the
literature review, which are not conducive to determining correct and incorrect
answers.

Modularity and its Effects on Operations and Logistics - A Case Study at

IKEA Industry

Author: Jacob Larsson

For a modern company to stay competitive on the market, efficient solutions and
production systems are often needed. The customer also request more variants
while still paying the same low price as before. To keep cost as low as possible
several strategies and aspects can be analyses and implemented. In order for IKEA
to meet their goals and to be able to deliver according to their plans for the IKEA
2020 strategy, a simpler supply chain and lower costs are needed. One possible
way to achieve these goals could be to implement modular product architecture.
In this report the benefits and drawbacks of modular product architecture is
discussed. Today IKEA has very little knowledge about how well their components
in their products can be modularized in order to gain cost reductions in the
manufacturing. Many of the products are designed with only the end customer in
focus, which in some cases leads to an inefficient production process. To get a
better understanding of how a change in the product architecture could affect the
cost at IKEA this study was conducted. The research was limited mainly due to the
limitations in time but also since the request from IKEA was to analyze the solid
wood range. The research approach in this study has been to use a single case
study methodology, since it is more flexible and well suited for this kind of
problem where the authors aim to do an exploratory study. It is also suitable since
the authors aimed to gain deeper knowledge about this particular case. In this
case the data has mainly been collected through a literature review, archive
analysis, observations and interviews. To be able to calculate the monetary
savings connected to the suggested changes in product architecture the products
where first decomposed in order to analyze possible common components. Then
a comparison between the old composition and the new with a reduction in
unique components where conducted. The study showed that IKEA could reduce
the number of individual components by 21%. Some of the components that
could be reduced are bought from suppliers which reduces the potential savings
that IKEA themselves can accomplish. However, the main goal is to lower the
overall cost for the entire supply chain and if fewer unique components are
needed the purchasing division can work more efficiently. Hopefully, this leads to
that the components can be bought to a lower price, increasing margins
throughout the entire supply chain. When looking at the potential savings for
IKEA several aspects where analyzed. One of the major costs in the production
where the cost connected to material use. The use of material is not directly
affected by a modular strategy. This raises the question on what IKEA should
focus on and what project they should prioritize. Modular product architecture
contributes to savings in changeovers, reduced scrap, and less inventory.
However, these are relatively small in comparison to the potential in reduced
material.

The effects of IKEA and external shopping centers on regional trade and
retail growth: a comparative analysis of Ikea’s establishment in Kalmar
and Karlstad

Author: Mohamed Abdulwahab Alhasweh

This paper examines the effects of IKEA store establishment in Kalmar and
Karlstad on the trade and retail inside the two cities, and as well on the trade and
retail in the close neighboring municipalities and in further peripheral
municipalities in both regions. After the establishment of IKEA store, Kalmar and
Karlstad have experienced significant growth in trade and retail. The question,
however, is how big this growth is in both cities? And how different locations on
different distances from Ikea have been affected? What impact there was on
different segments of the retail? How different business branches have been
affected? How large the catchment area for the emerging new large-scale retail
locations is? These questions, in addition to few others, are investigated in this
paper. The thesis starts with an introduction chapter containing a background of
the topic, problem description, the investigated questions, the purpose, and the
outline of the paper. The next chapter includes the frame of reference which
consists of literature review and theoretical framework about the external
shopping centers and their impact on retail and regional trade development. It
includes also information gathered from previous studies technical reports and
other available sources about the subject. The third chapter includes description
for the methods used to collect the primary and secondary data needed for the
purpose of this study. Then the empirical framework which demonstrates the
results of the conducted research followed by analysis and concluded in
discussion and conclusion. Mixed methods are used as research strategy in this
thesis, and the method to conduct the research is based on telephone interviews
for the primary (qualitative) data, and documents and desk research for the
secondary (quantitative) data. The gathered data is analyzed and designed in a
way that allows the usage of comparative analysis technique to present the
findings and draw conclusions. The results showed that new established Ikea
retail store outside the city boundaries results with many effects on the city
center and on the neighboring municipalities as well. The city center seems not to
be affected negatively, but on the contrary positive effects were witnessed in
both regions, these positive effects are linked to the increase inflow of customers
from the external retail area which is known as spillover effect. III On the other
hand, the neighboring towns and municipalities are more negatively affected
especially with the trade of con-convenience goods as the consumers in these
towns and municipalities start to go to the area of Ikea and the large external
retail center to do their purchasing, the substitution effect is then said to be
occurred. Moreover, the further far municipalities do not seem to be significantly
affected by the establishment of Ikea. These effects whether positive or negative
could be monitored by looking to few trade parameters such as the turnover, the
sales index, and the consumers’ expenditure, these parameters can be very useful
to measure the developments and changes in the trade and retail in a given
place.
 COMPANY PROFILE

IKEA is an internationally known home furnishing retailer. It has grown rapidly

since it was founded in 1943. Today it is the world’s largest furniture retailer,
recognized for its Scandinavian style. The majority of IKEA’s furniture is flat-
pack, ready to be assembled by the consumer. This allows a reduction in costs and
packaging. IKEA carries a range of 9,500 products, including home furniture and
accessories. This wide range is available in all IKEA stores and customers can
order much of the range online through IKEA’s website. There are 18 stores in the
UK to date, the first of which opened in Warrington in 1987. In July 2009 IKEA
opened a store in Dublin too – it’s first in Ireland.

IKEA stores include restaurants and cafés serving typical Swedish food. They also
have small food shops selling Swedish groceries, everything from the famous
meatballs to jam. Stores are located worldwide. In August 2008 the IKEA group
had 253 stores in 24 countries, with a further 32 stores owned and run by
franchisees. It welcomed a total of 565 million visitors to the stores during the year
and a further 450 million visits were made to the IKEA website. IKEA sales
reached 21.2 billion Euros in 2008 showing an increase of 7%. The biggest sales
countries are Germany, USA, France, UK and Sweden. In 2008 IKEA opened 21
new stores in 11 countries and expects to open around 20 more in 2009 as part of
its strategy for growth.
IKEA Vision and Business idea
The IKEA vision is ‘to create a better everyday life for the many people’ puts this
concern at the heart of the business. Our 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.

SWOT (Strengths, Weaknesses, Opportunities, Threats)

Strengths
 Flat-pack technology
 Numerous global suppliers
 Focus on “low price with meaning”
 Extra in-store perks: restaurants, shopping carts, pencils, etc.
 Unique store environment
 Modern design pieces as well as traditional pieces

Weaknesses
 Not doing appropriate market research when branching into a new culture’s
market-such as when IKEA came to America.
 Ratio of sales representatives to consumers
 IKEA’s self-service ethos, American’s are not used to this type of service.

Opportunities
 Saving money on labor by establishing supplier relationships with
developing countries
 Movement into other countries that do not have this type of retailer
 Capitalize on good design with reasonable pricing
 Capitalize on the unique and appealing shopping experience
Threats

 Lower prices of general retailers like Target and Wal-Mart that have the
ability to regain losses on other merchandise
 Finding ways to appeal to a borader public-Scandinavian design and style is
a niche not specifically suited to everyone’s tastes. Therefore, IKEA must
figure out how to do this before someone else does.

PESTLE ANALYSIS External Environmental Factors

IKEA faces a variety of external environmental factors when conducting business
in a competitive, global furniture market. These different factors, provides an
explanation of what faces IKEA (The Broad Environment) Research shows in the
broad environment, an individual firm can do little to directly influence these
factors.

In this study, IKEA is broken down by social, economical, technological and

political/legal factors to dissect the broad environment.

Socio culturally it was hard for IKEA to integrate itself in the American market. The
furniture market in the United States contained a wide dichotomy between high-
end and low-end design. Within this fragmented market, the top 10 furniture
retailers were only responsible for 14.2% of the entire market share. The general
discount stores, i.e. Wal-Mart, Target, and Office Depot bring up the low-end
market. These stores usually marketed their furniture on the basis of cut-rate
pricing making margins low in for these channels. There were also smaller shops
offering cheap furniture to price-conscious customers such as college students.
However, these stores reflected their low price focus with dreary, dingy
environments containing haphazard displays and poor, inconsistently managed
inventories.

Conversely, the high-end specialty markets offered luxurious store environments

with clean, plush displays, conjuring up affluence, prosperity and comfort. These
specialty retailers include Ethan Allen, Thomasville, and Jordan’s Furniture. Many
of these retailers offered easy payment credit options lessening the debate when
considering big-ticket items. Also, these stores came complete with high-touch
sales consultants who assisted with measurements and product selection.

These retailers offered interior design services for consumers whom were more
interested in complete home makeovers. In addition, they boasted of huge
inventories often containing many sub-styles within each specific style. Complete
with delivery services, retailers could guarantee that consumer’s new purchases
would be delivered and set up in their homes in a matter of weeks without them
even having to lift a finger. Lastly, these specialty retailers focused on the quality
of the furniture touting that their quality pieces will last a lifetime hence the
justification of steep prices-a customer would not or should not “need” to replace
the piece again within their lifetime.

The other large part of IKEA’s bumpy entry to American culture was the lack of
market research. Many Americans didn’t like IKEA products because the beds and
kitchen cabinets did not fit American sized sheets or appliances, sofas were too
hard for American comfort, the dimensions were in centimeters, and the
kitchenware was too small for American serving preferences. A manger of the
first store in Philadelphia (1985) recalled people drinking out of the vases instead
of the serving glasses.

Economically, IKEA is low cost. This is a big piece of breaking into the American
market. IKEA had to focus and advertising campaign directed specifically to thwart
American’s unwillingness to part with their furniture. Part of this angle is the low
cost. “It is only furniture, change it.” By being willing to listen to consumer
feedback and changing the way American’s looked at furniture, during the mid-
1990’s IKEA’s profit share in American markets improved.

Technologically, IKEA’s Flat Pack is unlike any other furniture retailers shipping
method-IKEA claims that they do not want to pay to ship air. This is precisely why
they can be “self-service” and do not have to employ as many people as someone
would think. These flat packs make it possible for people to lug their packages
home without having to wait weeks for delivery. IKEA provides pencils, measuring
tapes, store guides, catalogs, shopping carts, bags, and strollers to assist with the
shopping experience. Customers are expected to transport their own purchases
as well as assemble them on their own. The methods in which IKEA’s stores are
lined up are ingenious. A customer will shop displays and then take their
selections (jotting their item numbers) down to the warehouse to pick up their
flat packed items before proceeding to check out.

Utilizing Porter’s Five-Force Model of Industry Competition, IKEA can be

evaluated in the following way:

1. Customers
Americans-the primary consumer base for IKEA’s debut in the American Market.
The most likely IKEA shopper are those sort of people who travel abroad, like
taking risks, enjoy fine food and wine, have a frequent flier plan, and are early
adopters of trendy consumer technologies such as Discmans, laptops, and cell
phones (incidentally, IKEA’s most atypical customer would be they type of person
who collects guns).

2. Suppliers
IKEA relies heavily on global suppliers. Once IKEA sets its base price for an item,
they then seek to balance cost-effective labor with the company’s quality product
standards. It does so by working with 1,800 suppliers in over 50 countries. In
many instances, IKEA circulates its idea within supplier rings and encourages them
to compete for the production package. Sometimes to meet the base price, IKEA
will have one design with pieces from several different suppliers.

3. Existing Competitors

Traditional Furniture stores are abundant in America. There are none exactly like
IKEA in the United States. Therefore IKEA has an advantage over those traditional
stores that have high priced furniture. If that is not what the consumer is looking
for, and then they can go to IKEA for quality, less expensive furniture with a
modern design edge.
4. Potential Competitors/Entry Barriers

Since IKEA is such a unique, original idea/store it would be very “hard to duplicate
the ‘totality’ of IKEA’s culture.” A store could probably duplicate one or two of the
things which compose IKEA’s atmosphere but they would fail in other aspects.
Like, a store could try and copy the Scandinavian design niche but it would be
hard and unauthentic (like what IKEA embodies) without the Scandinavian
heritage.

5. Indirect Competitors/Substitutes

Wal-mart, Target, Office Depot and other low-cost suppliers are indirect
competitors in the fact they do offer low-priced furniture that consumers
assemble themselves. However, these indirect substitutes differ in the fact that
these are general retailers instead of where IKEA is a specific retailer of home
goods. Target, for instance, retails apparel, accessories, home goods, groceries,
office products and cleaning supplies.