IKEA: Redefining the Market to Achieve Success - Technology and Operations Management (2024)

FAQs

How has IKEA managed to achieve this successful growth? ›

Through a massive vertical integration strategy, IKEA became one the largest consumers of wood in the world, and built a plants capable of pulverizing wood into dust and manufacturing many multipurpose boards at one time.

By merging retail locations with warehouse facilities and a self-service model, IKEA is able to reduce distribution and product storage costs to maintain a competitive edge. IKEA's operations management controls in-store logistics to manage these integrated facilities and support an efficient flow of goods.

This is achieved by producing home furnishing products with a focus on combining function, quality, design and value. IKEA has successfully capitalized on a differentiated low price business model by having this vision permeate through every part of the organization, from design, sourcing, packing and distributing.

To that end, IKEA created an innovative Demand Sensing, an AI-based tool that optimizes stock levels to ensure the consistency of shopping experiences for its customers. To create projections and predict future demand more intelligently and effectively, the tool leverages up to 200 data sources for each product.

IKEA is​ built on a culture of entrepreneurship and is known for being an innovative challenger and thinking differently. To renew and improve is in our core values. The innovation approach has its starting point in the IKEA vision – to create a better everyday life for the many people.

Quality products, affordable prices and a do-it-yourself assembly attitude are big reasons for IKEA's success.

Low Cost, High Quality

The brand's signature style is low-cost self-assembling furniture that does not skimp on quality. This is what makes the business envious of its competitors. Materials used in IKEA furniture are thoroughly described to ensure customers know exactly what they're paying for.

The Ikea marketing strategy contributes majorly to its success because it's original, imaginative, and distinctive while maintaining a transparent value proposition.

The cost focus and differentiation focus are the two aspects of the company's main strategy. IKEA uses a combination of these strategies to achieve its vision. One of the strategies it uses is its cost leadership strategy.

IKEA reaps substantial operational cost savings from getting customers to perform part of the work. Since storerooms also act as warehouses, customers select furniture, pick up the flatpacks, then transport and assemble them all at their own cost.

What is IKEA's unique selling point? ›

IKEA Unique Selling Proposition Examples

The globally known Swedish-origin furniture and hardware company, IKEA, has a USP that focuses on benefiting customers through high-quality furniture for a low price. "To create a better everyday life for the many people." is their USP. IKEA's vision goes beyond home furnishing.

IKEA will tweak its strategy in the wake of changing consumer behavior and open small format stores in the country. Swedish furniture retailer IKEA is planning to open small city outlets along with its mega standard stores in India supported by an online channel.

As a symbol of big box retail, the Swedish furniture giant wants to harness e‑commerce to become more efficient and agile. Ikea has therefore been committed to a radical digital transformation incorporating cloud computing since 2018 – but the Covid-19 crisis incited them to step it up.

Circular and climate positive

Our ambition is to be a circular business by 2030. We are committed to designing all of our products with circular capabilities. We aim to use only renewable or recycled materials and to provide new solutions for our customers to prolong the life of products and materials.

IKEA has been the largest furniture retailer in the industry since 2008 and enjoys several benefits which come with this position. This includes a loyal customer base, a consistent revenue stream, favorable brand equity, and the advantages which come with the widespread popularity of the brand.

Ikea's value proposition also plays a key role in its success. Ikea's business plan is “to offer 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.”

IKEA, home furnishings retailer that was the world's largest seller of furniture in the early 21st century, operating more than 300 stores around the world. IKEA specializes in low-priced goods, sold whenever possible in compact “flat-pack” form for in-home assembly by the customer.

Customer Value is the biggest reason for IKEA's growth and popularity.

Industry-wide supply chain challenges

However today, like many other industries, IKEA continues to face significant transport and raw material constraints driving up costs, with no anticipated break in the foreseeable future. Disruptions are expected far into 2022.

Transformation process: This is the actual processing where raw material of IKEA takes the form of output. Input may be either in form of information, human power or physical requirements to build output.

What has allowed IKEA to be successful? ›

Its commitment to style, affordability, and sustainability, along with its clever use of marketing techniques, has allowed it to dominate the retail market. IKEA is well known for its successful sales strategies, which help the company to generate revenue and gain a larger share of the market.

Market penetration.

IKEA uses market penetration strategy aggressively.

IKEA utilizes a great long-term strategy of cost leadership which has shown to be successful on a global scale. They aim to keep prices low for those who can't afford it, allowing the customer to be satisfied with their options. The company puts style at the front of their brand image.

Having a positive impact means that we always aim to generate more than we use ourselves, working to make a positive difference beyond our own business. We are committed to creating a better everyday life for the many people and to be people and planet positive.

IKEA's product development strategy

IKEA has a strategy to focus on low cost at a consistent level of quality. The high volume of interchangeable parts requires an extensive, worldwide supply chain. Initially the company leased out equipment to suppliers and provided training to ensure quality.

There are 7 components to it – Price, product, promotion, place, people, process, and physical evidence. Together they make up a marketing mix. Ikea is known to sell a wide range of products( goods and services) that cater to a large segment of consumers.

IKEA designs unique products that incur low manufacturing costs while meeting strict requirements for function, efficient distribution, quality, and impact on the environment. According to a case study produced by The Times of London, more than 50% of the products are made from sustainable or recycled products.

The furniture giant follows a marketing strategy called the 7 P's of marketing that stand for: Product, Place, Price, Promotion, Physical evidence, People and Process. IKEA prioritizes projecting a consistent brand message across all 7 elements to create a strong connection with their customers.

Based on Porter's Generic Strategies, which were proposed by Michael Porter, IKEA mainly follows the “Cost Leadership Strategy”. IKEA seeks for suppliers who could manufactures well-designed subassemblies at the lowest costs and customers need to assemble the products themselves.