The operations management

Introduction to the Company

Mr. Ingvar Kamprad was the person who founded IKEA. His business grew by years and by 1947 he began stocking-up furniture's produce by local manufacturers. It was not possible for him to make individual sales call; therefore he started catalogues in which items he sold were listed. He used to promote the catalogues through mail orders and it soon became popular among the customers. Furniture was introduced in IKEA's product catalogue in 1947. After that his sales just shoot up and then he decided to terminate all other products and sell only furniture which was low price and modish. In the year 1953, IKEA opened its first furniture shop at Almhult in Sweden. As time passed his speed of expanding the business grew. From 1973, he started expanding his business to rest of the Europe and the worldwide market. He started opening new store every year from 1974 to 1989. By 1990's IKEA had reached out to the Main land China, all over the Europe and Middle East. In the year 2000, the group's first store was opened in Russia. The IKEA group began their first rail service in the year 2001. The IKEA group commenced its first website in June 2007. IKEA planned to expand its operations in Tusacany in November 2008.

At present IKEA group has approximately 292 stores all over in 36 countries and IKEA owns 258 stores in about 24 countries. The other 34 stores of the IKEA group are owned and run by the franchisees outside the IKEA group in about 16 countries. IKEA has approximately 9,500 varieties of home furnishing product. IKEA even have in-built restaurant in which they serve typical Swedish and local dishes. They have around 160 ranges of different food varieties in their food court. IKEA comprise of 41 trading service offices in about 30 countries. They have around 1,380 suppliers from about 54 countries. Kampards frugal habits encouraged their co-workers to minimize waste and cut costs at every level. This helped IKEA to come up with artistic products that were designed and available at affordable prices, which helped IKEA to enhance their brand image. IKEA is a biggest furniture store in the world but its products accounts only five to ten percent of the furnishing market in a particular country where it operates.

IKEA's furniture comes in a range of styles and colors but it is usually known for its sleek design. IKEA has planned to decorate a hotel chain with its own furniture, this would target all the customers who would go to these hotels and it will also benefit the hotel chain with low priced furniture with good quality. IKEA' store are huge and once the customers enters the IKEA's store they wouldn't go without seeing all the furniture available. Average IKEA stores are as big as 30,000 m² and the store are designed in a way that it is impossible for the customers to go directly to the exit. This marketing strategy provokes customers to buy and they often buy furniture than their actual requirement which benefits IKEA. IKEA's operation of marketing is base on countries communal and educational deep feeling which varies significantly across markets, for example, advertisements in the UK were more straight forward compare to those humorous once in North America.

Marketing

As a method of promotion, IKEA renovated the bedrooms of four kids in Singapore which looked similar to TV studios, from which they hosted their own TV specials on the cable channel. ("Our vision is to create a better everyday vision for the many, but to try not to be like the many,". "We try to be different. We have formulated this way of thinking in our internal manuals. It is a way of making an umbrella that secures a similar way of thinking globally"). (Source: - said by Mr. Larsson)

Wednesday is the slowest day in Netherland for IKEA. Amsterdam-based agency Strawberry Frog for furniture manufacturer IKEA recognized that the Dutch word for Wednesday, Woonsdag, also means living day and this festival was started by IKEA. IKEA markets buy printing its covers on the Metro newspaper on every Wednesday with articles about Woonsdag. On every Wednesday of 2004, IKEA promoted Woonsdag which is now marked as a new national day, by printing its articles in the newspapers and magazines, and also promoting by radio, viral campaigns and through internet. On this particular day, IKEA hand over discount vouchers, woonsdag bags and T-shirts and on the streets crowed even sings woonsdag song. In one of IKEA's recent guerrilla campaigns, it promoted the campaign by redesigning the Berlin train station, by painting the walls with dazzling fabrics and also did the lighting through lampshades which changed the whole environment to look attractive. IKEA introduced a "guerrilla" advertising campaign called Any Place can be Beautiful to promote the new publication of their catalogue. The television spot shows an unmarked cardboard box sitting on a sidewalk. After a moment, hundreds of pieces of yellow paper, which look like post it notes, erupt from the box and from a square on the ground around it. At the bottom of the TV screen appears a URL. All though there is no indication of its purpose, from the URL link people can upload the photos of the room they would like to renovate. The photos which the people give in the contest are voted by several visitors and the winner receives a $ 15,000 worth of remodeling of their rooms by IKEA.

One of the IKEA tagline, "Redecorate your life" has become very popular phrase in Spain over the last five years, representing that IKEA can help as people make thoughtful changes in their lives. In one the IKEA's campaign, people made real announcements on TV; a secretary told her boss that she wants to quit the job, a young man told his parents that he is a gay. IKEA uses low-priced resources in an innovative way and minimizes production retail cost and distributional cost, so that the customer can get benefits from low price. IKEA has a vast range of products wide enough to have something that appeals to everyone and to cover all the function in the home. IKEAS products are more trendy then being modern, so they are practical enough for everyday use.

Marketing oriented companies are illustrated by their focus on the customer; the customer is given the first priority. They work on customer's behaviour and their needs and this strategy is adopted by every company in the long run to develop a sales customer relationship. They try to recognize customer needs by providing solutions instead of pushing sales. Constant reading and analysis of the marketplace helps them to acclimatize, encourages, and distinguish their products and services. Although one of the latest way of marketing taken by IKEA was online marketing and also IKEA wants to set up an observed marketing

Role of marketing and effectiveness

IKEA's advertising in the UK was meant to attract more traffic to its store by raising awareness. Its unique style of retail advertising provokes conversation and arguments. Despite few of its advertisement ran into controversies but most of them were strong enough to raise awareness of the brand and it let people know that its different from other home furnishing companies and it also helped to increase sales. They advertise by means of television, sponsorships to magazines and radio promotions. Its advertisement help sustain many different areas of business including brand awareness, store themes, catalogue drops and store opening. The idea of Live Unlimited has helped IKEA to become more stylish and ambitious. In one of its London TV commercial shows that the couple is ignorant about quickly changing of the living room and furniture around them. This 30 second commercial depicts 3000 separate products of furniture and wall slides. In London it markets by providing free oyster wallets to all tube station and to all retail stores where oyster top-up is done.

IKEA spends about £10 Million on media planning and advertisement in UK. Nearly 110,000 customers visit IKEA stores a day that comes up to 40 Million customers a year. The latest IKEA advertisement aims to illustrate its customers how to make best use of space in the house. It encourages people to glance at their house in a diverse prospective and visualizes how one space can be presented in a different way. 70% of the IKEA's visitors are women therefore its campaigns target women's. It says 20 stores expansion in the coming 5 to 6 years.

IKEA's main effectiveness lies in its well-built international brand recognition developed due to its exceptional philosophy and low product prices and together with high sales performance. The firm's major limitation is the actuality that it is especially dependent on continent of Europe, with 82% of its stores located in this region, and it faces difficulties like fulfilling customer expectations of service and price. IKEA is having problems in expansion of its business in establishing markets in the continent like Eastern Europe and Asia. The improvement of quality lines, with the existing stores and new high street stores set off the outskirt stores, and the development of e-commerce sites in countries has helped to increase sales, by improving the customer service. These extra developments have increased competition in the market, which has lead to introduce similar product ranges at low prices. This is followed by the low demand in miserable economic conditions in its European and US the market and it also poses a potential threat to the political and instable economic market of the Chinese and Russian, in which the company plans to invest heavily in the short-midterm, also presents a potential threat. (Johnson, Scholes and Whittington, 2005)

It is a global company therefore it had many competitive advantages in the domestic and in the international competitive market which gave the company pricing freedom. With a standardized core product IKEA could have the server of the largest furniture factories producing the same item to supply the world demand. IKEA's competitors like Furniture Brands International, Stanley Furniture Company, Inc and DFS Furniture Company plc who had joined various buying groups has difficulties co-operating on a much smaller scale, often because they could not agree on what specific furniture models to order. Only few of them would get economies of scale in purchasing as they are not that large.

By strengthening its business into a network IKEAcould achieve economies of scale. Traditional advertising is a powerful tool which can help to gain strength in the local areas which can outperform the efficiency of being global. It can help in gaining local advantage and wittiness in its advertising. IKEA has been referred as an extremely price conscious company. In its catalogue some additional brochure are also provided along with some advertising.

IKEA aims at expanding its already developed retail business in the near future, which doesn't mean its expansion into new areas, but instead it aims building and developing its old areas. Its recent development in the e-commerce has helped IKEA to gain more revenue and in the long run will help to have a good impact on its turnover, which shows that the company is preparing well for its future threat. Customers are well aware of the quality of the IKEAS product, so the customers may find internet shopping more preferable, as they do not need to check the quality of the product in person. It has adopted aggressive expansion strategy, but sales growth in the coming years would remain reserved due to its weakness in the global market.

Due to the improved economic condition of the Europe and the US, and its expansion of its business in the Asia has led stepping up its growth, with its revenue doubling every year than then predicted figures. Shopping with IKEA has become easier with the development of the e-commerce, which has forced to increase their profit targets. It might fall short of its targets due to its expansion into existing and new markets, as the company is facing problem with the high set up costs and low spending power, and some other hidden issues in the developing market.

Conclusion

Its marketing strategy has gained IKEA its expansion into the Asian and the US. As furniture items are not bought very often, IKEA has emerged as good marketing company to promote its business. It has good understanding of the needs of the customers and lot of research, time and resources has been used in understanding the needs. Kampard himself has spoken to its customers in person, in one of his rail trip. He has asked customer about what do they feel about the company and what changes should be made in their store. One of the customers suggested introducing food court, and therefore he came up with the idea of introducing food court, as the company was losing customers in the lunch time. It always comes up with innovative ideas to promote its brand, by means of sponsorship, advertisement and other campaigns. It spends about £ 10 million in the UK, about € 4.3 million in France, and about € 1.5 million in The Netherlands, on advertisement which shows that a lot of money is spend on marketing.

IKEA is well known in the Europe, but it has recently come up in the UK and the US, so it should spend more effort in marketing in these countries, as these countries have a huge market. Culture plays an important factor in the international market, and there should always be a balance in culture consideration, as too much culture consideration can weaken the company's global strategy and too less consideration can weaken local consumer's loyalty. But IKEA has emerged out to be a better company in balancing the culture consideration in the global market.

We think IKEA is a marketing company to a considerable extent, but still its marketing is falling short against the huge company.

Reference

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