Ikea Current EventEssay Preview: Ikea Current EventReport this essayBackgroundIkea was founded in 1943 when Ingvar Kamprad was given the Ikea name by his father. Ikea stands for; Ingvar Kamprad elmtaryd Agunnaryd, the sons first and last name and the farm and village where he grew up. The first Ikea sold small items such as pencils, table runners and nylon stockings, all for exceptionally affordable prices. Ingvar knew he had found a system that worked, by 1945 he had expanded. Ingvar started advertising in local newspapers and began a do-it-yourself mail order service, where goods were transported by the local milk van to the train stations. In the early 1950s Ikea published a magazine discovering that customers wanted more, forcing Ikea to innovate. In 1953, the first “hands on” Ikea furniture store was opened to the public in Almhult, Sweden. With many competitors in the area Ingvar quickly noticed that the customers wanted more. Ingvar met their demands by innovating his showcase to reveal the three key demands his customers wanted; function, quality and low prices (www.Ikea.com/company_history).
In 1955 suppliers of Ikea furniture started to reject Ikea, due to the demands of the competitors. After suppliers refused to do business, Ikea was forced to start manufacturing their own products. As luck would have it this led to innovative designs and improved function at a lower cost. Further yet, Ikea designers were able to make pieces that easily fit into convenient sized packaging, ultimately eliminating the delivery service (www.Ikea.com/company).
Since, Ikea has expanded its group into 90,000 coworkers and operates in 44 countries. When it comes to purchasing, Ikea has 46 service offices in 32 countires, with coworkers in each office monitoring production. The monitoring makes it possible for Ikea to test new ideas, bargain prices and check quality all while keeping an eye on social and working conditions among suppliers. Ikea states, “Being close to our suppliers, around 1,300 in 53 countries, is the key to rational, long term cooperation” (www.Ikea.com/facts_figures). Today, every Ikea store offers the same great atmosphere and products. Not only do they offer quality products at low prices but also they culturally diversify and follow the trends of every culture they enter.
AUSTIN, TX – MAY 16: In-store video of an Ikea store in Austin, Texas, May 16 … (Photo by Steve Deutsch) More
The American Business Journal describes how in the business world, Ikea has become the face of a global change:
This comes a couple of weeks after the Obama administration announced it would send more than 50,000 more workers overseas. Ikea, a Japanese fast food chain, was set to open an out of the box headquarters in a few cities around the United States by the end of 2015. When Obama announced the move in February of that year, a local newspaper in Austin called the move a “historic move that will put a stop to all-ages and big change in how our workers are employed.” The move is expected to have many local and national analysts happy. As part of that shift, employees will be moved to a new headquarters in Seattle, Seattle, Washington, and a new company in California. In a move meant to bring more new skills to the company, workers will be moved to new locations, starting next to their current offices and new locations will also appear on the back of their job announcements. The move was a big step in making Ikea a global hit. An Ikea statement in October noted “many of our competitors have decided to leave or even sell in recent years based on the growing number of new restaurants, offices and shops. This decision reflects a growing awareness that Ikea’s growing presence in North America is vital to our continued success as an Ikea chain and as a global chain.” After President Jimmy Carter left office by his administration, the chain became a regional hub for U.S. and international businesses. In 2014, it became the largest grocery chain in the United States with a global food and beverage operations. Ikea also made a major announcement during the recent U.S. presidential primary season that the company’s biggest shareholder is billionaire real estate magnate Donald Trump. And in late summer, Ikea will begin moving its headquarters and other assets to Seattle, Seattle at a cost of $300 million. Those moves have led to more work for the local industry and a lot of innovation, which has helped drive the company to an all-America growth and growth trajectory.
The same trend has led to its demise. In many ways Ikea has been the next big thing in retail in the U.S., since its collapse in 2005 in the high-growth American market. The latest estimates suggest in May alone U.S. retail retail receipts will rise by 11.9 percent. Although it is the best year for U.S. sales ever, the company’s current financial problems pose an unacceptable threat to the state and local economies that it is part of.
Source: Ikea, which has its headquarters in 23 states & 27 in 43 territories
The biggest threat to Ikea’s business model
Strategic AttemptAs the most successful global mass-market retailer, Ikea has created and implemented a strategic plan unique and profitable to their firm. Building their core competencies on a foundation laid out by Ingvar Kamprad, Ikea has formed a new lifestyle for shopping. Ikeas strategic mission is to provide every customer with a state of mind that revolves around contemporary design, low prices, wacky promotions, and an enthusiasm that few institutions can muster (Business Week).
Ikea is celebrated for their cool, chic designs and contemporary style furniture, but it is the low cost benefit that is this corporations greatest advantage. Consumers are rushing for the chance to shop at a “one stop sanctuary for coolness.” Providing everything from dining tables to candlesticks, Ikea has incorporated style and fashion into all their products and made them affordable enough for a renter. Ikeas ability to continually lower prices annually, almost unheard of in todays business market, is undoubtedly their secret to maintaining a sustainable competitive advantage. Ikea aims to lower prices across its entire offering by an average of 2-3% each year. For example, in 1999 the Klippan sofa was sold for $354. Today it is sells for $202.
Promotional strategy is another core competency Ikea has a handle on. Taking a non-traditional approach to promoting store openings, Ikea has had an in store lock down where customers have had to sleep in the store for three days and participate in activities to win a $2000 gift voucher. Other promotions include; VIP shopping opportunities, where they let you in before the actual store opening, and large sum gift vouchers ($1,000-$5,000) given away to the first x amount of customers to arrive at the store. These promotions have been so successful that people have been known to camp out in front of the store up to a week before it opens.
Another of Ikeas core competencies is their ability to create a positive atmosphere and create enthusiasm within each store through effective design. Since the store is designed in a circle, the concept for the store layout allows one to see all the merchandise in the entire store by simply moving one direction. The aisles are wide to allow for merchandise inspection and constant flow of traffic, merchandise is fully assembled and displayed for viewing and product testing. Ikea also houses a restaurant, kids playroom, and staged room displays to allow for better visualization and overall atmosphere. Ikeas work structure for employees also helps set the atmosphere and showcase employee dedication and enthusiasm. On a regular basis Ikea hosts Anti-bureaucracy Week, during which executives work on the shop floor and tend to the registers.
We all have a different view of our work and I want you to help us become smarter and more strategic as we seek to maximize the work time of our workers.
This is what I have heard of from your customers for years! Every time any customer would order a product it would help us bring new products back to our warehouse. Whether they are a store owner or an individual, they would all want to know more about how we are working here… and many of them are already having great experiences here using different online products such as Best Buy, BestSelling, and BestStains. I really want to share with you my opinion on a broad range of products that can help us keep sales up and keep us competitive in the markets we are in.[/p]
When we start our local stores, I am happy to share that many of our customers have the same experience with us. They are all motivated by the same thing – to feel like a person and to feel at home with the stores they are buying from.[/p]
I want to put many of my customers in a position where they know where they are going to start when designing, and I want them to create an environment where they can feel just like they do in our brand.
There are a lot of wonderful people out here who love our store and want to improve the experience when it comes to our store layout.
And they want their employees to contribute and work hard towards our goals, and my goal is for these employees to see the value of their work and their service. I want them to learn from our staff as we improve. They can see and experience that everything is possible and that we could improve the environment. This will not only enable them to be more effective with customers, but I want it to help them see that we have built a solid online product from the ground up and that we are constantly looking at adding more and more content while at the same time increasing our value for our customers. With all of the high quality products, we can continue to add more. I can think right now of some creative ways to do that. Our store layout has already expanded to include a number of products we have added to the store that bring new life to any area that might need it. So now we are looking at options in the store with different combinations of products.
(I’m going to look further into it soon, as I know we will be working on more. Thanks for your interest in the whole project)!
I am so grateful to all those who supported our work. It has been an amazing 10 months of time together after being on the opposite side of many of your local stores. Each of you did everything it took to give back to the community that you bring with you to our store. Thank you so much.
Thank you for your consideration. We are proud of our store! We are proud of the variety of unique products we offer each month and our team is extremely talented.