E- Business of Ikea Essay Example

2005), and providing functional products at a very affordable price, while their customers provide self service, home transport and self assembly. This works in favour of both participants in an exchange, as it saves both the company and the customer considerable costs.

This cost saving is also a source of IKEA’s competitive advantage. IKEA provides consumers with the most intelligent products at this price point (Comment-leader: Another clever move by Ikea? 2006). The philosophy of “We do our bit, you do your bit and together we save money” exemplifies theses beliefs and helps to communicate this to consumers. Another of IKEA’s competitive advantages is the use of economies of scale (IKEA expansion brings new jobs to communities, economic benefits to cities and affordable furnishings to homes across America, 2004).Economies of scale refers to the notion of increasing efficiency of production as the number of goods being produced increases, which is associated with bulk buying. These competitive advantages are unrelated to IKEA’s e-business strategy.

Combining traditional retailing with electronic retailing IKEA currently has a multichannel business model (Turban et al 2008), and combines physical retail megastores with electronic retailing. The website was created to support their traditional business activities (Kemp, E 2006) as it permits business to consumer transactions.This is an example of a clicks-and-mortar business, as physical products of furniture and furnishings are being sold, with a physical process of delivering and transferring the products, however there is a mixture of in store sales (physical agents) and online sales (digital agents) (Turban et al 2008). Initially only 70% of the furniture range was available online (Jones 2007), with products such as sofas, bedding and lighting available online,

however Swedish food products remain available only in the physical store (IKEA rolls out UK e-commerce site, 2007).

This business model is promising as it allows IKEA to retain its loyal customer base as well as gaining new online consumers. The loyal customers, who visit the physical agents, are able to continue as they usually would, and their expectations remain fulfilled. In conjunction, customers who were unable to access stores are now able to make online purchases. This strategy is based on capitalisation of a trusted and well-known brand name, like IKEA, which has been in operation since 1943 (Kippenberger, T 1997).

The e-strategy ww. ikea. com was developed in response to changes in demand and negative publicity; it has resulted in increased costs and unsustainability for the business. In 2005, IKEA planned to move beyond the “We do our bit, you do your bit” marketing strategy by working on an online strategy. The 15 megastores located in the United Kingdom were plagued by “overcrowding and poor consumer experiences” (Jones, G 2007, Carroll, B 2007) especially during the opening of a store in Edmonton, which resulted in a riot and negative publicity.The website aimed to make the company more accessible, more flexible, and able to cater to the increased demand among UK consumers (Jones, G 2007), which reflects IKEA’s ability to adapt to changes and opportunities in the environment.

The digital marketing specialist, Agency. com was hired to manage IKEA’s online customer relationship management, by increasing brand loyalty and recruiting new customers, as well as to launch the electronic commerce programme and website design (Kemp, E 2006).Customer relationship management provides customers with superior customer care, as problems are

easy and quick to resolve, information can be accessed easily, and a wide variety of products and services can be offered (Turban et al 2008). Sensitivity and good customer relationship management is vital to IKEA’s success. IKEA’s website and online shopping experience is quite similar to many other electronic retailers.

There are special offers advertised on the main page (http://www. kea. com/gb/en), customers are able to register and login, there is an easy to use search function, so that customers are able to find and purchase products, as well as a complete “Product A-Z” list. Navigation is simple, even for first time users, as there is no clutter, and labels are clear. The site provides a concise, step-by-step page that describes how to make a purchase online, this is very useful for new customers, but is not irritating to experienced buyers.IKEA also provides the opportunity for consumers to register to receive a newsletter, a one-to-many communication device becoming more prevalent in e-businesses.

Difficulties implementing the e-strategy Electronic commerce involves high costs that compromised IKEA’s ability to offer customers the best and lowest price, a value at the company’s core (Carroll, B 2007). Additionally, spokesperson Mona Liss acknowledged that there had been some difficulties for customers to complete the process of placing an order online.From the start, IKEA treated furniture purchasing as a journey and built the shopping experience around that idea (Novosedlik, W 2005), IKEA’s online manager, Allan Lidforsen said it is difficult to translate IKEA’s “brand values and visual identity to the internet” (Carroll, B 2007), so the physical shopping experience is partially lost by online shoppers. These issues resulted in Anders Dahlvig’s decision to cease

further investments to develop the online store (Carroll, B 2007).

IKEA is now redirecting their focus to the in-store experience as a sales channel, although Dahlvig said that the website will continue as “an important communication channel to recruit, inspire and prepare customers for their visit to [a physical] IKEA store”. The established United Kingdom online store will continue to run, to prevent the issues that preceded its implementation. Conclusion The success of IKEA has been based upon the sensible treatment of suppliers as well as the logistics system, understanding of customers and their changing needs, and the ability to adapt to changes in the environment.IKEA was unable to meet the demand of consumers in the United Kingdom, and chose to react to this situation by implementing an e-business strategy. The e-business strategy increased the accessibility of products for consumers via a website; however the development of this strategy was outsourced to Agency. com and was quite expensive.

Even though the website is effective, this increased costs, and impacted upon IKEA’s ability to deliver low-cost furniture and furnishings, and also provided no competitive advantages.It was eventually decided that the e-strategy was unsuccessful and the CEO, Anders Dahlvig chose to discontinue further development of the online store.

References

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