Marketing and Ikea Essay Example

woods is the primary product manufactured and exported by the industry in nearly every country. Traditional furniture-producing countries account for more than 70% of the global market.

Thanks to their well-established production capacity, advancements in science and technology, solid funds, and rich management experiences, some countries and regions have become capable of covering almost 30% of the world market. This development is most notable in China, Southeast Asia, Poland, and Mexico, with China leading the way. These countries are witnessing strong growth in their furniture industries and displaying great potential. The European Union furniture industry alone contributes approximately half of the global furniture production.

The production value of this industry in this region is approximately 82 billion, employing about 1 million individuals. Among European countries, Germany leads in furniture production with around 27% of total export production. Italy follows with 21.6%, France with 13.5%, and the UK with 10.4%. In South East Asia, the major furniture producing countries include the Philippines, Indonesia, Malaysia, Singapore, Thailand, Korea, Taiwan, and India.

Asia is experiencing strong growth in its lobar furniture trade compared to countries like the USA, Europe, and Australia. China, in particular, has shown remarkable growth over the past 20 years, offering abundant business opportunities and vitality to the global furniture industry. Besides being a major production center, China has now also become a hub for circulation and exhibition of furniture. This growth has sparked a restructuring of the global furniture industry and trade patterns.

The Indian furniture industry is worth approximately 350 billion, with the unrecognized sector accounting for 85% of this. The World Bank has conducted a study which states that the organized furniture industry

is projected to grow by 20% annually, resulting in a boom for India, Brazil, and Russia.

IKEA Company Background

KEA, established in 1943 in Quandary, Sweden, by a 17-year-old Swede named Angina Kampala (lake; History, 2013), is the result of Kampala's entrepreneurial spirit. He set up his own business, offering affordable products that fulfilled various needs (KEA; History, 2013).

Kampala commenced his business by selling various items such as pencils, wallets, leery, picture frames, and watches. He adopted a strategy of buying goods in bulk to reduce costs and passed on some of the savings to his customers. In 1947, Kampala expanded his range of products to include furniture, which proved to be highly popular. In order to maintain affordability, he procured furniture from local manufacturers located in nearby forests. As the business continued to grow, Kampala faced challenges in making individual sales calls and, therefore, resorted to advertising in newspapers.

In 1951, a product catalogue was designed by Angina and distributed to nearby potential customers of his store. The company name KEA was formed by combining Angina's initials (I. K) with the initials of the farm name (Elementary (E)) and the village he grew up in (Quandary (A)) (KEA; History, 2013). KEA's blue and yellow logo was inspired by the colors of the Swedish flag (KEA; How KEA Works, 2013). After eight years, Angina shifted his focus to becoming a furniture provider on a larger scale, leading him to discontinue all other products except for low-priced furniture (KEA; History, 2013).

KEA is renowned for engaging its customers in various stages of the product experience, including searching for products, selecting them at the in-store

warehouse, bringing them home, and assembling them themselves. (Arnold ; J, 2002). In 1953, KEA inaugurated its initial furniture showroom in Almost, Sweden, allowing customers to physically interact with and evaluate Kike's furniture prior to placing orders. Due to KEA's exceptionally competitive pricing, its competitors compelled suppliers to refrain from supplying to 'KEA.

KEA began designing and engineering its furniture and then outsourced the manufacturing to Eastern European countries, predominantly Poland, in 1955. The goal was to create affordable, stylish, and functional furniture. In the same year, one of KEA's employees decided to remove the table legs to facilitate transportation and minimize damage. This prompted KEA to experiment with flat packing in 1956. Recognizing that flat packing would significantly reduce transportation and storage costs, the company started designing furniture that could be easily packed in a flat format.

KEA opened its first store in Almost in 1958, marking the company's initial venture. By allowing customers to transport and assemble products themselves, KEA identified an opportunity to reduce costs significantly. As a result, the furniture was sold at approximately 30% lower prices compared to competitors. Expanding beyond Sweden, KEA established its first store in Oslo, Norway, in 1963. Shortly after, in 1965, another store was opened in Stockholm, Sweden. During this time, the self-serve concept was introduced, with customers given access to written material and information desks to learn about the products on display.

The customers were invited to choose the products they liked without any sales staff pressuring them. This improved the shopping experience as there were no salespersons constantly pushing for purchases. Customers received tickets for their purchases and were instructed to pick up

the goods at delivery docks. Door delivery service was not provided, so customers had to arrange their own transportation. They had the option to purchase car racks or rent self-driven vans. KEA expanded into multiple European countries, and by 1974, there were 10 KEA stores across five European countries.

KEA moved its headquarters from Almost to Copenhagen, Denmark because of the latter's central location, making it the perfect choice to support the company's European expansion plans. In 1974, KEA experienced significant success in Germany when it opened its first store. By 1980, an additional 10 stores had been established in Germany. KEA also expanded internationally by opening stores in various countries including Australia (Sydney in 1975), Canada, Singapore, Canary Islands, Iceland, France, Saudi Arabia, and Kuwait. The company entered the US market in 1985 with a store opening in Philadelphia, Pennsylvania.

The company chose to keep the same product assortment and specifications in all of its stores globally, including the US. However, this strategy did not succeed because of the contrasting lifestyles of American and European customers. Consequently, adjustments had to be made to products like beds and kitchenware to better cater to local needs. Nevertheless, the Scandinavian style and design were still upheld. In 1986, Kampala shifted from being CEO to serving as an advisor for SIFT.

By 1990, KEA had 89 stores in 21 countries and had diversified its sources of supply, including countries such as China. Initially, KEA primarily relied on Eastern Europe for its products, but as it expanded, its reliance on this region decreased. Around 25% of its supplies in the 1980s were from Eastern Europe, but this decreased to

15% by 1990. Similarly, KEA's dependence on Scandinavian markets for revenue also decreased from 85% in 1975 to 26% in 1990.

In 1991, KEA established Edgewood, a furniture manufacturing subsidiary, focused on producing wooden furniture and components. During the sass period, KEA expanded its presence into Taiwan, Malaysia, Spain, and China. In 1997, KEA took its business online with the launch of www.kea.com, offering customers an online product catalogue. Additionally, in the mid-sass, KEA introduced a separate product line exclusively designed for children. In 2000, KEA implemented The KEA Way, a Code of Conduct for its suppliers in the purchasing of Home Furnishing Products.

It outlined specific issues such as minimum wages, the prevention of child labor, and the provision of amenities for workers at suppliers' facilities, as well as external environment and forestry management. KEA moved its headquarters to Elided in the Netherlands in 2001. During the mid-sass, as KEA's European markets became saturated, the company shifted its focus to the Asian, Russian, and US markets. In 2006, it opened its first store in Tokyo, Japan. As of August 31, 2012, the KEA Group operated in 44 countries, with 30 service trading offices in 25 countries.

The KEA Group operated 33 distribution centers and 11 customer distribution centers in addition to their 298 stores across 26 countries.

IKEA Corporate Structure Figure

IKEA Corporate Structure

IKEA Group Companies

The KEA Group Companies focus on performing essential tasks to bring KEA products to the market. These companies consist of Edgewood, KEA of Sweden, Purchasing, Distribution, as well as other departments like Human Services, Internet Technology and Communications. (lake Corporate Structure)

ANGINA Holding

B. V. ANGINA

Holding B. V. S, the parent company for all of the KEA Group companies governed by a Supervisory Board, has Angina Kampala serving as Senior Advisor and his son Matthias on the Supervisory Board. The KEA Group companies include KEA Services B. V. and KEA Services ABA, which consist of nine divisions in Sweden and the Netherlands. These divisions support the work in all the KEA Group companies (lake Corporate Structure, 2012).

Stitching ANGINA

The privately held company Foundation KEA is owned by Stitching ANGINA Foundation, a registered non-profit based in Elided, Netherlands. The control of Foundation KEA lies with Stitching ANGINA Foundation.

The Kampala family established the Dutch foundation in 1982 to maintain control and minimize taxes. The foundation, worth IIS$36 billion in 2006, had tax benefits as trusts and foundations. Its main objectives are to hold shares, reinvest in the KEA Group, and provide funding for charity through the Stitching KEA Foundation (lake Corporate Structure, 2012).

Business Vision and Mission

The business vision of KEA, which dates back to 1976 according to the KEA Group Early summary (2012), is to create a better everyday life for the many people.

The essence of this vision is to provide a range of furniture options that are both visually appealing and practical, while also being affordable for most customers. The founder has always valued profitability and affordability, which has been a driving force since the company's beginning. IKEA's mission is straightforward: to offer a diverse selection of furniture and accessories at reasonable prices, ensuring accessibility for the majority. By offering a wide assortment, the emphasis is on functionality, allowing customers

to find all their needs in one convenient location.

That's why you can find everything at 'KEA. 'KEA, 2011) Low prices are one of the cornerstones of Kike's concept (KEA, 2004). Due to Kike's founder's mentality, KEA stress low prices which Angina Kampala came from SMS;land, a poor farmer area, where employees received low wages and one had to make the best of it. Counterattacked Kike's business idea, which was part of his Our Business Ideas has always been to give people with thin wallets a chance to furnish their homes in a beautiful and functional way. We call it "democratic design". (KEA Group Early Summary, 2012).

That is the reason why at 'KEA, you can find everything. ('KEA, 2011) Kike's concept is built on low prices as one of its main principles. (KEA, 2004) Kike's founder's mentality, rooted in a poor farmer area called SMS;land where employees received low wages and had to make the most out of it, influenced the emphasis on low prices at KEA. This countered Kike's business idea, which has always been to give those with limited financial resources the opportunity to furnish their homes in a beautiful and functional way. This approach is referred to as "democratic design" by KEA. (KEA Group Early Summary, 2012).

Initially, the business idea focused on catering to Kike's customers. However, it has now expanded to include KEA co-workers, employees of KEA suppliers, and the overall environment. Kike's core values of unity, excitement, constant innovation, and dedication towards achieving their goals will guide them through various stages, regardless of their size.

The IKEA concept

The KEA Concept focuses on providing a diverse

selection of affordable, well-designed and functional home furnishing products.

The KEA Concept aims to make home furnishings accessible to a wider range of people by offering affordable products. It encompasses the process of designing, manufacturing, transporting, selling, and assembling KEA products. This holistic approach turns the KEA Concept into a tangible reality. (Copra, 2009)

IKEA Range

The KEA product range satisfies fundamental activities with its diverse selection of well-designed and functional home furnishing products.

The KEA range offers products for all areas of the home, as stated by Copra in 2009. The approach taken by KEA designers is different from most retailers. While others use design to justify higher prices, KEA designers use design to ensure the lowest possible price. They begin designing each KEA product based on its functional requirement and price. They leverage their extensive knowledge of cost-effective manufacturing processes to create functional products that are often coordinated in style. Furthermore, they strategically purchase large volumes to further reduce prices.

Most KEA products are designed to be transported in flat packs and assembled at the customer's home, which helps reduce transportation and storage costs and ultimately lowers the price (Copra, 2009). KEA designers constantly strive to improve people's lives without breaking their budgets. They aim to combine good design, function, and quality while keeping the prices low. Even the smallest details, like improving the function of a table-top, are taken into consideration.

KEA designers prioritize affordability, recognizing that a product lacks value for the customer if it is not affordable (Copra, 2009). To ensure low prices, KEA designers leverage production capabilities from different sectors in innovative ways, such as outsourcing furniture upholstery

to a separate factory or repurposing leftover materials from one product to create new ones. Additionally, KEA customers play a role in maintaining low prices.

According to Copra (2009), customers personally choose and collect the products, transport them to their homes, and also assemble them on their own.

Goals

KEA's business philosophy revolves around four key goals: creating a sales department that operates with great efficiency, introducing creative concepts for home furnishing, delivering customer service on par with leading furnishing stores, and promoting KEA as a family-friendly shopping destination. Throughout its history, KEA has remained dedicated to both individuals and the environment.

KEA's goal of improving the daily lives of the masses is central to their business. They have addressed the increasing public demand for sustainability by selecting sustainable products, suppliers, stores, and communication methods. As a result, KEA encourages suppliers to maximize their use of raw materials and energy, reducing costs and helping the company achieve green goals while benefiting the environment. (Adamant, Theory, Adele, Sesame, & Yakima, 2011)

Environment and Corporate Culture

KEA is committed to protecting the environment and minimizing any harmful effects. In line with the "green" trend followed by most customers, KEA's suppliers are focused on reducing waste that pollutes the air, water, and ground. They accomplish this by using recycled or recyclable materials and sourcing wood from known areas. Moreover, suppliers must avoid using components listed as chemical 'Compounds and Substances', as well as woods from national parks, nature reserves, or areas with high conservation values. Certification is required for the use of woods by suppliers.

KEA collaborates with several organizations such as trade unions, Nags, EUNICE,

Save the Children, and WFM. Alongside these partners, KEA prioritizes enhancing children's rights while advocating for responsible forestry practices, better cotton cultivation, and the reduction of CO emissions (KEA, 2011).

Organization

The culture at KEA is characterized by enthusiasm for our values, a constant desire to innovate, a willingness to take on responsibility and help others, and a humble approach to our tasks. We prioritize simplicity in our behavior and aim to create a family-friendly environment for our employees. Our organization does not have a noticeable hierarchy, meaning even managers may engage in tasks like stocking shelves. The design team is granted autonomy in their work but are expected to regularly create new and appealing products. This corporate culture is deeply rooted in the philosophy of sustainable development and an ongoing commitment to improving all aspects of our value chain. This approach effectively aligns with KEA's future strategies and shapes the industry accordingly.

The culture of the company focuses on efficiency and low cost without compromising on quality or service.

IKEA Corporate Social Responsibilities

KEA recognizes the potential of aligning conventional business goals with social and environmental responsibility in order to benefit a wide range of people. KEA aims to play a crucial role in promoting a low carbon society and making substantial reductions in its carbon footprint across all areas of operation.

KEA Cars focuses on three main areas of activity: Children, better living, and environmental projects. The company aims to minimize the impact of its products on the environment and to ensure that they are manufactured in a socially responsible manner. This includes lowering prices, but not at the expense of

ethical production. Additionally, KEA stores and national retailers are actively involved in various social responsibility projects aimed at improving overall wellbeing and reducing environmental impact.

Organizational Structure and Management

The present organizational structure is characterized as highly functional with a global market strategy. This enables KEA to maintain centralized control over functional activities while benefitting from low cost and improved quality from international suppliers. Additionally, this structure enhances control over strategic decisions and reduces functional lay-offs. In order to streamline the logistics process, the organization has integrated purchasing and distribution processes into a single umbrella function.

As KEA expands globally, the need for centralized strategic direction becomes more crucial. The headquarters in Sweden face various challenges due to the rapid internationalization, such as the increasing complexities of meeting national needs and addressing cultural differences. Moreover, emerging demographic trends and the need to cater to diverse consumer groups at a national level also impact KEA's focus. These factors can affect the maintenance of KEA's global organizational structure.

The solution to the problem is to strike a balance between the autonomy of each country and central intervention by increasing the autonomy of subsidiaries and franchisees. Due to logistical challenges and long lead times, KEA needs to ensure that its suppliers offer high quality, technology transfers, and economies of scale. This also helps to prevent potential suppliers from creating competitive products for Kike's local competitors. Without Kike's centralized logistics system, there could be severe shortages in stores.

IKEA Business Strategy

KEA is a cost leader in the home furnishing market thanks to the efficiency of their internal production. The company's suppliers are typically located in low-cost

countries and have convenient access to raw materials. These suppliers offer standard furniture on the market. Due to its size, KEA has the ability to purchase large quantities of furniture and often receives significant discounts, a concept known as economies of scale. By effectively combining low-cost furniture with high quality, KEA has successfully established itself as a formidable brand.