IKEA Crossing Cultural Boundaries

IKEA Crossing Cultural Boundaries

IKEA: Crossing cultural boundaries to furnish the globe

IKEA is an internationally known home furnishing retailer. It has grown rapidly since it was founded in 1943. Today it is the world’s largest furniture retailer, recognised for its Scandinavian style. With product names such as ‘klippan’, ‘poäng’, ‘färgrik’, ‘jerker’, and ‘snodd’, IKEA, has developed into the world’s biggest home furnishings retail chain. The company’s quirky and identifiable Swedish image has proved popular with consumers all around the world for decades.

Since it was founded IKEA has always had concern for people and the environment. The IKEA vision ‘to create a better everyday life for the many people’ puts this concern at the heart of the business. IKEA has responded to the public’s rising concern for sustainability in its choice of product range, suppliers, stores and communication. It has also spotted business potential in providing sustainable solutions. IKEA’s concern for people and the environment encourages it to make better use of both raw materials and energy. This keeps costs down and helps the company to reach its green targets and have an overall positive impact on the environment. (Case Study Excerpt)Read the instructions below:
IKEA is proposing on opening a store in New Zealand. The owners of IKEA hired your advertising agency and have sent you brief information about their company (IKEA case study). As a Communications Manager, your
task is to analyse the company and its current marketing strategies and tactics. Based on your analysis, you are to recommend tactical marketing strategies to promote IKEA to New Zealand consumers especially the ‘do-it-yourself’ (D.I.Y.) consumer market but ensuring it is within IKEA’s mission, values and strategic objectives.

Additionally, your Creative Director has requested you to provide additional information on negotiation skills in dealing with the Swedish owners. You are to prepare your marketing communications brief and report back to your Creative Director based on the following tasks assigned to you.

TASK 1
Prepare a comprehensive background analysis on IKEA covering the following sections:
• History of IKEA
• IKEA’s organisational structure
• Vision & mission statements and how it helps achieve IKEA’s objectives
• Core values & beliefs to reflect IKEA’s identity
• Product portfolio offered by IKEA

History of IKEA

IKEA is a global retailer recognised for its DIY ready-to-assemble furniture. The company was a product of innovation, perseverance, and diligence of Ingvar Kamprad, its Swedish founder (Jonsson & Foss, 2011). At 17 years old, Ingvar was given a cash reward by his father for good performance in school. He used the money to start IKEA. At the initial stages, Kamprad started selling and delivering merchandise using milk trucks. By 1947 he diversified the business by introducing furniture manufactured by the locals. He later began to introduce revolutionary ready to assemble furniture designs by focusing on simplicity, quality, practicality, and affordability.  From then on, the company started to expand by opening stores in different states like Denmark, Norway, Switzerland, Germany, and other European nations.Organisational Structure

IKEA applies the functional organisational structure. We can define the functional structure as a framework whereby various teams are assembled into particular groups according to experience or specific assignments. Besides, all the company’s franchisees are independent (Hultman et al., 2012). Most of the franchisees are owned and managed by the INGKA Group. INGKA Group and Inter IKEA Group were founded by the same person. Inter IKEA entails three core businesses: IKEA Range, IKEA Industry and Supply, and Inter IKEA Systems B.V. The Inter IKEA System is the entity’s worldwide retailer that handles franchise contracts with twelve franchises in close to 50 markets (Jonsson, Rudberg, & Holmberg, 2013). The IKEA Range and Supply manufactures and supplies products for the furnishing and home improvement chain. At the same time, the IKEA Industry produces more than 10 per cent of the entire range of home furnishing products supplied by the firm. In 2016, the company implemented a significant restructuring initiative to clarify roles and improve its franchise system. The restructuring saw it transfer its production and supply activities to its Inter IKEA group managed by the Inter IKEA Holding B.V.

Mission and Vision

IKEA has a simple vision statement “to create a better everyday life for the many people”. The entity’s vision statement also explains its mission (IKEA, n.d.). However, the mission statement tends to be broad and does not include things like customers, products and other vital aspects of the business like financial strength, culture, and competition. IKEA’s mission and vision support its business strategy, which is to develop and design sustainable products based on everyday consumer needs, keeping prices affordable and offering attractive, reliable, and functional furnishing solutions.

Core Values and Beliefs to Reflect IKEA’s Identity

Core values can be defined as fundamental beliefs or guiding principles that dictate the behaviours and operational strategies of people and businesses. IKEA has strived to be innovative, creative, common-sense problem solvers, and straight-forward (IKEA, n.d.). Its core values include cost-consciousness, taking care of the planet and customers, togetherness, simplicity, uniqueness with a reason, renewing and improving, acting as a role model, and giving and taking responsibility. The core values have shaped IKEA’s identity as a low-cost furniture supplier, that capitalises on quality, sustainability, and innovativeness.

Product Portfolio Offered by IKEA

IKEA products can be categorised into various groups: kitchen and appliances, bathroom, beds and mattresses, furniture, home textiles, rugs, baby and kids, and storage and organisation. The company also deals in lighting products such as integrated lighting, outdoor lighting, led light bulbs and smart lighting (IKEA, n.d.). Other categories include cookware and tableware, home décor, home electronics, home improvement, laundry and cleaning, pet accessories outdoors, home and safety, gardening and plants, as well as the IKEA food and restaurant.TASK 2
Analyse two (2) potential competitors in New Zealand and provide a comprehensive appraisal of the competitor’s strengths (2 points) and weaknesses (2 points) supported with examples. Your appraisal must be supported with evidence of research.

Competitors in New Zealand

The two major potential competitors of IKEA in New Zealand are Danske Mobler and Freedom Furniture. Danske Mobler is known as one of the oldest beacons of Scandinavian designer furnishing products in New Zealand (Danske Mobler, 2015). It was developed by Bente Winther and Kaj in 1962. Similarly, Freedom is a leading furniture and homewares dealer with more than 58 stores in New Zealand and Australia. The business is owned and managed by Greenlit Brands.

Strengths and Weaknesses

Freedom deals in extensive furniture ranges, including both modern and classic furniture. Customers can order for single pieces or whole ensemble, contemporary, and quality craftsmanship designs (Freedom, 2017). The main strengths of the company include customer knowledge and diversified product portfolio. The company’s product portfolio includes furniture care, entertainment, home and office, dining, bedroom, outdoor, living, armchairs, sofas and reduced to clear furniture. Having been founded in 1981, the company enjoys more excellent customer knowledge concerning its brands which can give it a competitive advantage against IKEA.

However, the company has continued to operate at a loss despite numerous attempts by its executives to increase its sales volume. For instance, in 2016, it reported an amount of 393000 dollars in losses with claims that it required financial assistance from its parent entity (Freedom, 2017). This can be seen as a significant weakness. Another weakness is that the company is still depending on the support from Steinhoff Asia Pacific Group Holdings, its parent company, to continue trading. In 2017, PWC drew attention to the company’s financial report claiming that its net current liabilities amounted to 33335000 as at October 1, the same year. It shows that Freedom does not enjoy substantial retail exposure in New Zealand.

Danske Mobler has been praised for its leading innovation and professional service to its clients. The company focuses on innovation to showcase quality, style, design, and fabulous furnishings (Danske Mobler, 2015). It a variety of leather and fabric lounge suits and that suit its customers’ living rooms. The company also has a group of highly trained employees that provide quality services to its customers.

Nonetheless, Danske Mobler’s key weaknesses include lack of geographical diversification and limited size. The company has a limited target market as it has restricted its operations to the New Zealand market (Danske Mobler, 2015). Besides, the company has a small size and revenue structure, which may make it less competitive compared with other companies like IKEA, which are highly diversified with operations in various markets globally.

TASK 3
Based on the case and your own secondary research, conduct a SWOT analysis on IKEA. Analyse two (2) key points for each factor and appraise its impact on IKEA’s tactical marketing strategies. Justify your key point with an example. Your appraisal must be supported with evidence of research.

TASK 4
Based on the case and your own secondary research, appraise IKEA’s current marketing strategies as follows. Your analysis must be supported with evidence of research.
• Segmentation strategy: Appraise the segment profile IKEA caters to focusing on customer demographics, lifestyle and purchasing behaviour. Justify your answer with examples.
• Targeting strategy: Appraise the targeting strategy applied by IKEA. Justify your answer with an example.
• Positioning strategy: Appraise IKEA’s positioning strategy which helps to differentiate their brand. Support your discussion by constructing a perceptual map of IKEA’s position in the homeware/DIY retail market. Your perceptual map should be based on two (2) product attributes.

TASK 5
Based on your analysis from Task 2, 3 and 4, analyse IKEA’s tactical marketing strategies (4P’s) applicable in the New Zealand market. Your analysis should be supported with evidence of research focusing on attracting the New Zealand’s D.I.Y. consumer market.
• Product strategy: Analyse IKEA’s products/services based on the three (3) product levels. Justify your answer with examples for each level.
• Price strategy: Analyse one (1) pricing strategy of IKEA. Justify your answer with an example.
• Place strategy: Analyse one (1) distribution strategy of IKEA. Justify your answer with an example.
• Promotion strategy: Analyse any two (2) traditional promotion mix strategies that should be applied by IKEA
in the New Zealand market.
Justify your answer with an example for each strategy. Each example must indicate if it will be a standardised or localised message strategy and should demonstrate the application of one Aristotle’s persuasive techniques in advertising.

TASK 6
Based on your previous success of developing promotional strategies in a multicultural context, your Creative Director has asked you to propose digital marketing communication strategies for IKEA New Zealand. Your proposed idea should convey some of IKEA’s core values to the wider New Zealand consumer market including incorporating Maori cultural values.
Your proposal should be based on the elements of the 6C Model of Social Media Engagement. Each element must be well justified with an example.

TASK 7
The chart below shows a comparison of Sweden and New Zealand based on Geert Hofstede’s 6 Cultural Dimension Theory. Analyse the chart and recommend three (3) important negotiation tactics your Creative Director should apply when meeting with the Swedish owners. Your tactics must be well-justified based on your chart analysis.