IKEA (Research Paper Sample)
The paper talks about IKEA, a Swedish furniture retail company. It looks into the reasons why IKEA has continued to be successful despite stiff competition in the furniture retail industry. The paper also discusses the social and environmental issues that IKEA has faced during its operation.source..
This is a six page paper on IKEA, a Swedish furniture retail company. It looks into the reasons why IKEA has continued to be successful despite stiff competition in the furniture retail industry. The paper also discusses the social and environmental issues that IKEA has faced during its operation. IKEA has faced two major problems; child labor and environmental pollution. The paper outlines how this affected its business and the measures that were undertaken to deal with these issues. The paper relies on eight sources and is in APA format.
Running head: IKEA
IKEA is a Swedish furniture retailer that was founded in 1943 by Ingvar Kamprad, who sold small items such as binders, ballpoint pens and cigarette lighters. The business grew tremendously and IKEA started offering locally made furniture. The furniture was positively received by customers and the company started receiving catalogues and creating self assembly and flat pack furniture to minimize storage space. The first store by IKEA was opened in Almhult, Sweden and more stores were opened in other locations such as Germany, Denmark and Norway. Currently, IKEA is a company with a global presence as 279 of its stores are found in 36 countries. The group owns 247 of these stores within 24 countries while in16 countries; the stores are handled by franchisees (Warc.com, 2012).
Kampard used catalogues to persuade people to attend exhibitions held by the store, where they would get to see the real furniture and place orders afterwards. This principle still applies as the store largely uses catalogues to tempt customers to visit the stores and make a purchase. Kampard success brought about several challenges as local cartels dealing with furniture prevented manufactures from supplying IKEA with raw materials. Kamprad had to look abroad especially Poland for new suppliers and developed a close working relationship with them. IKEA prospered and started offering affordable, quality furniture to customers allover the globe. IKEA brand now offers furniture, home appliances and accessories ranging from chairs, houses, desks and foot warmers under one roof. IKEA has also opened a chain of restaurants that offer various traditional Swedish delicacies such as meatballs, cream sauce, hot dogs, potatoes, lingonberry jam and juice (Warc.com, 2012).
Marketing Strategy Adopted by IKEA
Although there is a lot of competition in the furniture retail market, IKEA has remained relevant by offering a wide variety of quality home furnishings at low affordable prices. IKEA understands that low prices are not appealing to customers, unless they correspond with good value for money. The firm’s goods are differentiated by design, style, low prices and space efficiency. IKEA products emphasize more on functionality, without neglecting superior design. IKEA corporate slogan emphasizes on low prices that have a meaning, which is a commitment to give customers well refined and high-class products. IKEA offers customers a wide selection of furniture that are easy to utilize, attractive and suitable for the mass market.
IKEA utilizes cost efficiency to achieve its tremendous success. The firm keeps the customers and manufactures cost at the lowest level possible (Ikea.com, 2011). IKEA arranges competition among its suppliers and this helps the firm in getting materials at lower prices. There is also competition among the internal designers and freelancers to ensure the products made are of superior design and materials. IKEA packs its product in flat packs and this reduces storage and transport costs. IKEA outlets operate on self service model and only fundamental customer care is given, cutting down on the staff needs of the company. Customers are expected to assemble and transport their products upon purchase and this helps in minimizing cost (Ikea.com, 2011).
IKEA has also strategically planned all its enormous retail outlets. All stores follow a one-way layout and this helps the customers in touring the entire store. Customers tour the store and select the furniture that appeal to them after careful viewing and analysis. After making a selection, customers are directed where to collect the product and finally pay for it at the cash register. Most IKEA stores open for long hours and some operate for 24 hours thus the customers can shop at their own convenience (Ikea.com, 2011). IKEA display stores also offer other value added services to customers such as grocery stores, child playrooms and restaurants.
Environmental Issues Affecting IKEA
During the late 1980’s, IKEA experienced its first environmental challenge. In Denmark, there was an increase in environmental awareness and the government initiated a policy to reduce the utilization of formaldehyde in building goods. IKEA widely used formaldehyde in the manufacturing of particle boards used in most of their furniture. The particle board helped IKEA in cutting down on cost and they had to find a way to resolve this serious problem that challenged their market share. Tests ran on some of the furniture with the particle board ascertained that the formaldehyde emissions were higher than those laid down by the Danish Environmental Law (Owens, 2009). The government fined IKEA and this case was highly publicized since the government wanted to emphasize the importance of the new regulations. IKEA suffered greatly from this negative publicity and its sales dropped drastically. According to a report, there was a 20 percent drop in Denmark alone.
IKEA had to act quickly to avert any other loss arising from the use of formaldehyde by suppliers. This was quite challenging as most of the company’s suppliers were from different nations that lack...
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