Ikea Case Study

1. What does IKEA mean in the eyes of the customer (value proposition)?

IKEA’s mission and vision:

“At IKEA our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”

The basic value proposition offered by IKEA is to provide stylish, functional, and reliable furniture at the cheapest prices in the market.

2. What is the business & marketing strategy (core strategy- marketing mix) of IKEA?

<Scope of answer is in the time setting of the case study>

According to the Ansoff’s Matrix for Product-Market Expansion, IKEA Group’s current strategy corresponds to the third quadrant, i.e. the MARKET Development Strategy. The direct implication of this is that, while IKEA is attempting to enter newer markets (USA in this case), it has continued with the same product offering which is its furniture with the Scandinavian design, at competitive prices. Hence, it is competing on the basis of price and variety in its product. It uses a specific price/product matrix to identify gaps in the product line.

In its pursuit of Operational excellence, IKEA has developed an extensive supply chain, across both design and production stages. Despite having its own facilities for the same, it relies heavily on its suppliers and external designers to create sufficient competition and minimizing its costs to increase the margins. The direct implication of this, is the high LTV that it has been able to provide its customers (LTV being directly proportional to the margin).

The growth strategy was to open 50 stores in USA by 2013. However, only 38 stores have opened till date.

Critically speaking, IKEA has largely grown on the lines of Integrative Growth strategy, with forward integration with its raw material and parts suppliers, and forward integration by opening its own...