THE IKEA CASE
Ikea was founded in 1943 by Ingvar Kamprad in Småland, Sweden. His business is described by the owner itself as "offering a wide range of household products, functional and quality designed at prices affordable for the vast majority of people." IKEA values: (http://www.ikea.com/ms/es_ES/this-is-ikea/working-at-the-ikea-group/index.html)
a) Leading by Example
b) Constant desire for renewal
c) Companionship and enthusiasm
d) Concern for costs
e) Striving to adapt to reality
f) Humility and will
g) Daring to be different
h) Accepting and delegating responsibilities
i) Simplicity
j) Being constantly in motion
Positive culture
- Adaptation of the products from the cafe to a great range of cultures (with the exception of the goods offered in the supermarket section, as most of these are originally Swedish).
- Adaptation of the prices rather than the products (there is an urge for the company to change the customer).
- They have created their own culture à plenty of products have Swedish names.
- It does not follow a hierarchical organization: its workers – often named Contributors (coworkers) - are very well regarded in the business.
- IKEA does not quote on the stock market: profits are reinvested in the company.
Negative culture
The company encountered several difficulties in the American market (with respect to the European):
- Lack of innovation regarding the decoration motives (US market).
- Issues regarding the use of certain metric systems (pounds, miles, inches, feet and gallons…). There is a necessity for the business to adapt to the Decimal System.
- Vast range of furniture.
- IKEA intends to modify buying habits (every customer/individual has to assemble the furniture).
- Difficulties in countries that are not accustomed to self-service.
- Problems in China due to the demand of the IWAY (IkeaWay) code to providers.
- The entry of the Japanese market was an utter failure (lack of knowledge about the customer’s interests and their competitor’s know-how.)
Ethics: positive
- They have a code of conduct for suppliers named IWAY Standard, where the minimum requirements relating to the environment, social impact and working conditions are established.
- A specific carpet called TÅNUM is made from the scraps left over from the production of our fabrics and quilts. In addition to those items being manufactured following responsible criteria and reusing waste, skilled craftswomen in Bangladesh are responsible of weaving them manually. This provides them a job and ensures them a fixed salary.
- In 2000, the company developed a code of conduct on child labour (in collaboration with Save The Children) and consulting the International Labour Organization (ILO) and UNICEF.
- Whenever customers buy a stuffed toy or a children's book in November and December, the IKEA Foundation donates 1 euro to SaveTheChildren and UNICEF. This campaign has raised an amount of 77 million euros since 2003, and has helped provide a better education to more than 11 million children from 46 different countries.
- “Standard IWAY forestry” clearly establishes the requirements to be met by the wood used in all IKEA products. In it, the prohibition on illegally harvested wood (from sources involved in social conflicts related to the forest, or forests with high conservation value) is included.
- In order to fulfill the purpose of retaining staff (workers), the company has launched a loyalty program called Tack! (This is the Swedish word for “Thanks”). In this initiative, employees receive an additional contribution to their pension funds. All full-time employees’ candidates receive the same amount (regardless of their country of origin, the department in which they work, the position they occupy and the salary they have).
- "The Other Letter" advertisement is a clear example of the social marketing the business goes for.
- In 2005, the company created its Social Foundation.
Ethics: negative
- Environmental issues related to gas emissions (methanol and
formaldehyde) in Denmark and Germany during the first periods after the creation of the business.
- Huge amount of complaints from IKEA providers due to the great pressure regarding production prices.
- IKEA was involved in the Horse Meat scandal in 2013. Consequently, the company had to withdraw its meatballs from the market, as they contained horse flesh.
- A specific cake served in the cafe was also removed due to the detection of an excessive rate of coliform bacteria (which are segregated during certain digestive procedures carried on inside mammal intestines). In other words, that product contained feces.
Change/trends: positive
- IKEA has established new trends in the market of furniture and decoration by offering products at low prices and the fact that the customer has to assemble their furniture.
- The furniture is distributed unassembled inside flat boxes, ensuring their fitting in cars.
- Ikea has focused tremendously on everything related to the “Around the table” concept; ranging from growing food, intelligent storage and recycling, planning and preparation of the food and how to serve and eat at the table. Furthermore, the company is always pushing forth health and sustainability principles (it has adapted to the interest of the population on the issue of healthy food and cooking at home, which shows no sign of slackening.)
Change/trends: negative (scarcity of them)
The company has experienced several issues related to their adaptation to new technologies:
- The website is obsolete with poor performance.
- Excessive shipping costs compared to competitors.
- IKEA did not adapt to the shifts in the market at the same rate as its competitors and that led to loses in capital.
Globalization: positive
- The company counts with over 315 stores in 27 different countries (2014).
Globalization: negative
- Increased competition due to online sales. Stores that offer products online follow the very same strategy that IKEA has, as the consumer has to assemble the furniture either way.
- Problems in Spain to maintain the pace of opening stores at an optimal level for the company due to administrative impediments (bureaucracy).
Strategy: positive
- Swedish Origin (associated with a healthy lifestyle image, familiar atmosphere and nature values).
- Good quality items sold at a low price.
- Their stores are considerably big and are located in the suburbs.
- Highly automated manufacturing, hence in large quantities.
- The School of decoration IKEA: where a diverse variety of courses, tutorials, videos (so attendants are given ideas on decorating exposing very practical, real cases) are offered.
- Financial strategy: growth from own resources, in other words, they earn money before spending it.
- Furniture is sold unassembled in flat boxes. The client is to transport and gather the pieces together; this enables the company to lower the price.
- They force the customer to go storewide (this encourages an impulsive sale products that perhaps were not to be purchased in the first place).
Strategy: negative
The company did not allocate capital, neither attention to its website, initially.
Innovation: positive
- The use of innovative promotional campaigns such as "Breakfast in Bed" in London stores.
- Development of the official mobile app: data regarding their stores, images of their products, introduction of new features such as augmented reality, inspirational content, videos…
- Collection of customer information by sending experts to homes to gather feedback.
- The seasonal launch of the new catalog always becomes a big event.
- Day care for children in stores.
- The use of direct marketing. For instance, letters were sent around Zagreb, this already mentioned correspondence contained a support that could be used to fold shirts, apart from informing the receivers about the opening of a brand new store.
Innovation: negative
- An urge for a constant innovation in order to keep their status as leaders in the market.