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1 Alexa McDaniel Rafael Garcia Bonnie Lee Allyson Hatz Molly Moseley IKEAAlexa McDanielRafael GarciaBonnie LeeAllyson HatzMolly Moseley
2 Humble BeginningsIngvar Kamprad was born on 1926, on a small farm called Elmtaryd, near the village of Aggunaryd, in the southern area of SwedenIn 1943, at the age of 17, Kamprad received a money reward from his father because of his success in the classroom, using the money to start IKEAIKEA’s first furniture showroom, in Almhult, Sweden, in 1953
3 IKEA’s First StorePressure from competitors caused suppliers to boycott the firm, protesting against Kamprad’s low pricesIn 1958, the first IKEA store was opened in Almhult, Swedenlargest furniture store in Scandinavia, at the time, with 6,700 square meters filled with home furnishings
5 IKEA IKEA arrives in Oslo, Norway, in 1963 First store on foreign territoryIn 1969, the Swedish company opened its first store in Copenhagen, DenmarkFirst IKEA store outside the Scandinavia, In Zurich, Switzerland, in 1973Shortly after that, IKEA arrived in Munich, GermanyIKEA’s largest market today
6 IKEA 1980’s 1990’s The company arrived in several different countries IKEA Family CardIn 1986, Ingvar Kamprad announced his retirement as CEO1990’sIKEA created its first Environmental PolicyContinued its path of growth and expansionBig Thank You event, on October 9th, 1999
7 IKEA2000’sInitiates a broad community program in northern India, in co-operation with UNICEF to address the root causes of child laborThe IKEA RailIn 2007 the IKEA Group and WWF start to co-operate on projects aimed at reducing emissions of greenhouse gases generated by IKEA operations
8 Competitors Target 97% of Americans recognize the target logo Niche market tweaked the discounted modelLow cost stylish furnitureLoyal customersRedcard credit card 5% discounts, 9% of sales2nd largest discounted retailer in the USGrocery stores makes it a one-stop-shop
9 Competitors Pier 1 Home furnishing industry Products imported from foreign suppliersLong standing relationships with vendors and agentsMaintains sustainable inventoryBrand awareness advantageAllows customers to return purchased merchandise within a reasonable time
10 Competitors MASCO Corporation Sells and makes building materials for homes and remodelingSell to large home buyers and home improvement storesLargest player in construction services. Upholstered furniture accounts for about 20% of sales and wooden cabinets for about 35%. In 2012 they were able to increase their net sales by 4% and had 78% of it sales in North AmericaTheir operating profit improvement came from reducing cost structure, streaming their sources and accelerating their supply chain savings.
11 IKEA’s Competitive Advantages Low-costlow-cost materials like ply wood and metal in their products instead of materials like cast iron and expensive hardwoods like other furniture productsThe in-house design of their furniture lines creates opportunity to save money by not having to pay large design commissions to designers that are out of their freelance network.Strategic sourcingestablished strong relationships with their producers and suppliers that provide them with long run parts and comply with IKEA’s standards for qualityIKEA considers their producers key stakeholders in their business and provide new technology that allows them to optimize their investments.
12 IKEA’s competitive advantages Wide range of productsIt produces every item you could possible need in a home from bedroom furniture all the way to gardening tools.Packing innovationThe flat packages allows customers to transport the items themselves and assemble them at home on their own time. The packages customers take home are the same ones the items were originally shipped in which helps reduce cost by up to 80%.The warehouse portion of the stores allows customers to find their products the day of shopping and take a hands-on approach to fetching the furniture themselves. This allows IKEA to dramatically reduce the number of employees needed to transport the furniture to customer’s home.
13 Value Added- ChainComponent parts& ManufacturingFinal AssemblyRetail- Distribution centersEnd Users (Customers)Back EndFront EndConstructed by the processes of collection, conversion and distribution of raw materials and final products.The back-end is responsible for the manufacturing of products, whereas the front-end is concentrated on the distribution of the manufactured final goods.
14 Support Activities Firm infrastructure Human Resource Management IKEA is a privately held company owned by Stichting INGKA Foundation, a non- profit registered in Leiden in the Netherlands which is controlled by the Kamprad family.The majority of stores are franchised through Inter IKEA Systems B.V. by INGKA Holding Group, which operates stores throughout Europe, North America and AustraliaHuman Resource Managementfocuses on developing their staff by training them to achieve their organizational goals that lead them to grow, success and innovation. The organizational culture plays a crucial part in how the HRM operates.Technology Developmenthome planner technology that lets customers place the dimensions of your personal rooms at home and arrange IKEA’S furniture in room to see what it would potentially look like.IKEA also utilize RFID technology to achieve information about products quickly in the stores
15 IKEA’s Vision To create a better everyday life for the many people. Concern for people and the environment- better use of both raw materials and energy.
16 IKEA’s SuccessIt is evident by this graph the majority of profits that IKEA has in the furniture industry, and the amount of success they have gained in such a short period of time.In 2010, IKEA's sales grew by 7.7% to €23.1 billion and net profit increased by 6.1% to €2.7 billion. Rivals of IKEA do not even come close to such astounding numbers.
17 IKEA’s GrowthAt the end of 2009, there were 267 IKEA Group stores in 25 countries.Last year, IKEA stores welcomed 590 million visitors in their stores.The top five sales countries are Germany, USA, France, United Kingdom, and Italy as shown in the pie chart below.
18 Keys to Success28 distribution centers and 11 customer distribution centers in 16 countries.Using flat packs, transporting goods were possible by rail and sea, and utilizing fuel-saving techniques allows them to be cost- effective (their main core competency) and environmentally friendly.Use their catalog in order to gain new clientele and boost profits.Last year 198 million copies of the catalog were printed in 56 editions and 27 languages.
19 Why Has IKEA Never Been Copied? Organized its business around a job to be done: Furnishing a room or apartment that same day.Organized and integrated in a different way than any other furniture retailer.Nobody has tried to duplicate or undermine them.This method is similar to Apple's. Apple depended on a clear job- to-be-done, design, carefully selected merchandise, and retailing as an experience. Similar to IKEA, Apple also became top of their industry.
20 Apple vs. IKEAUnlike Apple, IKEA has grown much more slowly. IKEA’s first store was opened in 1958 and had 72,110 square feet. The first two Apple stores opened in May Since then the number of Apple stores grew significantly faster and surpassed the number of IKEA stores in 2010.The other difference: sales growth. In 1954 IKEA’s revenue amounted to approximately $1 million but has grown steadily. In contrast, Apple has grown more rapidly and is also more profitable in terms of margin.
21 In 2011, IKEA had 655 million visitors in its store, more than twice as many compared to Apple. In IKEA, each visitor spent about $27, while Apple's store visitors purchased for twice as much.IKEA has three times the number of retail employees, but Apple’s revenue per employee is 1.5 times bigger than IKEA’s.The largest difference: the efficiency of real estate. IKEA’s operations have more than 30 times the sales floor of Apple. By measure of sales per square foot, IKEA would not even make the top 20 list of US retailers.One major thing that Apple and IKEA have in common: a clear formula for positioning retail operations. Both operations are positioned around a job-to-be-done that has a high priority in people’s life. Apple offers a place where people can discover and get answers about technology without the pressure of making a purchase. IKEA offers a place where people can get exactly what they need exactly when they need it.
22 SWOT Analysis: Strengths A strong global brand which attracts key consumer groups in any region. It promises the same quality and range worldwide- consistency.Offers a wide range of well designed, functional products at low prices.A 'democratic design' reaching a perfect balance between function, quality, design, and price. Their 'Cost Consciousness' means that low prices are taken into account when each product is design from the outset.
23 SWOT Analysis: Weaknesses The size and scale of its global business. This could make it hard to control standards and quality. Some countries where IKEA products are made do not implement the legislation to control working conditions. This could represent a weak link in IKEA's supply chain, affecting consumer views of IKEA's products.The need for low cost products. This needs to be balanced against producing good quality. IKEA believes there is no compromise between being able to offer good quality products and low prices.IKEA needs to keep good communication with its consumers and other stakeholders about its environmental activities. The scale of the business makes this a difficult task
24 SWOT Analysis: Opportunities A growing demand for greener products.A growing demand for low priced products. Trends in the current financial climate may result in consumers trading down from more expensive stores.Demand for reduced water usage and lower carbon footprints.
25 SWOT Analysis: Threats Social trends such as the slowdown in first time buyers entering the housing market (which is a core market segment for IKEA buyers).Market forces more competitors entering the low price household and furnishings markets.Economic factors: the recession slows down consumer spending and disposable income reduces.
26 Porter’s Five Forces: Competition Within the Industry IKEA has high competition within the industry from Ashley Furniture, Galiform, Wal-Mart, John Lewis and Homebase. But the global brand name and trust in customers about product quality, cost effectiveness, and immensely popular design has given IKEA a competitive edge.Growing markets made IKEA diversify its business empire into food and textile industry.IKEA also went into the mobile industry by offering cheap and flexible non-contract mobile services for its customers, which is very unique and unheard of in this industry.
27 Porter’s Five Forces: Bargaining Power of Suppliers The bargaining power of suppliers is low.Suppliers have not gotten any major bargain power as IKEA is a well established brand in the market.Suppliers tend to gain more by coming into a business relationship with such a high value retailer.
28 Porter’s Five Forces: Bargaining Power of Buyers Buyers have a high power of bargaining. Most often, competition in retail market gives the buyer plenty of options to choose from based on price, services and design.Recession has forced retailers to become more competitive in pricing to attract people who are reluctant to spend more for home improvements.
29 Porter’s Five Forces: Threat of New Entrants The threat of new entrants is low since it is well established as a global icon.Customer loyalty has helped in improving this competitive advantage in retail market.IKEA has a huge market presence over Europe, US, Asia and Australia. It is virtually impossible for any new entrant to pose a threat to an already well connected business empire with geographic and product diversity.
30 Porter’s Five Forces: Threat of Substitutes The threat of substitutes is medium. Though there are a number of substitutes in home furnishing industry, the low-to-medium income customers tend to stick with IKEA due to the cost effectiveness.IKEA has been criticized for poor customer service, stock availability, product guarantee and lesser variety.The all-in-one-shop concept in IKEA is not available in substitutes like B&Q, DFS and Wickes (all large UK retailers).
31 Corporate Social Responsibility Kamprad promised to keep prices low, but not at the expense of the environment“To us it’s about taking care of people and the planet – from tackling the problem of children living in poverty to creating renewable energy. Our co-workers, suppliers and partners have been working on these issues and more for a while. You can see evidence of this work through innovative IKEA products and solutions, and through the way we do business. If we all take small actions, we can all contribute to big results.” (IKEA.com)
32 Corporate Social Responsibility LED LightingLED lights: use 85% less energy, last 20 times longerBy 2016, all LED lightingRecyclingThroughout the companySelling products for consumers to recycle90% of waste at IKEA is recycled or used for energy productionWoodDo not use more than is being producedLong-term goal: use 100% FSC-certified wood.Renewable Energy50% of energy used at IKEA is renewable energyLong-term goal: 100% renewable energy
33 Corporate Social Responsibility Other ways IKEA is helping the environmentSocially responsible cottonPromote public transportation for employeesCautious with water consumptionThe IKEA FoundationIKEA believes that children are the most important people in the world.Nonprofit organization that specifically focuses on aiding children who live in povertyOver $106,821, donated in 2012
34 IKEA Related to Blue Ocean Strategy Constantly lowering pricesAdjust to different environments (globalization)Continuous innovation“Flat-packing”Furniture can be sent home with consumerLower transportation costsThe IKEA ExperienceChildren play areaUnique store layout and servicesIKEA Restaurant
35 PEST Analysis Political Level of political stability Level of corporate and consumer taxationRelevant tariffs and trade restrictionsInternational and European trade regulationConsumer protection legislationsEconomicOverall and industry-specific economic growthCurrency and exchange ratesLabor costsInflation ratesMarket trends
36 PEST Analysis Social Changes in demographic variables Lifestyle changesFashion trendsLocal cultural factorsBuying patternsTechnologicalEmergence of new industry-specific technologiesLevel of funding in industry researchesLevel of potential for technological innovationsInnovations in ITUse of energy and associated costs