Ikea Case Study- (Business Model)
2 Minute Summary
IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943. Everybody knows that Ikea offers the products at a very lower price than any retail shop. Ikea has invested 800 crores in India, It has more than 9500 Products and has more than 350 stores in 35 countries. the new store is spread across 400,000 square feet in the southern city of Hyderabad & plans to invest 105 billion rupees in India. the company is a non-profit. IKEA employs about 135,000 people. Because of tax rules for non-profits, IKEA pays about 33 times fewer taxes than their for-profit competitors. The Ikea trademark and the concept is owned by another private company named Inter Ikea Systems. It acquired TaskRabbit on Sep 28, 2017. IKEA has many mobile apps. But the most popular app is IKEA STORE. The app is having almost 9,60,333 monthly downloads. IKEA is the lead investor in 4 companies. Full Detail in Blog.
Everybody knows that Ikea offers the products at a very lower price than any retail shop.
In this blog, we’ll talk about Ikea Case Study(Business Model) as the Swedish furniture company opened its first retail store in India.
Like Walmart acquired Flipkart and entered the Indian Market. Ikea can destroy the Whole Furniture Market in India.
Ikea has invested 800 crores in India, It has more than 9500 Products and has more than 350 stores in 35 countries.
According to CNN, the new store is spread across 400,000 square feet in the southern city of Hyderabad & plans to invest 105 billion rupees in India.
But have you ever wondered? How does Ikea work?
What is the meaning of IKEA?
How IKEA works?
How IKEA business model earns ?
You must have many questions regarding IKEA, like What is the meaning of IKEA?
How IKEA works?
What is IKEA?
How IKEA earns?
This will be the most detailed case study on IKEA.
I will be answering all of your questions.
Let’s START WITH
WHAT IS IKEA?
IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943.
IKEA is a globally renowned furniture retailer that sells ready-to-assemble furniture, kitchenware and home accessories.
The company started with selling pens, wallets, jewellery with the concept of meeting consumers demands at the most affordable prices.
After five years into the business, IKEA brought in the furniture. Since then furniture has been the mainstream for the business.
IKEA furniture is now a well-known multinational brand.
IKEA MEANING
You must be wondering that what is the story behind the unique name the brand has.
The name IKEA isn’t just a fun.. it stands for – Ingvar Kamprad Elmtaryd Agunnaryd.
Short-form is cooler to pronounce right? But it actually has a deeper meaning.
The first two letters of IKEA i.e. I and K are the initials of the name of the founder Ingvar Kamprad.
While ‘E’ comes from the name of the farm he grew up on – Elmtaryd.
And the last letter ‘A’ comes from the Swedish village, Agunnaryd,
where the farm was located.
HOW IKEA EARNS? – IKEA BUSINESS MODEL
They follow Price-leadership model. Low prices are the main concern stone of the IKEA vision, business idea and concept.
In the world of IKEA furnishings, the products are named after Swedish towns like Aneboda, Akurum and Anordna.
But the costumers worry less about the names and care more about how much they cost.
Ikea furniture is a beacon for bargain hunters. Its whole business model evolves around selling their product at the lowest price possible.
IKEA business model revolves around their vision which is – offering a very wide range of well-designed, functional home furnishing products at so low prices that as many people as possible will be able to afford them.
Anybody can make a high-quality product for a high price, or a poor-quality product for a low price.
IKEA follows a different approach, they have developed methods that are both cost-efficient and innovative. Before designing the product… they decide the price tag.
Their designers begin with designing of the product after keeping the price in mind. The IKEA Group has 31 distribution centres in 16 different countries, supplying goods to IKEA stores. It has about 45 trading service offices in 31 countries.
They have very close relationships with their 1,350 suppliers in 50 countries.
IKEA’S SMART SECRET
Is IKEA – a Non- profit organization. ?
WHAATTTTT?
You must be having a lot of questions by now, like if IKEA is a non
profit organization then –
How do they manage their running cost?
Where all the money goes away?
Where does all this money earned is utilised?
You will get all your answer right away as you continue reading.
I would say a big YES,
IKEA has a little known secret: the company is a non-profit
They grew with a vision that states ‘to create a better everyday life for as many people as possible. And on a mission to offer a wide range of home furnishing products at a price so low that as many people will be able to afford them.’
Besides the vision and mission, the main motive of showing itself a non profit organization could seem as business-driven.
IKEA employs about 135,000 people. Because of tax rules for non- profits, IKEA pays about 33 times fewer taxes than their for-profit competitors.
There is one more big hole in this whole IKEA non-profit organization.
Money is not trapped inside Ikea’s foundation.
The Ikea trademark and the concept is owned by another private a company named Inter Ikea Systems.
So, to operate Ikea stores and use the brand name, the non-profit Ikea have to make payments each year to the private company – Inter Ikea Systems.
This clearly means money is paid directly from IKEA profits to the owners of this private company to license the trademark.
The beneficiaries or we can say owners of this private company are not publicly recorded, but it’s not hard to speculate that the Kamprad family is on the receiving end of this loophole.
HISTORY – STARTING AND GROWTH OF IKEA
Let’s talk about the exciting history timeline of IKEA.
From the of how it is started to the story of how it evolved exponentially.
1926
It all started in 1926 when founder Ingvar Kamprad is born in Småland
in southern Sweden.
The 1940s-1950s
In the year 1948 – Furniture was introduced into the IKEA range.
Local manufacturers produced the furniture for IKEA in the forests close
to Ingvar Kamprad's home.
In the year 1956 – IKEA came up with the idea of designing furniture for
flat packs. It started focusing on self-assembling furniture models.
The 1980s
In the year 1980s – IKEA expands dramatically into new markets such
as the USA, Italy, France and the UK.
In the year 1984,
Ikea family was introduced a new club for the customers was launched.
Today, Ikea family is in 16 countries (over 167 stores) and has about 15
million members.
FINANCIAL FACTS AND FIGURES
Categories – Consumer Electronics, Furniture, Retail, Shopping, Smart Home.
Headquarters – European Union (EU)
Founded Date – 1943
Founders – Ingvar Kamprad
No. of Employees – 10001 +
Legal Name – IKEA BV
Digital links
Website – www.ikea.com/
Facebook- www.facebook.com/IKEAIndia
LinkedIn – www.linkedin.com/company/ikea-group/
Twitter – https://twitter.com/IKEAUSA
Till now IKEA has only 1 acquisition.
It acquired TaskRabbit on Sep 28, 2017
Mobile app and its downloads
IKEA has many mobile apps. But the most popular app is IKEA STORE.
The app is having almost 9,60,333 monthly downloads.
Website and its monthly traffic IKEA is ranked 166 among websites globally.
And having almost 146,040,680 monthly visitors.
Investments
IKEA is the lead investor in 4 companies. Those are –
XL HYBRIDS – IKEA announced its investment in this company on
October 12, 2017
MAT SMART – IKEA announced its investment in Massmart on Jan
23rd, 2018
TRAEMAND – IKEA announced its investment in Traemand on Dec
19, 2018
LIVSPACE – IKEA announced its investment in Livspace on Dec 19,
2018
MANAGEMENT AND THE CORE TEAM
CEO – Jesper Brodin
CFO – Alistair Davidson
FOUNDER – Ingvar Kamprad
HEAD OF CORPORATE FINANCE & TAX – Krister Mattsson
HEAD OF DIGITAL – Christian Moehring
HEAD OF E-COMMERCE, SOUTHEAST ASIA – Koen Besteman
HEAD OF UK MARKETING PROCUREMENT – Maria Malpartida
HEAD OF INNOVATION – Jens Heitland
8 IKEA Marketing Strategy
Many people confuse marketing with promotion. People believe that marketing is something you do to sell your product. But, this is not completely true. Marketing begins even before the production stage, as designing a product based on the demand and needs of the customers is also a part of marketing. This is what IKEA Believes in. Everything in IKEA is from a customer’s point of view. Let’s dive deep into learning different strategies of IKEA.
1. Amazing Customer Experience
Have you tried shopping from IKEA? If not, then I would strongly recommend you to try IKEA next time you need a piece of furniture.SHopping at an IKEA store is a different experience than shopping from any other furniture store. Whenever adults go out shopping with their kids, both the kids and parents face issues.
IKEA has got an amazing solution for this where none of them would feel any type of burden and in fact, both of them would like to spend more time at the IKEA store. Yes, I am talking about the free childcare facility provided by the IKEA stores. You can just leave your child safely with them and enjoy hustle free shopping and the child will also spend some quality time playing and making new friends.
Another amazing thing is that instead of standing and having a long discussion about which product to buy and calculating your cost, you can have a seat ad enjoy your paneer butter masala meal while discussing the furniture.
These little things not only add a value to the customers shopping experience but also give them a reason to visit again and even suggest others to visit the store.
2. Brand Identity
In such a competitive environment, is it very important to stand out or be unique and creative to survive? You have to build your brand in such a way that customers prefer you over other companies.IKEA is very strongly working with this. Its goal is to become the leader of every home.
IKEA focuses more on the product and the customers which a lot of companies fail to do. If you create what your customers want then you can build a good brand identity. Your every action should be a signal of your brand.IKEA uses this technique in its advertising. If you have been following IKEA for a while then you will not have to think a lot you can recognise directly that this is an IKEA ad.
3. Content Marketing
With the growing digital environment, the content has become an important element of the digital industry. Content is used by most of the companies to promote their product digitally. From a picture art to a long written blog anything can be used as content in digital marketing.
One of the best strategies you can use in this digital era is to interact with your customers directly.IKEA uses all types of contents to reach out to their customers. From images, videos to textual content IKEA has it all. To reach your customers digitally, it is very important to identify your potential audience, basically defining who your customers are. Then the most important step is defining how your potential customers can find you?IS is through your social media handles or is it through your website or a combination of all these. And then you need to target them both organically and by paid promotion techniques.
4. Social Media
Social media is something which cannot be avoided. Everyone nowadays uses social media, thanks to the internet revolution and jio revolution in India. Your presence on every social media platform is must, it doesn’t matter if you are an old company or a new one. Social media allows you to be in constant touch with your customers. You can use various strategies across your social media platforms that can help you create trust and a good brand image in front of your customers and also develop new customers.
There are a few strategies which you can follow.
- If you follow a consistent posting schedule, then you can have a good content interaction as regular posts can make your customers think about you.
- You can also use promotional strategies provided by social media companies to reach a new audience and attract them by telling them about your new products and offers.
- Another important feature of social media that you can use is to understand your audience. Understanding your audience is important because they are the ultimate consumers and having clarity about the consumers makes it possible for a brand to plan its products and marketing accordingly.
5. Innovation
IKEA is very famous for new designs and products. It keeps on constantly adding a new design or a new to product to its collection. This allows customers to visit the store even if they do not want to buy anything so that they can check the latest trends and products. If you check their social media handles, you will find a lot of different types of content that displays new and innovative products. This is a very good strategy as your customers stay updated with your products. Even if they do not add the products to their cark at the moment, they still add it to their wishlist. Which indirectly gets converted into sales. Thus, innovation in products and making innovation reach your customers is very important.
6. Creative Marketing Campaigns
IKEA is very creative when it comes to marketing. Their posts are so engaging that you want to click on it and see them that what is there. The example given below demonstrates how one will swipe right to see what they have for you. Isn’t it creative? If you observe, they have made good use of the present condition in a creative way. Similarly, a humorous and creative content strategy can help you get more engagements.
7. Amazing Use of Technology
Living in the 21st century, you can make amazing use of technology to provide a great experience to your customers. Augmented reality and virtual reality are some great examples of technology can you can use especially in such industries.IKEA makes use of both these augmented realities and the virtual reality
What is Augmented Reality?
This is the most amazing use of technology that IKEA could have done. With this, you can use your mobile phone to see how a piece of particular furniture would look at your home. You can also use this to decide at which corner of the house that particular furniture would look good. This is like a trial technology where you can try the products virtually at the comfort of your home without actually buying it. It is similar to something used by Lenskart.
What is Virtual Reality?
Yet another amazing use of technology. Where most of the people are busy using virtual reality for gaming purposes, IKEA has its smart use. Through virtual reality technology, IKEA allows its customers to feel the look of the furniture. For example, say you want to buy a modular kitchen, you can try the kitchen before actually buying it in a virtual reality headset. The most amazing part is that you can try cooking and get real experience.
8. Payments Methods
Consumers have become a lot more advanced than before. Customers need comfort. Since the evolution of the digital era, there are a lot of different methods of payment. Every consumer has different payment options. It becomes important to have all the options available so that the customers get a hustle free shopping experience. As already, IKEA is a price dominant company, best price with all modes of payments is like a cherry on the cake.
Unknown Facts About IKEA
- Ikea is the third-largest wood consumer on the planet. Being the leading furniture company it should not be shocking.
- IKEA is claimed to print more copies of its annual catalogue each year than the bible.
- IKEA has very good food sales. Being known for its furniture has a very good taste when it comes to their restaurant. This can be a great contribution to their revenue as they have an approximate sale of 2 billion annually.
- As in 2014, they have 716 million visitors to their store. This is a very huge number.
- The first IKEA restaurant was launched in 1956 to feed its customers that would feel hungry after spending the whole day shopping.
SWOT Analysis of IKEA
STRENGTH
* Its vision – ‘to create a better everyday life for many people’
* Economies of scale
* Lowest Price
* Countless designs
WEAKNESS
* Bad press
* Low quality
* Difficulty to control standards across locations.
OPPORTUNITY
* Solutions for a sustainable life at home
* Developing social responsibility
THREATS
* The recession slows down consumer spending
* More competitors entering the low price household and furnishings
markets
IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943.
IKEA is a globally renowned furniture retailer that sells ready-to-assemble furniture, kitchenware and home accessories.
The company started with selling pens, wallets, jewellery with the concept of meeting consumers demands at the most affordable prices.
After five years into the business, IKEA brought in the furniture. Since then furniture has been the mainstream for the business.
IKEA furniture is now a well-known multinational brand.
IKEA KEY VALUES
They are very strict about their values.
They firmly believe that every individual has something valuable to
offer.
Let’s look at some of there core values –
1. Cost – Consciousness
Their first priority is to make their product affordable to as many
people as possible. They challenge themselves constantly to make
the product more affordable without compromising on quality.
2. Renew and Improve
They always challenge themselves to try something new and to find a
a better way out.
3. Caring for People and Planet
They believe in caring for people as well as for the environment.
They act as a force for a positive change.
IKEA IN INDIA
In 2006, Ikea first displayed an interest in the Indian market but back then
the Indian laws allowed only 51 per cent foreign ownership.
With the government of India relaxing the norms for foreign direct
investment (FDI) in single-brand retail, IKEA announced in October
their intention to open stores in India.
IKEA opened its first store in India on Aug 9, 2018.
It took IKEA 12 long years to enter the Indian market.
The first store in India was opened in Hyderabad.
Hyderabad, the southern Indian city gave it a roaring welcome.
So far, more than 3 million customers have visited IKEA Hyderabad
store and about 8 million have visited IKEA’s India website
In the year 2016, Ikea purchased land in Mumbai and said that it planned
to open stores in Bengaluru and Delhi too.
After Hyderabad, in 2019 IKEA has launched its first online store in
Mumbai is offering more than 7,500 products.
It will provide delivery to most of the locations in Mumbai and will have
a delivery time of four to seven days, subject to availability and distance.
In India, IKEA currently has more than 55+ suppliers.
Also, have more than 45,000 direct employees and 400,000 people in the
extended supply chain.
Now, the company plans to have more than 25 stores in India by 2025.