IKEA: An International Brand Name Introduction \"Once upon a time, a long, long time ago we decided that, instead of making furniture for people with fat wallets, we would side with most people instead and offer them a better everyday life. We decided to offer a wide range of home furnishing items of good design and function, at prices so low the majority of people could afford to buy them.\" lngvar Kamprad. IKEA started in Sweden over 50 years ago with one man's vision. lngvar Kamprad, the founder of IKEA, asked the questions: Why are nice homes only possible for people with a lot of money? Why shouldn't everybody be able to afford a nice, functional home? Why does furniture have to be so expensive? Why is there no one offering a wide range of home furnishing articles of good form and function at prices so low that the many people can afford them. lngvar Kamprad wanted to help create a better everyday life for the people in Sweden where he lived. Business start-up The IKEA concept was a revolutionary one which was well ahead of its time. Essentially, IKEA has built an anti-brand which stands for the good of the many people rather than a narrow group ofshareholders. IKEA began with the question: 'Who's on the side of the customer?' From this stemmed a corporate philosophy which asked two further questions: 'lsn't there room for an antibrand that stands for low price, high quality and innovation?' 'lsn't there room for an anti-brand that stands for the benefit of everyone?' Large IKEA stores were built on the outskirts oftowns where rates were cheaper, and people could park easily. The furniture was sold in flat packages which saved space and allowed for ease of handling and transport. Finally, lngvar Kamprad built his business on the philosophy 'We do a little, you do a little, togetherwe save money' which meant that the customer became part of the production process. The DIY idea was refined and put into operation on a large scale. All this allowed for long production runs, which provided economies of scale and growth whilst maintaining the quality ofthe finished products. IKEA's vision A vision is the ideal or aim to which an organization and its people work. The vision statement should answer the question 'Who is IKEA?' Having a clear vision enables an organization to enthuse its employees, customers, suppliers, and other important stakeholders. Today IKEA's corporate vision is that of: 'A community ofprofessionals, constantly developing the skills necessary to create a better everyday life at home for the many people.' IKEA's mission IKEA's mission is: 'To develop the skills of every IKEA employee, so that they may become professionals in providing a complete range of home decorating products ofgood form and function at a low price.' The mission for lKEA's employees is: 'I will gain the knowledge necessary to develop myself and my skills so that my work and my life are more meaningful.' Today's business idea The three key dimensions of IKEA are therefore: Good FORM and FUNCTION, at a LOW PRICE. However, form and function in harmony are only half the story. Affordability also has an important part to play. 3rice is the third and most critical dimension for those who seek to make good design and practical function available to the many, not just the few. It is the combination of form, function, and a low price at the same time, which makes IKEA products unique. IKEA continually strives to provide beautiful, practical furniture at a low price. This means, for example, that IKEA designers work with production unit suppliers to design furniture in a way which makes the most rational use of available production capacity. It means that products are designed to be produced in environmentally suitable materials that can be purchased at reasonable prices and that products are designed so that customers can assemble them themselves at home to save money. IKEA purchasers travel the world to find the best possible manufacturers at the lowest possible price, without undermining the designer's original idea or lowering the quality ofthe product. The result is that design engineers are not frightened by the mathematics of making maximum use of materials and technology. It also means that customers do not need a degree in engineering to put their furniture together! Meeting environmental standards Nowadays, consumers demand that furniture design meets the highest environmental standards. IKEA has responded to this consumer demand and has set itself high standards which mean that: manufacturing is carried out so that materials, technology, and transportation have the least possible damaging effect on the environment. raw materials are used rationally, and waste is minimized. Unfortunately, no manufacturing process is completely environmentally friendly but at IKEA, an extraordinarily strong emphasis is placed on thinking and acting ecologically. For example, by striving: not to consume resources at a rate faster than nature can replace them. Not to use unnatural materials and substances to preserve nature and its inhabitants to refrain from dumping waste. Conclusion Because IKEA is fundamentally concerned with serving the requirements of 'the many people,' the design process begins with finding out what the consumer wants. IKEA therefore engages in a continual cycle of market research to nd out about consumer lifestyles, what benets consumers are seeking from a range of household furnishings, what consumer perceptions are of existing products and many other things. IKEA has always been conscious ofthe importance ofa detailed analysis ofcustomer needs in all markets. Source: Business case studies/UK Answer all THREE (3) case study questions Question 1 Which of Porters THREE (3) generic competitive strategiesoverall cost leadership, differentiation, and focus is IKEA predominantly applying? Explain your answer based on lKEA's business strategies. (20 marks) Question 2 IKEA, from a strategic standpoint, runs the risk of being 'stuck in the middle' where its strategies are concerned. What does this mean and what are its implications for IKEA? (20 marks) Question 3 What are the risks for IKEA in pursuing Porters generic competitive strategies? Explain the risks associated with an overall cost leadership strategy, differentiation strategy and focus strategy for IKEA. (20 marks)