IKEA was founded in 1943 by 17-year old Swede named Ingvar Kamprad. The company, which initially sold pens, Christmas card, and seeds from the shed on Kampard’s family farm, eventually grew into a retail giant in home furnishings and a global cultural phenomenon, what Business Week called a “one-stop sanctuary for coolness” and “the quintessential cult brand.”

IKEA inspires remarkable levels of devotion from its customers, who visit in numbers that average 1.1 million per day. When a new location debuted in London in 2005, 6000 people arrived before the doors open. A contest in Atlanta crowned five winners “Ambassador of Kul” (“kul” is Swedish for ‘fun’) who, in order to collect their prizes, had to live in IKEA store for 3 full days before it opened, which they gladly did.

IKEA achieved this level of success by offering a unique value proposition to consumers: leading-edge Scandinavian design at bargain prices. The companies fashionable bargains include Klippan sofas for US $249, Billy bookcases for $120, and Lack side tables for $13. In Scandinavian markets, IKEA has even sold 2,500 prefabricated homes for around $45,000, depending on local housing prices. The company is able to offer such low prices in part because most items come boxed and require complete assembly at home, meaning they are easier to transport, take up less self space, and seldom require delivery, which reduces costs.

IKEA’s mission of providing value is predicted on founders Kampard’s statement that “People have very thin wallets. We should take care of their interests”. IKEA adheres to this philosophy by reducing prices across its products by 2 to 3% annually. It focuses on value also benefits the bottom line: IKEA enjoys 10% margins, higher than competitors such as Target (7.7%) and Pier 1 Imports (5%), its main competitors in the U.S.

Many of its products are sold uniformly throughout the world, but IKEA also caters to local tastes. In China, for example, it stocked 250,000 plastic placemats with the year of the Rooster themes, which quickly sold out after the holiday. When employees realized U.S. shoppers were buying vases as drinking glasses because they considered IKEA’s regular glasses too small, the company developed larger glasses for the US market.

IKEA managers visited European and U.S. consumers in their homes and learned that Europeans generally hang their clothes, whereas U.S. shoppers preferred to store them folded. Wardrobes for the US market were designed with deeper drawers. Visits to Hispanic household in California led IKEA to add seating and dining space and it’s California stores, brighten the color palettes, and hang more framed pictures on the walls.

IKEA evolved into a retail empire with 264 stores and revenues of U.S. $22.2 billion in 2006, and still had excellent growth opportunities. IKEA planned to double the number of U.S. outlets by 2010. IKEA now has four stores in the Arab world region (one in Kuwait and three in Saudi Arabia) with different franchises. In the UAE, it currently has two stores under a franchise with the Al-Futtaim Group. A third opened in Abu Dhabi in 2011.

Please read the IKEA case carefully and answer the following questions in relation to the different Marketing Strategies that we have covered in the class. Provide YOUR OWN input, rationale and justification behind every choice, strategy and decision you take.

Questions:

1- How does IKEA satisfy the needs of different markets and consumers and what factors (cultural, social, personal, psychological) do they take into consideration in doing that? Explain in details with justification.

2- What is IKEA’s main pricing strategy and do you think it is successful? Explain your rationale in details AND recommend two other pricing strategies that IKEA can use to satisfy it’s customers and sustain it’s market share.

If IKEA was to open in Lebanon once the economic situation is stable, as their marketing manager,

1- What marketing distribution channels would you use and why? Explain your choice in detail focusing on two different channels.

2- Which IMC tools would YOU use to create awareness about their store and products? Please follow the steps in Developing an Effective Marketing Communication Strategy to answer that (target audience, communication objective, message, media, source). 

3- Do you believe that IKEA should practice sustainable marketing? Justify.