KEA Is A VERY SUCCESSFUL EXAMPLE OF A EUROPEAN company that has managed, over only a few decades, to become the worldwide leader in the fumitme industry. It is today active in 44 countries all over the world and accounts for more than 90,000 employees. Sales reached 143 billion in 2005, and can be Split into three regions: Europe (31 per cent), North America (16 per cent) and AsiafAustralia (3 per cent). Founder Ingmar Kamprad had the Vision that people would buy more furniture if the price is low enough. the furniture is of decent quality and no delays exist in delivery. The IKBA business idea is therefore 'to offer a wide range of well designed. functional home furnishing products at prices so low that as many peeple as possible will be able to afford them\". This concept was totally innovativo in the market after the Second World War when IKEA was created. At that time, furniture was expensive and mainly targeted to people with higher revenues. IKEA succeeded to identify a segment of the market where consumer needs were not yet satised. It was composed of young couples Whose budget was low and needed to be totally furnished. This business concept required large volumes to be built in order to be protable. Kamprad always had one obsession; reduce costs in all areas of the business system. This led him to innovate and create new ways of developing and selling furniture. First, he outsourced manufacturing in counties where labour was less expensive. Poland was one of the rst producing countries followed by other low-cost countries such as China. He also decided to Select less expensive wood than what was traditionally used for rmimre and acquired even forests to control the whole process. He was then a pioneer in what We can call now vertical integration. He also discovered that 'knockng down' furniture shipped in at boxes would reduce transportation costs dramatically, by more than 80 per cent. He also asked consumers to contribute to the development process. Consumers have to assemble themselves the knocked down furniture, get them in the stores and transport them home. This process was totally new and the only way to reduce costs to the maximum. Kamprad also built unique relationship with suppliers. His vision was to ensure xed volume for a certain period of time to suppliers in exchange for lower costs. This was a 'winwin' strategy to benet from efficiency and long productions runs. Finally, stores were and are still located outside cities to take advantage of cheap land. This was quite different from competition that was usually located in the centre of cities. All these innovations have permitted lKEA to sustain a strategy of offering prices as low as possible. Interestingly, prices have even been lowered by 2 per cent in 2005 versus one year earlier. The product range is developed to be extensive enough to have something that appeals to everyone and to cover all functions in the home. It counts over 10,000 articles. Design is functional and modern, in line with the unique Swedish style. 'Ibday, all products are still designed in Sweden inAlmhult. The IKEA tradition is also to give names to all its products. Names are still given in Swedish (OCKERO, VALLO) and not translated in the different countries of the World as part of the IKEA Swedish image. lnteresthrgly, unique additional seivices are provided to consumers to maximise the shopping experience such as a buffet style restaurant with food o'ered at a very good price and special children areas to keep children busy when their parents shop. IKBA has even recently created a teen area with videos games for the same reasons. IKEA also oers long opening hours. Conununication has always been focused primarily on the IKBA catalogue where a maximum of furniture can be visualised. Of the IKEA mutual marketing budget, 70 per cent is being Spent on this alone. This catalogue is published in 45 different editions and 23 different languages. In 2005, 160 millions catalogues were distributed all over the world. This is the most widely distributed commercial publication in the world. Other media now being used to an increasing degree include TV, radio and Internet-based communication. Source: Author. (This case was written by Professor Jean-Jacques Lambin.) Questions What are the target segments of IKBA? What is so unique with their positioning? How can they manage to maintain low prices? How coherent is the marketing mix with the marketing strategy? PPPZ\