Subject: Strategic Marketing

Assignment.

The aims of this activity are: To provide an opportunity to practice and develop your ability to think on strategic marketing case studies. To generate insight into connections by encouraging you to reflect on strategic marketing course content. To encourage reflective reading on strategic marketing practices.

Read the IKEA CASE STUDY AND ANSWER THE FOUR QUESTIONS.

No. 2: IKEA Discussion questions for No 2 case study: 1. Develop a profile of the typical IKEA customer. To what extent does the profile vary across countries? (10 marks) 2. Discuss how IKEAs management wants the brand to be positioned in the eyes and minds of the retailers customers. (10 marks) 3. Describe and evaluate IKEAs value chain strategy. (10 marks) 4. Discuss IKEAs strategy for building a strong global brand. (10 marks)

Below is the attached file for the case study.

Case 2-2 coolness. It is a trusted safe zone that people can enter and immediately be part of a like-minded cost/design/ lkea environmentally-sensitive global tribe. There are other would-be curators around-Starbucks and Virgin do a When Roger Penguino heard Ikea was offering $4,000 good job-but Ikea does it best. in gift certificates to the first person in line at the open- If the Swedish retailer has its way, you too will live ing of its new Atlanta store, he had no choice. He threw in a BoKlok home and sleep in a Leksvik bed under a a tent in the back of his car and sped down to the site. Brunskra quilt. (Beds are named for Norwegian cities; There, the 24-year-old Mac specialist with Apple Com- bedding after flowers and plants. One disaster: a child's puter Inc. pitched camp, hunkered down, and waited. bed called Gutvik, which sounds like "good f" in And waited. Seven broiling days later, by the time the German.) Ikea wants to supply the food in your fridge store opened on June 29 , more than 2,000 Ikea fanat- (it also sells the fridge) and the soap in your shower. ics had joined him. Some were lured by the promise The Ikea concept has plenty of room to run: The of lesser prizes for the first 100 . Others were just there retailer accounts for just 5% to 10% of the furniture marfor the carnival atmosphere (somebody even brought a ket in each country in which it operates. More important, grill). The newly wed Penguino got his certificates and says CEo Anders Dahlvig, is that "awareness of our brand bagged a $799 Karlanda sofa and a $179 Malm bed, is much bigger than the size of our company." That's among other items. He also achieved celebrity status: because lkea is far more than a furniture merchant. It "Whenever 1 go back, employees recognize me and sells a lifestyle that customers around the world embrace show me the new stuff". Penguino is a citizen of Ikea World, a state of mind taste and recognize value. "If it wasn't for Ikea," writes that revolves around contemporary design, low prices, British design magazine Icon, "most people would have wacky promotions, and an enthusiasm that Cew institu- no access to affordable contemporary design." The magtions in or out of business can muster. Perhaps more azine even voted lkea founder Ingvar Kamprad the most than any other company in the world, Ikea has become influential tastemaker in the world today. a curator of people's lifestyles, if not their lives. At a As long as consumers from Moscow to Beijing and time when consumers face se many choices for every- beyond keep striving to enter the middle class, there will thing they buy, Ikea provides a one-stop sanctuary for be a need for lkea. Think about it: What mass-market retailer has had more success globally? Not Wal-Mart privately held Ikea guards profit figures as jealously Stores Inc., which despite vast strengths has stumbled as its recipe for Swedish meatballs, analyst Mattias in Brazil, Germany, and Japan. Not France's Carrefour, Karlkjell of Stockholm's ABG Sundal Collier conservawhich has never made it in the U.S. Ikea has had its tively estimates Ikea's pretax operating profits at \$1.7 slip-ups, too. But right now its 226 stores in Europe, billion. Ikea maintains these profits even while it cuts Asia, Australia, and the U.S. are thriving, hosting 410 prices steadily. "Ikea's operating margins of approximillion shoppers a year. The emotional response is mately 10% are among the best in home furnishing," unparalleled. The promise of store vouchers for the Karlkjell says. They also compare well with margins of first 50 shoppers drew thousands to an Ikea store in 5% at Pier 1 Imports and 7.7% at Target, both competithe Saudi Arabian city of Jeddah in September, 2004. tors of lkea in the U.S. In the ensuing melee, two people died and 16 were To keep growing at that pace, Ikea is accelerating injured. A February opening in London attracted up to store rollouts. Nineteen new outlets are set to open 6,000 before police were called in. worldwide in the fiscal year ending Aug. 31, 2006, at a Why the uproar? Ikea is the quintessential global cost of $66 million per store, on average. CEO Dahlpig cult brand. Just take those stunts. Before the Atlanta is keen to boost Ikea's profile in three of its fastestopening, Ikea managers invited locals to apply for the growing markets: the U.S., Russia (Ikea is already post of Ambassador of Kul (Swedish for fun). The five a huge hit in Moscow), and China (now worth $120 winners wrote an essay on why they deserved $2,000 million in sales). In the U.S. he figures the field is in vouchers. There was one catch: They would have to wide open: "We have 25 stores in a market the size of live in the store for three days before the opening, take Europe, where we have more than 160 stores." The goal part in contests, and sleep in the bedding department. is 50 U.S. outlets by 2010: Five are opening this year, "I got about eight hours of sleep total because of all up from just one in 2000. the drilling and banging going on," says winner Jordan The key to these rollouts is to preserve the strong Leopold, a manager at Costco Wholesale. enthusiasm Ikea evokes, an enthusiasm that has inspired Leopold got his bedroom set. And Ikea got to craft two case studies from Harvard Business School and another story about itself-a story picked up in the endless shopper comment on the Net. Examples: "Ikea press that drew even more shoppers. More shoppers, makes me free to become what I want to be" (from more traffie. More traffic, more sales. More sales, more Romania). Or this: "Half my house is from Ikea-and buz. A new store in Bolingbrook, III., near Chicago the nearest store is six hours away" (the U.S.). Or this? is expected to generate some $2.5 milion in tax rev- "Every time, it's trendy for less money" (Germany). enues, so the town is paying down debt and doing away What enthralls shoppers and scholars alike is the with some local levies. store visit-a similar experienee the world over. The Such buzz has kept Ikea's sales growing at a healthy blue-and-yellow buildings average 300,000 square feet elip: For the fiscal year ended Aug. 31, revenues rose in size, about equal to five football fields. The sheer 15\%, to $17.7 billion (see Exhibit 1). And although number of items -7.000 . from kitchen cabincts to With 226 stores in 33 countries, lkea is now Sweden's best known export 164 Part Two Markets, Segments, and Custower lallue candlesticks-is a decisive advantage. "Others offer Then, clutching your dog-cared catalog (the print affordable furniture," says Bryan Roberts, research run for the 2006 edition was 160 million more than manager at Planet Retail, a consultancy in London. the Bible, lkea claims), you proceed along a marked "But there's no one else who offers the whole concept path through the warren of showrooms. "Because the in the big shed." store is designed as a circle, I can see everything as The global middle class that lkea targets shares buy. long as 1 keep walking in one direction," says Krystyna ing habits. The \$120 Billy bookcase, \$13 Lack side Gavora, an architect who frequents Ikea in Schaumburg. table, and S190 Ivar storage system are best-sellers III. Wide aisles let you inspect merchandise without worldwide. (U.S. prices are used throughout this case.) holding up traffic. The furniture itself is arranged in Spending per customer is even similar. According to fully aceessorized displays, down to the pieture frames Ikea, the figure in Russia is S85 per store visit-exactly on the nightstand, to inspire customers and get them to the same as in affucnt Sweden. spend more. The settings are so lifelike that one writer Wherever they are, customers tend to think of the is stiging a play at Ikea in Renton, Wash (Exhibit 2 ). Ikea, the figure in Russia is $85 per store visit-exactly an the nightstand, to inspire customers and get them to the same as in affiluent Sweden. spend more. The settings are so lifelike that one writer Wherever they are, customers tend to think of the is staging a play at Ikea in Renton, Wash (Exhibit 2). store visit as more of an outing than a chore. That's Along the way, one touch after another seduces the intentional: As one of the Harvard B-school studies shopper, from the paper measuring tapes and pencils states, Ikea practices a form of "gentle coercion" to to strategically placed bins with items like pink plaskeep you as long as possible. Right at the entrance, for tic watering cans, scented candles, and picture frames. example, you can drop off your kids at the playroom, These are things you never knew you needed but at less an amenity that encourages more leisurely shopping. than $2 each you load up on them anyway. You set out EXHIBIT 2 What a Sweetheart of a Love Seat Lars Engman learned the hard way that furniture plus three in the U.S. and two in China, each of which needs to do more that just look good. After his 6-year- is guaranteed a minimum volume. old daughter and her rambunctious pals destroyed his After much experimenting with different materiexpensive Italian-made sofa in three months in the als, the frames are now made from a combination of 1970 s, the Ikea product developer was inspired to particleboard, fiberboard, and polyurethane foam, a create an equally stylish but kidproof alternative. "I mix that is cheaper and lighter in weight than solid wanted it to be hard-wearing and kid-friendly without wood. It wasn't until last year, though, that Ikea finally compromising on design," says Engman, now Ikea's figured out how to break down the Klippan so it could design manager, based in Almhult, Sweden. It would be flat-packed. Now the frame comes in four separate have to be soft around the edges yet sturdy enough to pieces: The armrests and back slip into slots in the withstand years of wear and tear, and have machine- seating base. The new system saves 50% on shipping washable slipcovers to make it easy to keep clean. costs and also frees up room at Ikea's warehouses. More important, it would have to meet the lkea chal- The cotton slipcovers for the Klippan have also lenge of good looks at a low price. A tall order. But gotten cheaper. By centralizing everything from the after endless testing of materials and fabrics, Klippan production of the fabric to the stitching of the covers was born in 1980. More than two decades later, the to just four core suppliers in China and Europe, Ikea $249 love seat with its clean lines, bright colors, sim- has been able to lower the retail price of the covers by ple legs, and compct size remains one of Ikea's best- 20%6 since 2004. sellers with 1.5 million sold since 1998 . Even after a product is dejigned and in the stores, The saga of the Klippan is that of Ikea in miniature: Ikea never stops secking ways to lower costs. For strong design, logistical efficiency, and constant cost- instance, it discovered that by using a different type of cutting. Although the sofa was initially manufactured production process, it could cut down the number of in Sweden, soon after Ikea outsourced production to materials used to make the Klippan sofa cushions to just lowereost suppliers in Poland. As the Klippan's popu- two. All of these efficiencics have allowed Ikea to slash larity grew, the company decided it made more sense the Klippan's price some 40 since 1999. Currently it to work with supplicrs in each of lkea's big markets sells for around $249 in the U.S., but the price next year to avoid having to ship the product all over the world. will fall to $202-affordable cven for a cash-strapped to buy a $40 coffee table but end up dropping $500 on and seeds from a shed on his family's farm in southern everything from storage units to glassware. "They have Sweden. In 1951, the first catalog appeared (Kamprad this way of making you believe nothing is expensive," penned all the text himself until 1963). His credo of cresays Bertille Faroult, a shopper at Ikea on the outskirts ating "a better life for many" is enshrined in his almost of Paris. The bins and shelves constantly hold surprises: evangelical 1976 tract, A Furniture Dealer's Testament. Ikea replaces a third of its product line every year. Peppered with folksy tidbits-"divide your life into Then there's the stop at the restaurant, usually placed 10 -minute units and sacrifice as few as possible in meanat the center of the store, to provide shoppers a breather ingless activity," "wasting resources is a mortal sin" and encourage them to keep going. You proceed to the (that's for sure: employees are the catalog models), or warehouse, where the full genius of founder Kamprad is the more revealing "it is our duty to expand"-the pamon display. Nearly all the big items are flat-packed, which phlet is given to all employees the day they start. not only saves Ikea millions in shipping costs from sup- Kamprad, though officially retired, is still the cheerpliers but also enables shoppers to haul their own stuff leader for the practices that define Ikea culture. One is home-another savings. Finally you have the fun for cgalitarianism. Ikea regularly stages Antibureaucracy agony) of asscinbling at home, equipped with nothing Weeks, during which executives work on the shop floor but an Allen wrench and those cryptic instructions. or tend the registers. "In February," says CEO Dahlvig, A vocal minority rails at lkea for its long lines, "I was unloading trucks and sclling beds and matcrowded parking lots, exasperating assembly experi- tresses." (Exhibit 3). ences, and furniture that's hardly built for the ages (the Another is a steely competitiveness. You get a sense running joke is that Ikea is Swedish for particle board). of that at one of Ikea's main oftices, in Helsingborg, But the comverts outnumber the critics. And for every Sweden, At the door-way, a massive bulletin board fun who shops at Ikea, there seems to be one working traeks weekly sales growth. names the best-performat the store itself. The fanaticism stems from founder ing coumtry markcts, and identiftes the best-sclling: Kamprat, 79, a figure as important to global retaling as furniture. The other message that comes actoss loud ExHIBIT 3 How to Build a Cult Brand Somare: Hwainem Whet Ikea sells a lifestyle that signifies hip design, thriit, and simplicity. For the aspiring global middle class, buying lkea is a sign of success. Here's how the Swades do it. CREATE THE STORY SEDUCE THE SHOPPER The retaler is a master at building Customer focus is so intense buzz, which creates evangelists for that even senior management its brand, who then spread the must work behind cash registers story by phone, word of mouth, and in the warehouse for briet and even blogs from Shanghai to stints every year. The stores Chicago. The Ambassador of Kul are laid out to promote fun: promotion, for example, gives Pestaurants and play centers essay contest winners the chance encourage shoppers to spend to camp out in a store before it the day. Simple touches, from opens. That excites shoppers and free pencils to paper measuringgenerates huge publicity. tapes, make it easy to shop. INSPIRE THE STAFF SURPRISE ON VALUE Employees won't get rich, but they Ikea mandates price cuts every do get to enjoy autonomy, very little year, but designers also deliver hierarchy, and a family -triendly on looks and quality. Every year culture. In return they buy into the designers must meet stretch philosophy of frugality and style that goals, like designing a bedroom drives the whole company. set for $130. 166 Part Two Markers, Sigmentsi. and Cusfomer lalice models from 1999 to 2006 with their curo price unusual materials. The results: a table fashioned from tags. In 1999 the Klippan was $354. In 2006 it will reddish-brown birch heartwood (furniture makers prebe $202 fer the pale exterior wood) and a storage system made The montage vividly illustrates thea's relentless from recyeled mitk cartons. cost-cutting. The retailer aims to lower prices across its If sales keep growing at their historical average, by The montage vividly illustrates Ikea's relentless from recycled milk cartons. cost-cutting. The retailer aims to lower prices across its If sales keep growing at their historical average, by entire offering by an average of 2% to 3% each year. It 2010 Ikea will need to source twice as much material goes deeper when it wants to hit rivals in certain seg- as today. "We can't increase by more than 20 stores a ments. "We look at the competition, take their price, year because supply is the bottleneck," says Lennart and then slash it in half," says Mark McCaslin, man- Dahlgren, country manager for Russia. Since Russia is ager of Ikea Long Island, in Hicksville, N.Y. a source of timber, Ikea aims to turn it into a major supIt helps that frugality is as deeply ingrained in the plier of finished products. corporate DNA as the obsession with design. Manag- Adding to the challenge, the suppliers and designers fly economy, even top brass. Steen Kanter, who left ers have to customize some Ikea products to make them Ikea in 1994 and now heads his own retail consultancy sell better in local markets. In China, the 250,000 plastic in Philadelphia, Kanter International, recalls that while placemats Ikea produced to commemorate the year of flying with Kamprad once, the boss handed him a cou- the rooster sold out in just three weeks. Julie Desrosiers, pon for a car rental he had ripped out from an in-flight the bedroom-line manager at Ikea of Sweden, visited magazine. people's houses in the U.S. and Europe to peck into their This cost obsession fuses with the design culture. closets, learning that "Americans prefer to store most "Designing beautiful-but-expensive products is easy," of their clothes folded, and Italians like to hang." The says Josephine Rydberg-Dumont, president of Ikea of result was a wardrobe that features deeper drawers for Sweden. "Designing beautiful products that are inex- U.S. customers. pensive and functional is a huge challenge." The American market poses special challenges for No design-no matter how inspired finds its way Ikea because of the huge differences inside the U.S. into the showroom if it cannot be made affordable. To "It's so easy to forget the reality of how people live," achieve that goal, the company's 12 full-time designers says Ikea's U.S. interior design director, Mats Nilsson. at Almhult, Sweden, along with 80 freelancers, work In the spring of 2004 . Ikea realized it might not be hand in hand with in-house production teams to iden- reaching California's Hispanics. So its designers vistify the appropriate materials and least costly suppliers, ited the homes of Hispanic staff. They soon realized a trial-and-error process that can take as long as three they had set up the store's displays all wrong. Large years. Example: For the PS Ellan, a $39.99 dining chair Hispanic families need dining tables and sofas that fit that can rock back on its hind legs without tipping over. more than two people, the Swedish norm. They prefer designer Chris Martin worked with production staff bold colors to the more subdued Scandinavian palfor a year and a half to adapt a wood-fiber composite, ette and display tons of pictures in elaborate frames. an inexpensive blend of wood chips and plastic resin Nilsson warmed up the showrooms 'colors, adding more used in highway noise barriers, for use in furnishings. seating and throwing in numerous picture frames. Martin also had to design the chair to break down Ikea is particularly concerned about the U.S. since into six pieces, so it could be flat-packed and snapped it's key to expansion-and since lkea came close to the right product. It once contracted wer ski makers- malliea experence, and mamy were in poor losations. With a network of 1,300 suppliers in 53 countries, 1990 because we really didn't listen to the consumer," Ikea works overtime to find the right mamufacturer for says Kanter. Stores weren't big enough to offer the the right product. It once contracted with ski makers- full likea experience, and many were in poor locations. experts in bent wood to manufacture its Poang arm- Prices were too high. Beds were measured in centimchairs, and it has tapped makers of supermarket carts eters, not king, queen, and twin. Sofas weren't deep to turn out durable sofas. Simplicity, a tenet of Swedish enough, curtains were too short, and kitchens didn't fit design, helps keep costs down. The 50 , Trof mug U.S.-size appliances. "American customers were buycomes only in blue and white, the least expensive pig- ing vases to drink from because the glasses were too ments. Ikea's conservation drive extends naturally from small," recalls Goran Carstedt, the former head of Ikea this cost-cutting. For its new PS line, it challenged 28 North America, who helped engineer a turnaround. designers to find innovative uses for discarded and Parts of the product line were adapted (no more metric Case 2-2 Ikea 167 EXHIBIT 4 Need a Home to Go with That Sofa? Like many young couples, artist Nina Leth Jensen, Swedish developer Skanska, also is cyeing France, 32 , and her husband, Jakob, 33, a manager with the Poland, the Netherlands, and the U.S. "There is a global Copenhagen metro, feared they would never be able need for affordable housing," says BoKlok managing to afford their own home. With a four-year-old child director Anders Larsson. "We want to fill that gap." and another on the way, the family was desperate to To come up with the right price tag, Ikea enlisted move to a bigger space but found themselves priced well-known Swedish economist Pia Nilsson. In-store out of the market. customer surveys then revealed what the market Then in June, 2004, Nina spotted an ad for BoKlok wanted: a safe, low-rise apartment in a small-scale (Swedish for "smart living"), a line of affordable pre- development with outside space, open-plan living, fab homes marketed by lkea. "I told my husband, 'this and lots of light. is the house for us," says Nina. "We already had a lot A BoKlok development consists of several timberof Ikea furniture, so why not have a total Ikea home?" framed buildings, each containing five to six apartToday, the Jensens live in a BoKlok development ments. Putting the units together is a snap. Most of in Hillerod, Denmark, just outside of Copenhagen. For the work takes place on the factory floor. The assem$45,000, some 25% less than comparable homes in bly line starts with carpenters, who ereet the walls Today, the Jensens live in a BoKlok development ments. Puting the units rogether is a snap. Most of in Hillerod, Denmark, just outside of Copenhagen. For the work takes place on the factory floor. The assem$45,000, same 25% less than comparable homes in bly line starts with carpenters, who erect the walls the area, the family got an airy 800 -square-foot, three- and windows. Then a fully equipped Ikea kitchen and bedroom apartment with an open-plan living area, bathroom are added. Floors, shelving units, and elecsmall garden, and garage. Ikea also threw in $500 in gift trical wiring are installed before painters add the final certificates and the free services of an Ikea designer. touches. The modular units are then delivered to the Aimed largely at first-time buyers, BoKlok is construction site on 18-wheel trucks. A crane drops proving a big hit, with more than 2,500 units sold in them in place, and builders complete the last fittings, Sweden, Finland, Norway, and Denmark since the a process that typically takes just one day. program was launched in 1997. In a new develop- CEO Anders Dahlvig acknowledges BoKlok "generment outside Oslo, the 60 homes sold out in 45min ates a lot of buzz for the brand," but adds, "we are not utes. Next up: Southampton, England, where the first a house builder ourselves, so we have to be cautious." BoKloks will go on sale in January. BoKlok, a stand- Yet with more and more people clamoring for the total alone company that is jointly controlled by Ikea and Ikea lifestyle, Ikea may have to change its tune. measurements), new and bigger store locations chosen, Perhaps the bigger issue is what happens inside prices slashed, and service improved. Now U.S. man- Ikea. "The great challenge of any organization as it agers are paying close attention to the tiniest details. becomes larger and more diverse is how to keep the "Americans want more comfortable sofas, higher- core founding values alive," says Harvard Business quality textiles, bigger glasses, more spacious enter- School Professor Christopher A. Bartlett, author of a tainment units," says Pernille Spiers-Lopez, head of 1996 case study. Ikea is still run by managers who Ikea North America. Were trained and groomed by Kamprad himself-and Can the cult keep thriving? Ikea has stumbled badly who are personally devoted to the founder. As the before. A foray into Japan 30 years ago was a disas- direct links with Kamprad disappear, the culture may ter (the Japanese wanted high quality and great mate- start to fade. rials, not low price and particle board). The company For now, the founder's legacy is alive and well. The is just now gearing up for a return to Japan next year. Klippan couches are selling briskly. New lines of fopds, Ikea is also seing more competition than ever. In the travel gear, and toiletries are due soon. Ikea is gearing U.S., Target Corp. has recruited top designer Thomas up for its Christmas tree promotion-you buy a live O'Brien to develop a range of low-priced furnishings, tree, then return it for a rebate (and end up shopping at which were launched in October. Kmart has been col- Ikea in the slow month of January). laborating with Martha Stewart on its own furniture And the fans keep clamoring for more. At least line. An Ikea-like ehain called Fly is popular in France. once a year, Jen Segrest, a 36-year-old freelance Web In Japan Nitori Co. has a lock on low-cost furniture. designer, and her husband travel 10 hours round-trip UC 2xVK The montage vividly illustrates Ikea's relentless from recycled milk cartons. cost-cutting. The retailer aims to lower prices across its If sales keep growing at their historical average, by entire offering by an average of 2% to 3% each year. It 2010 Ikea will need to source twice as much material goes deeper when it wants to hit rivals in certain seg- as today. "We can't increase by more than 20 stores a ments. "We look at the competition, take their price, year because supply is the bottleneck," says Lennart and then slash it in half", says Mark McCaslin, man- Dahlgren, country manager for Russia. Since Russia is ager of Ikea Long Island, in Hicksville, N.Y. a source of timber, Ikea aims to turn it into a major supIt helps that frugality is as deeply ingrained in the plier of finished products. corporate DNA as the obsession with design. Manag- Adding to the challenge, the suppliers and designers fly economy, even top brass. Steen Kanter, who left ers have to customize some Ikea products to make them Ikea in 1994 and now heads his own retail consultancy sell better in local markets. In China, the 250,000 plastic in Philadelphia, Kanter International, recalls that while placemats Ikea produced to commemorate the year of flying with Kamprad once, the boss handed him a cou- the rooster sold out in just three weeks. Julie Desrosiers, pon for a car rental he had ripped out from an in-flight the bedroom-line manager at Ikea of Sweden, visited magazine. people's houses in the U.S. and Europe to peek into their This cost obsession fuses with the design culture. closets, learning that "Americans prefer to store most "Designing beautiful-but-expensive products is easy," of their clothes folded, and Italians like to hang." The says Josephine Rydberg-Dumont, president of Ikea of result was a wardrobe that features deeper drawers for Sweden. "Designing beautiful products that are inex- U.S. customers. pensive and functional is a huge challenge." The American market poses special challenges for No design-no matter how inspired-finds its way Ikea because of the huge differences inside the U.S. into the showroom if it cannot be made affordable. To "It's so easy to forget the reality of how people live," achieve that goal, the company's 12 full-time designers says Ikea's U.S. interior design director, Mats Nilsson. at Almhult, Sweden, along with 80 freelancers, work In the spring of 2004 , Ikea realized it might not be hand in hand with in-house production teams to iden- reaching California's Hispanics. So its designers vistify the appropriate materials and least costly suppliers, ited the homes of Hispanic staff. They soon realized a trial-and-error process that can take as long as three they had set up the store's displays all wrong. Large years. Example: For the ps Ellan, a $39.99 dining chair Hispanic fumilies need dining tables and sofas that fit that can rock back on its hind legs without tipping over, more than two people, the Swedish norm. They prefer designer Chris Martin worked with production staff bold colors to the more subdued Scandinavian palfor a year and a half to adapt a wood-fiber composite, ette and display tons of pictures in claborate frames. an inexpensive blend of wood chips and plastie resin Nilsson warmed up the showrooms' colors, adding more used in highway noise barriers, for use in furnishings. seating and throwing in numerous picture frames. Martin also had to design the chair to break down Ikea is particularly concerned about the U.S, since into six pieces, so it could be flat-packed and snapped it's key to expansion-and since lkea came close to together without screws (Exhibit 4). B Wlowimh it whe mot own clocks cleaned in the carly the right product. It once contracted whis skmasers Tulthea experichec, and many were in poor locations. prices slashed, and service improved. Now U.S. man- Ikea. "The great challenge of any organization as it agers are paying close attention to the tiniest details. becomes larger and more diverse is how to keep the "Americans want more comfortable sofas, higher- core founding values alive," says Harvard Business quality textiles, bigger glasses, more spacious enter- School Professor Christopher A. Bartlett, author of a tainment units," says Pernille Spiers-Lopez, head of 1996 case study. Ikea is still run by managers who Ikea North America. were trained and groomed by Kamprad himself-and Can the cult keep thriving? Ikea has stumbled badly who are personally devoted to the founder. As the before. A foray into Japan 30 years ago was a disas- direct links with Kamprad disappear, the culture may ter (the Japanese wanted high quality and great mate- start to fade. rials, not low price and particle board). The company For now, the founder's legacy is alive and well. The is just now gearing up for a return to Japan next year. Klippan couches are selling briskly. New lines of foods, Ikea is also secing more competition than ever. In the travel gear, and toiletries are due soon. Ikea is gearing U.S., Target Corp, has recruited top designer Thomas up for its Christmas tree promotion-you buy a live O'Brien to develop a range of low-priced furnishings, tree, then return it for a rebate (and end up shopping at which were launched in October. Kmart has been col- Ikea in the slow month of January). laborating with Martha Stewart on its own furniture And the fans keep clamoring for more. At least line. An Ikea-like chain called Fly is popular in France. once a year, Jen Segrest, a 36-year-old freelance Web In Japan Nitori Co. has a lock on low-cost furniture. designer, and her husband travel 10 hours round-trip 168 Part Two Marhets, Segments, and Customer lalue from their home in Middletown. Ohio, to lkea in even started a blog called OH! IKEA. The banner on Schaumburg. III, near Chicago. "Every piece of furni- the home page reads "Ikea in Ohio-Because man canture in my living room is lkea-except for an end table, not live on Target alone." which I hate. And next time 1 go to Ikea I'Il replace it," Source: Kerry Capell, "IKEA," BusinessWcek, November 14, says Segrest. To lure the retailer to Ohio, Segrest has 2005, 97-106. Case 2-3 Invaluable Role China and India: Opportunities Now hop a plane to India. It is hard to tell this is the