IKEA's Global Marketing Strategy

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Case Details:

Case Code : MKTG119
Case Length : 19 Pages
Period : 1998 - 2005
Pub Date : 2006
Teaching Note :Not Available
Organization : IKEA
Industry : Furniture Retail
Countries : Sweden, US and China

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It's the most Everyman store in retail. It crosses income, age, gender, nationality. It is truly a wonder."¹

- Candace Corlett, Principal, WSL Strategic Retail² on IKEA.

"Our IKEA vision is something that we've found is universally understood, from Moscow to the United States and especially in Atlanta. This vision includes IKEA's catchphrase of 'You do a little. We do a little. And together we save a lot'."³

- Linda Mee, Store Manager of IKEA Atlanta, US.

Introduction

The Sweden-based Inter IKEA Systems BV (IKEA) was ranked 42 by BusinessWeek magazine in its list of Top 100 global brands⁴ for the year 2005. In January 2005, IKEA was placed third in BrandChannel's⁵ fourth annual Reader's Choice Awards for the global brand with the most impact in 2004. According to the BrandChannel rankings, IKEA was the #1 brand in Europe and Africa. IKEA was the world's largest furniture retailer that specialized in stylish but inexpensive Scandinavian designed furniture (Refer to Exhibit I for facts on IKEA). IKEA's success was attributed to its vast experience in the furniture retail market, its product differentiation and cost leadership. The company sold its furniture in kits, to be assembled by the customers at home.

In addition to furniture, IKEA also sold utility items such as utensils, hooks, clips, stands, etc. IKEA's founder Ingvar Kamprad (Kamprad) had built an international furniture chain of 226 stores in Europe, Africa, Asia and the US. For fiscal year 2004-05, the company generated revenues of US$ 17.9 billion, a 15% increase over the previous fiscal year.

IKEA held a market share of not more than 10% in the markets in which it operated. In spite of this, it had been successful in almost all countries, because of public awareness of the IKEA brand. According to Anders Dahlvig, Chief Executive Officer (CEO) of IKEA, "Awareness of our brand is much bigger than the size of our company. That's because IKEA is far more than a furniture merchant. It sells a lifestyle that customers around the world embrace as a signal that they've arrived, that they have good taste and recognize value."⁶ The British design magazine Icon⁷ said, "If it wasn't for IKEA, most people would have no access to affordable contemporary design."⁸ The magazine also voted Kamprad as the most influential tastemaker⁹ in the world.

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1] Donna Goodison, "Finding the Icky in IKEA: Offers Too Much of a Good Thing," www.business.bostonherald.com, November 09, 2005.

2] Headquartered in New York, WSL Strategic Retail is a consulting company that offers retailers and manufacturers strategic solutions to marketing problems.

3] "IKEA Furnishes the Southeast," www.ddimagazine.com, August 01, 2005.

4] Since 2000, BusinessWeek magazine has teamed up with Interbrand, a leading brand consultancy firm to publish a ranking of the 100 Top Global Brands by dollar value. The brands are selected according to two criteria. They have to be global in nature, deriving 20% or more of sales from outside their home country. There also has to be publicly available marketing and financial data on which to base the valuation.

5] Brandchannel.com was launched on February 05, 2001 by Interbrand. It provides a global perspective on brands. For increasing brand awareness, it offers tools and information including global listings for conferences, courses and careers, as well as links to other valuable industry resources.

6] "IKEA: How the Swedish Retailer Became a Global Cult Brand," BusinessWeek, November 14, 2005.

7] Icon is an international design and architecture magazine. It interviews top architects and designers in the world, visits the best new buildings, analyses interesting new cultural movements and technologies and reviews a range of exhibitions, books, products and film. The first Icon issue was released in 2003.

8] "IKEA: How the Swedish Retailer Became a Global Cult Brand," BusinessWeek, November 14, 2005.

9] A tastemaker is one who determines or strongly influences current trends or styles, either in fashion or the arts.