Business strategy: IKEA invades America
* Porter analysis of the Furniture suppliers’ American Market:
CUTOMERS: Basically every American. IKEA’s target is the American, who doesn’t want to spend a lot of money in its furniture supplies, but who wants style and design as well. In IKEA’s vision, the typical customer is a traveler, who enjoys drinkingwine, risk and good life. The target of IKEA is really broad, which is positive for the company.
SUPPLIERS: In order to reach the lowest price, IKEA uses its global strength and create a competition with worldwide suppliers. They don’t care if different parts of the same final product are made in different countries. The goal is to have the lowest price at the end. So the suppliers are a lot andIKEA has a lot of power on them, which is positive for the company.
COMPETITORS: The competitors are varied. It goes from the local supplier to big suppliers such as Wal-Mart. The main difference is that there are not low priced furniture retailers in the US. IKEA are quite alone on that market, but some of the competitors has a really big network and can attract easily the customer. The competitionis for IKEA the biggest problem on the market.
BARRIERS TO ENTRY: As the CEO of IKEA said, it is very hard to copy the whole world of IKEA. You can try to compete with IKEA on the prices, or on the Brand name (with huge stores, etc.) but you cannot create everything of IKEA. So the barriers to entry are very high in this market, which is good for IKEA.
SUBSTITUTES: I don’t think that there area lot of substitutes of furniture. You can use a table as a desk but you can buy this table at IKEA too. So this point is very good for IKEA.
To conclude, we can say that the market environment for the company is very good because there are a lot of barriers for a company to really compete with IKEA. The main task for the company is to broad its target and to try to eliminate the competitors.* SWOT Analysis of IKEA:
* Low costs because of the worldwide network of suppliers
* Big Brand image
* Wide range of products, and styles
* Big stores, with self service, facilities (restaurants …) and creation of attractive environment.
* Try to apply the same strategy in every country, which has failed in America (no market research)
*Only 14 stores in the US, which is few compare to other countries (Germany has 30 stores.)
* “Do it yourself” approach for the products, which can make some customers don’t buy the product
* Poor quality, the product’s lifetime is really limited.
* Export the concept in other countries
* Creates other kinds of shopping such as internet, or outlets for end series
*Develop the existing partnership with suppliers in order to reduce costs again
* Hard competition with the other big chains of suppliers (Wal-Mart, Office depot)
* Difficulty to attract new customers, by opening new stores.
After this analysis of IKEA’s environment, we can do a strategy analysis for the company on order to find new ways to become more profitable and to succeedin their growing strategy.
IKEA’s principal strategy is to be able to sell products at the lowest price. In order to do that, they have to cut all their prices, by different actions on their production process. This low cost strategy involves that the company just provides the products. The services, the costs and the price are cut to minimum. This strategy is coherent in each partof the production process, and in each department of the company.
First, for the product and the design, the company is always looking for the best efficiency. During the choice of the raw materials, IKEA try to find quality materials for the surface parts, those which are visible and external. The less visible parts are made with less quality raw materials, in order to save money. The company...