MALAYSIAN GRADUATE SCHOOL OF ENTERPERENEURSHIP & BUSINESS

ANALYZING CONSUMER MARKETSCase study on

submitted to :Dr. Bidin Chee Bin Kifli

October 2015

Presented by: group 2 AZHAR NAIMA MUTLAK

p14d487f SHIVAN SALEEM KHALID

p15d082f WIJDAN IBRAHIM ABDULHAMEED

p15d088f KHALDOON FATHI p15d089f

AWS SALAH ABDULLAH p15d085f

Introduction:

Founded in 1943 by a 17-year-old Swedish named Ingvar Kamprad.

Company’s Mission is to provide value to consumers because they have very thin wallets.

In the beginning they were sold pens, Christmas cards, seeds frame for picture and later grew into a retail titan in home furnishings. Unique selling proposition is of leading edge Scandinavian design at very low prices.

It has evolved into a largest furniture retailer in the world with approx. 300 stores in 38 countries with revenues exceeding 21.5 billion euros in 2009. Its top countries in terms of sales include Germany-16%, United states-11%, France-10%, United kingdom-7% and Italy-7%.

Q 1: What are some of the things IKEA is doing right to

reach consumers in different markets?

IKEA achieved this level of success by offering a unique value proposition to consumers: leading-edge Scandinavian design at extremely low prices. IKEA’s vision is “to create a better everyday life for many people.” Its mission of providing value is predicated on founder Kamprad’s statement that “People have very thin wallets. We should take care of their interests.” IKEA’s stores are located a good distance from most city centers, which helps keep land costs down and taxes low. In China, it stocked 250,000 plastic placemats with 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.

What else could it be doing?

IKEA managers visited European and U.S. consumers in their homes and learned that Europeans generally hang their clothes, whereas U.S. shoppers prefer to store them folded. Therefore, wardrobes for the U.S. market were designed with deeper drawers.

Visits to Hispanic households in California led IKEA to add seating and dining space in its California stores, brighten the color palettes, and hang more picture frames on the walls.

Q2: IKEA has essentially changed the way people shop for

furniture. Discuss the pros and cons of this strategy?

Pros:

Because of the wide variety of items displayed and the layout of the shop designed in a one way format results in customers seeing everything available. They might therefore end up buying even something that they hadn't thought about Convenience for the customer because everything is boxed and they do their own assembling. It easy to transport(on buying and when people move) Also saving shelf space for other lKEA products and reducing transport costs for the consumer hence resulting in the lower prices Using unconventional names for their products that people can easily remember(belief is that people remember names better than they do codes).

Cons:

The size and scale of IKEA sometimes affects the quality standards of their products and therefore negatively affect the view that customers has of them. As such customers will have to pay more attention to the products they are buying The format of the shop(everything i on floor) can be too overwhelming for the customers such that they may not even know where to start from Not maximizing on the growing technology available for marketing and advertising, so consumers might end up going elsewhere The fact that that people have to assemble their own items can be problematic for people who are not good at fixing or assembling items.

Recommendations : IKEA needs to find more local suppliers to keep price lower. To understand local culture and purchasing habit, the company should carry out extensive market research. To attract more middleclass consumer huge adaptation is necessary. Extensive training for the employees and better supply chain management will solve customer service and out-of-stock problems for IKEA.

Conclusion: Therefore it is apparent that IKEA has managed to both capitalize on its cost leadership and ensure they meet local demands through differentiation of products thus using transnational strategy. IKEA has chosen to mostly enter markets through wholly-owned subsidiaries in order to maintain their brand image, although when compelled, other methods such as joint ventures and franchising has been made use of. This strategic decision has enabled IKEA to maintain a competitive advantage, and earn above average returns due to leadership in the market.