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Introduction to the Worksheets
Worksheet 1 - Company Analysis
Name of Company: IKEA
Name of product: Readytoassemble furniture
Company head office (town & country): Leiden, Netherlands
Question:
- How is the company doing financially (trend)
- Performance of the product (search for data e.g. Passport, Mintel, Statista)
- Clues about strategy (Annual reports, news interviews, Marketing Week etc.)
- Is it already international (breakdown of revenue by home country vs. overseas, trend)
- What is its market share & trend?
- Who are its main rivals?
Opinions to form based on evidence:
- What is the orientation of the company/division/product
- Does it use the marketing concept
- What examples are there of the elements of the marketing mix in its home country
- Draw a SWOT for the company but attempt to list each item in the matrix in order of importance, based on what you found e.g. most important strength to least strength etc.
Answer:
IKEA was founded at Sweden in the year 1943 and then the company then moved its headquarters to Netherlands and it has grown to become the largest furniture retailers of the world. IKEA is considered as the foremost names in the global ready to assemble (RTA) furniture market. Geographically, the Netherlands account for about 4 per cent of the total revenue of IKEA, while Europe accounts for 62 per cent and the Rest of the World is at 34 per cent (Market Line, 2019).
Figure: Inter IKEA Distribution of Sales, 2018
IKEA's largest market is Germany, closely followedby the US, which was the largest contributor togrowth over the 2015 2018 period. Unlike Germany,the US market saw four new store openings duringFY 2018. Apart from the US and Canada, all of IKEA'sremaining top 10 markets are in Europe.
Figure: Global Footprint of IKEA
IKEA's home market, Sweden, was its seventh largestmarket in 2018. Despite high penetration, it was stillable to show healthy growth over 2013 2018. IKEA achieved strong growth over the 2015 2018 period, with global sales rising by 18%. It achieved this growth in almost equal measure through market momentum and through gaining market share.
IKEA's sales growth over 2018-2021 will be driven by a balanced split between mature and emerging markets. The US is forecast to be its fastest growing market over the 2018 2021 period. It is likely that the US will overtake Germany as IKEA's largest market by 2021.
The closest competitor overlaps for Ikea lie more in, home improvement and gardening retailers than in homewares and home furnishing stores. The only significant direct competitor within Ikea's chosen category is Steinhoff; however, in 2018, Steinhoff sold several of its European chains, such as Kika and Poco, reducing the overlap. Ikea is becoming increasingly exposed to overlap with the online giants Amazon and eBay, as a result of the company increasing its online presence.
Figure: IKEA Top Countries, 2018
SWOT Analysis
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Strengths
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Weaknesses
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Brand value
Financial strength
Products
Marketing
Cost consciousness
R&D
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Negative image
Control for the standards
Scale-ability
Increasing costs of raw materials
Environmental issues
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Opportunities
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Threats
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Cost conscious consumers
Developing nations and emerging markets
Saturated markets
Environment friendly and green business model
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Changing laws and legislations
Higher income
Counterfeit
Rise of internet
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Figure: Competitive Landscape of IKEA
Figure: Annual revenue of the IKEA Group worldwide from 2001 to 2019 (in billion euros)
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Worksheet 2 - Market Analysis
Question:
Thinking about the company/product chosen, look for research information like news reports, secondary sources like Statista or Mintel to draw up a profile of the kind of customers who buy/use the product.
Think about:
- Demographics
- Income
- Location (city/rural/mix?)
- Why they buy the product
- Any evidence about why they choose this rather than a competitor
- Any trends (changes) over the past few years
Answer:
In the financial year 2019, IKEA was able to generate a global revenue of more than €41 billion and the key competitive advantage that IKEA holds is its extensive knowledge regarding its consumers. IKEA has become less dependent on its established markets in Western Europe. In its third largest region, Asia Pacific, it saw a 4% CAGR over the 2013 2018 period, on the back of expanding economies in the region, as well as store openings, with seven of its 19 new outlets opened in FY 2018 being in Asia Pacific (Euromonitor, 2019; Statista, 2019b).
The products that are produced and sold by IKEA are available to the consumers via the IKEA stores, as well as the ecommerce platform that is available in the form of the webstore. IKEA understands the aspects associated with the purchasing behaviour of the consumers and the manner these can be influenced so that they are encouraged to make purchase of the products and are induced to make such decisions (Clifford, 2019). The majority of the consumers of IKEA comprise of those belonging to the middle-class demographics, who seek cheap as well as sturdy and stable furniture that would last for a long time and would provide less hassle during the assembly. Moreover, the ready to assemble furniture allow the consumers to carry the product to the place of their need and assemble it as per the requirement.
Consumers tend to purchase the IKEA products majorly due to the suitability with regards to the usage of the products. The main strategy that is implemented by IKEA is to decide on the price of the piece of furniture and thereby reverse engineer on the construction of the product. Moreover, IKEA follows a democratic design approach that allows it deliver form, quality and functionable products at low prices. Despite the products being affordable, the quality is not compromised in any manner (Clifford, 2019). IKEA has been experiencing major change in the trends with regards to the sales of its products, particularly in the UK and Ireland. There was a decline in the sales by 2.2 per cent, while the market share increased to 6.8 per cent, by 0.4 per cent. The online sales had leapt to about 25 per cent (Kollewe, 2012). It has been observed that there exists a brand loyalty of the consumers belonging to the furniture market of Thailand and the same has been facilitating its sales in the market. Despite the fierce competition, IKEA has been successful in establishing itself in Thailand and it is expected that it would continue to enhance its sales in the market.
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Worksheet 3 - Country Analysis
Question:
What country have you chosen?
If it is a particularly large or diverse country you might want to choose a region. Note it here:
Now you need to build up a picture of that country. Issues to find out about:
- Population
- Demographic breakdown and trends
- Income, spending power and trends in wealth distribution
- Cultural beliefs and norms (e.g. status of women, ethnic breakdown, influence of religion
- Political system & stability
- Are there any cultural beliefs that are widespread e.g lucky/unlucky numbers or colours
- Any evidence of positive or negative feelings towards the country your product comes from
- Any legal issues, like protection of intellectual property, legal system that could help or harm a company
Answer:
Thailand is situated in the south east Asia and was successful in escaping the colonial rule. The country follows Buddhist religion, along with monarchy, while the military has helped in shaping its society as well as politics. Since the year 2001, the politics of Thailand is being dominated by the irreconcilable split between detractors and supporters of Thaksin Shinawatra. Thaksin Shinawatra has served as the Prime Minister of the nation until 2006 when he was ousted by the military. The population of Thailand is 69 million as of 2018 and the total area of the nation is 198,115 square miles. The major language of the country is Thai, while the religion is Buddhism (BBC News, 2019).
Figure: Population Pyramid of Thailand
The prevailing median age in Thailand has been estimated to be about 38.3 years and the life expectancy of both the genders is 77.7 years, while for the females it is 81.3 years and males have it at 74.2 years.
Figure: Median Age
Over the past 40 years, Thailand has had made outstanding progress with respect to the socio-economic development. It has moved from a low income nation to an upper income nation within a generation and the same is attributed to the impressive poverty reduction as well as sustained strong growth. The economy of Thailand grew at an average rate of 7.5 per cent annually during the period of 1960 and 1996, which then reduced to 5 per cent during 1995 and 2005 following the Asian Financial Crisis, resulting in high number of unemployment and poverty of millions. The decline in poverty over a span of 30 years was achieved to be 7.8 per cent in 2017, from the high 67 per cent of 1986 (The World Bank, 2019).
The cultural belief that prevails in Thailand has several idiosyncrasies. In Thai culture, family matters first and great emphasis is also given to the extended family, unlike the western nations. For the family, status is important, although the same is not always very apparent. Respect, concept of face and shame are crucial in Thailand, and the prevalence of the same is higher than the western nations (Williams, 2018). The women in Thailand have high status and they can retain their right of property as well as own land. They enjoy the benefit of freedom of movement and they can work in several fields, thereby enjoying the rights same as men (Facts and Details, 2019).
Worksheet 4 - Country PESTLE Analysis
Question:
From the information you have found, build a PESTEL analysis of the country you have chosen from the point of view of your company/product. Remember PESTEL is a strategic (forward looking) tool, not just historical. Think about not just what, for example, are the issues now but are there any coming, e.g. new laws proposed, that could affect the product/company? This is where news sources are especially helpful.
Answer:
The PESTLE analysis of Thailand would provide an insight on the different aspects that would impact the performance of IKEA in the nation and thereby, the company is needed to develop suitable strategies to overcome the same.
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Political Factors
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- As per the latest Worldwide Governance Indicators of the World Bank, Thailand has ranked 66.83 percentile for the 2017 government effectiveness indicator and this is lower than Malaysia
- This measure implicates the commitment of the government to the different policies
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Economic Factors
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- As per the World Economic Forum, Thailand ranks 14thwith respect to its financial system and this would facilitate IKEA to gain more market as the consumers shall be able to afford its products and thereby enjoy the services offered by the company
- The Thai households comprise of those that are most indebted in Asia and large sums of finances are also owed to loan sharks. This may affect the purchase intention of certain group of consumers that are targeted by IKEA
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Social Factors
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- The advancement over child labour is expected to be fruitful for the company as they would not be needed to include much regulations and legislations regarding the same.
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Technological Factors
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- The rising software piracy can affect the business of IKEA
- The adoption of ICT by consumers would facilitate the adoption of ecommerce that has been introduced by IKEA
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Legal Factors
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- The legal system of IKEA allows the organisations in providing the consumers with efficient deliverance of services and this would facilitate IKEA as well
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Environmental Factors
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- As per Environmental Performance Index (EPI), Thailand ranks 121 and therefore, IKEA would be required to follow extensive environment and sustainability plans for maintaining and improving the environmental conditions of the nation
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Worksheet 5 - Promotional Mix
Question:
What promotional tools do the company currently use? Collect examples. Think about whether these have changed recently. If they are already active in the country you have chosen it would be helpful to compare what they do at home with what they do in that country.
Answer:
The promotional mix that is used by IKEA for the promotion of its products in Thailand can be detailed as follows.
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Price
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The price of product that are instigated by IKEA are maintained such that the consumers are able to afford the same without much consideration. The consumers are able to make purchase of the products due to the affordability that is offered by IKEA and thereby, IKEA has been successful in developing a strong market in Thailand.
Moreover, IKEA ascertains that the products are developed in such manner that the affordability aspect does not affect the quality of the final product.
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Product
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Looking specifically at homewares and home furnishing stores, at a global level, Ikea is by a wide margin the largest player. However, this is in a highly fragmented marketplace, with only five retailers holding 1% or more of global value sales. Ikea is known for its highly standardised concept, therefore growth through M&A is not seen as a relevant means of expansion by the retailer.
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Place
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Although IKEA has its roots in mail order, since opening its first store in 1958, in the small Swedish town of Älmhult , store based retailing has become its dominant channel, accounting for 95% of global
sales. Ikea is increasingly diversifying its distribution away from its established big box outlets located out of town, by developing smaller outlets in urban locations, as well as pick up points for online orders. These outlet types will ensure Ikea becomes accessible to the world's growing urban population. Nevertheless, it is still continuing to open big box outlets, including in new markets. Its growth strategy will make it less reliant on Western Europe.
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Promotion
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Online sales of IKEA accounted for just 5% of its total sales in 2018, and are available in 35 markets. In order to remain competitive in the face of changing shopping habits, it will be necessary for Ikea to increase its online presence. So as to facilitate the increase in the sales of the product, IKEA keeps promoting its products via the various social media platforms and thereby keeps updating and attracting the consumers to make purchase of their products. IKEA also offers several inhouse promotions to the consumers that enable them to attract more customers and thereby increase its consumer base and popularity.
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