Ikea company Case Study
I have also cited any sources from which I used data, ideas of words, whether doted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Student Signature: Instructor’s Grade on Assignment: Instructor’s Comments: success of a company that had developed its product and brand around a culture that was outside of the US and then took that product and brand and penetrated another country in this case, “United States” who ended up being quite successfully and have continued that success in the years since.
Many people when they hear of the name Kea think of a international furniture company that offers sheik, stylish, modern and cheap array of furniture. What has made Kea so successful is the reinventing of the wheel from a business perspective by doing such things as cutting the company’s business costs at the corporate level to give that back to the customer, empower its customers to assemble their own furniture which allows them in most cases to take their product home with them immediately after their purchase.
As MBA students who may ultimately hold management positions within a company such as ‘kea, its imperative that we apply real case scenarios to handle certain situations from every aspect of business which includes marketing products to existing and prospective customers. Reviewing the case, we have gathered several key points that has lead to Kike’s success, what Kea may be lacking, where there are areas of improvement, and to analyze certain techniques used by the company to expand their target market, extend their reach into different demographics, building a strong band and creating customer loyalty.
The first question that was asked with regard to the assigned case was concerning key factors that accounted for Kike’s success. Kea was able to penetrate the US market in particular as a result of the product offerings that it has had and has intended to maintain in its repertoire. What appealed customers to their product lines span over a wide variety of reasons which include its reasonable priced items compared to competitors while at the same time maintaining high quality product.
They have been able to achieve this by implementing cost saving metrics from every aspect of the business in terms of the company’s expenses.
An example of this as outlined in the case study was Kea sourcing its product supplies from a wide range of suppliers to keep costs as low as possible. These cost cutting measures resulted n a lower expenses budget and the company being able to transition those savings off to their customers by offering the lowest pricing compared to industry standards. Additionally, Kea offers a product style that was unique to the American market that hadn’t been seen and hasn’t been replicated by its competitors. Most importantly, Kea has done a remarkable Job at providing excellent customer service from every aspect of the customer experience.
As explained in the case, many of Kike’s competitors lacked in this area, which ultimately left an opportunity for the company to steal market share.
Kea capitalized by providing an area for customer’s children to play while they shopped, offered an in store restaurant where families can eat during the shopping experience, product displays allowed customers to visually see how rooms could look with Kike’s furniture which ultimately offered suggestions on interior design ideas. Walking into a competitor’s show room is a completely different experience.
Most of its competitors you walk into a show room and are immediately greeted by a sales associate who immediately tries to upsets you on different products that are often overpriced. At Kea the consumer is empowered aggressive sales associates. The lack of intimidation in most cases leads too more satisfied customer who doesn’t feel the pressure of over buying yet knows that they can request to speak to sales associate should they need assistance with product information and suggestions. If you go to furniture stores such as Rooms to Go, they do not offer same day pick up and product may take a few days to arrive to be picked up.
The difference with Kea is that customers have the option to take the product with them after they make their purchase. Without having to wait for delivery or for he product to be available. The details listed above are driving force that has lead to the success of Kea over its competition. These points ensure that their customer’s purchasing experience is what they had imagined it to be which create a good reputation for your brand, creates demand for your products, and over time creates customer loyalty.
Understanding their customers wants and being able to develop their brand to span across a wide range of demographics has also aided in differentiating Kea from its competition. Kea paid close attention to its competition and even surveyed them to help innovate the many and reach key target markets.
During its inception Kea was more focused on providing the lowest price possible but weren’t as worried much about the design of the actual furniture.
This mentality has changed throughout the years and now Kea offers a wide variety of styles and price points The second question pertaining to the Kea case was with regard to the company’s strategy and product range. Kike’s product strategy and new product range are based on the consumer priority such as consumer trends, and once a product priority is established then the product’s target detail price is set and it is referred to as the matrix. The matrix is consisted of three basic price ranges and four basic styles as shown on Fig. B.
I agree with the matrix approach described because within each price range, Kea would establish a benchmark and set its own price about 50 percent lower than the competition.
Besides being used to set retail prices, the matrix is also used to identify gaps in the company’s product line up, and by plotting the current product offerings on the grid product managers can easily identify the market opportunities. The use of the atria allows Kea to explore every possible niche within their market at the same time keeping up with the competition not only by product type but with price and product type simultaneously.
Kea works with more than 1,800 suppliers in more than 50 countries to always seek to balance the cost-efficient labor with the company’s product quality, and once the target retail price for the proposed product is established then a manufacturer is selected to produce it. We were asked to address negative aspects of purchasing Kike’s product and the entire shopping experience. The biggest downfall with purchasing Kike’s products is arability of that product.
Kike’s products have a reputation of being trendy and stylish but customers find out from over time that the furnish purchased from Kea doesn’t last more than a few years before it needs to be replaced.
Most Kea products have been found to fall apart after a couple of years or will have trouble enduring anything such as an unsettling as a move to a new place. Another downslide that comes with shopping at Kea would be to having to pick up and assemble packages with no help of an Kea employee, even though this method helps in lowering the home bulky packages or boxes.
Neither be left with any choice other than assemble furniture with complicated instructions alone. The vision statement states that Kea seeks to build a partnership with its valued customers. Looking from a global scale, Kea does an amazing and exemplary Job at building relationships with its customers by creating aesthetically pleasing yet affordable designs. On a much smaller scale, Kea is simply a warehouse of products and provides very limited services after a purchase is made which basically cuts the relationship off after that point.
The creation of functional designed furniture rates profit but does not build relationships; regardless the population continues to enjoy shopping at Kea due to the low prices and their visually appealing furniture. In order to preserve a long lasting relationship with its customers, Kea must learn and keep creating unique and fashionable furniture while keeping its pricing as affordable as possible, and continue create advanced ways to help customers feel less disconnected after purchasing a product.
The fourth question pertained to Kike’s ambitious goal of opening fifty stores in the US by 2013 and if the group felt this was a realistic goal or not. As an overall business perspective expanding your business to new demographics it cannot be consider a bad idea if your business is doing very well. In the KEA case, they are a very stable and profitable company as we can see from their sale over time, sales by region and top five sales countries with the United States with of their net income.
Therefore expending their stores to fifty stores throughout the United States can’t be considered a bad idea.
KEA is definitely not being overly optimistic in its growth plan of opening fifty stores in the United States by 2013. Fifty stores is not a argue number in that similar retail chains such as Crate ; Barrel or Wall-Mart have over 100 stores in the United States. If KEA wants to remain within consumers top preferred stores to shop for furniture and house accessories, more stores need to be built and become accessible to everyone. In order to improve Kike’s value proposition and become more attractive to its American consumer base, it would have to become transparent.
American consumers want to know that they are not only getting a great deal, but that they are purchasing from a company they can trust. Being transparent tit who their suppliers are, where items are sourced, and the labor conditions of its employees will give KEA a competitive edge and ultimately lead to an attractive value proposition for American consumers. Also KEA must take this into consideration when trying to appeal to the American furniture market. Americans love quality products that are durable, which is not KEA best qualities their products are reported to have a low or short term of durability such as one to three years.
To better accommodate the American market, KEA should focus more on providing products that will last, and not be disposable after a few years of use. Not to say that KEA shouldn’t still provide its lower prices items, but expand their products in terms of quality.
The last question regarding the case was concerning the group’s opinion of Kea changing its product strategy and whether it should expand and the affects of doing so. The goal of any big business and in particular a biblically traded company is to investment.
In order to do this, companies such as Kea need to continue innovating products offerings and services provided in order to ensure that they are differentiating themselves from their competition. Failure to do this effectively will almost certainly allow a competitor to step in and provide what your customers want or may have asked for. With that being said, Kea has done an excellent Job with creating a product strategy that has continued to evolve as they have targeted a new demographic of customers, and released updated and more design oriented furniture and selections.
I would however think it may be to Kike’s benefit to offer an even more higher end type product targeting the upper middle to upper class especially in certain cities where income levels may be on the higher end of the spectrum.
These customers aren’t price sensitive but rather looking for high quality and trending products to update their houses and apartments with. These types of products should possess higher quality then the typical Kea products that are offered to different customers who each have different price points.
Kea has a sophisticated system when it comes to adding new products and styles to its product offers. Adding a significant amount of new products and styles ultimately may affect that system and result in the product process being more expensive which would then by passed off to the customer. If the customer’s has a negative reaction to a significant increase in product offerings it ultimately could affect the profitability of the company and further weaken the financial condition of the company.
A strong method that companies have at their disposal when considering to change its product line is going straight to the source, which is the customer. Providing customers with surveys, setting up regular focus groups and investing in research and development can help the company make very important decisions when it comes to adding or removing product lines. If you walk into an Kea tore you will see the difference between the store and its competitors as soon as you walk in.
The company should continue to use marketing research in order to maintain that level of differentiation. To date Kea targets a wide range of customers at different price points and have continued to cater to that segment while looking for new opportunities through market research. In conclusion, the group felt that the Kea case was a prime example of a company who has a great a great product strategy, has created a reputable brand, and ultimately has created a niche in the rake that has continued to maintain a wide range of customers at different pricing points.
Skies focus on innovation and on customer service has helped propel the company to where it is today. As a result of its growing popularity they have continued to expand throughout the United States and in many countries. What Kea has managed to do as a company in general is much more difficult to accomplish than what they have displayed.
