The founder of KEA Case Study
KEA is one of the world’s most successful global retailers. In 2007, KEA had 300 home furnishing superstores in 35 countries and was visited by some 583 million shoppers.
Kike’s low priced, elegantly designed merchandise, displayed In large warehouse stores, generated sales of 21. 2 billion in 2008, up from 4. 4 billion in 1994. Although the privately held company refuses to publish figures in profitability, its net profit margins were rumored to be approximately 10% high for a retailer.
The founder, Angina Kampala, now In his ass but still an active advisor to the company, Is moored to be one of the world’s richest men. Company Background KEA was established by Angina Kampala In Sweden In 1943 when he was 17 years old.
The name KEA was an acronym: I and K his initials; E stood for Elementary, the name of the family farm; and A stood for Quandary, the name of the village in southern Sweden where the farm was located. KEA is a privately-held, home products retailer that sells flat pack furniture, accessories, and bathroom and kitchen items in their retail stores around the world.
The company which pioneered flat-pack sign furniture at affordable prices is now the world’s largest furniture retailer. The KEA concept began when Angina Kampala, an entrepreneur from southern Sweden, had an Innovative idea. In their province the solo Is thin and poor, the people have the reputation for working hard, living frugally and making most out of the limited resources.
So when Angina started his furniture business, he applied the lessons he learned to the home furnishings market.
Angina’s innovative idea was to offer home furnishing products of good function and design at prices much lower Han competitors by using simple cost-cutting solutions that did not affect the quality of products. Angina used every opportunity to reduce costs, and he scraped and saved in every way possible except on ideas and quality. KEA TIMELINE 1 sass- The founder of KEA, Angina Kampala, is born 1 sass- KEA is founded by Angina Kampala aged 1 7 years old in a small farming village in Sweden. The name KEA was formed from the founder’s initials (I.
K) plus the first letters of Elementary and Sanguinary, the farm and village where he grew up.
Originally KEA sold everything from pens and wallets to picture frames, watches and even lady stockings. Sass- Production of the first KEA catalogue in 1951 and the first advertisements appear in local newspapers. Angina distributed his products via the country milk Van, which delivered them to the nearby train station then Introduction of flat packaging. In the late Sass Angina decided to stop selling everything except furniture items. KEA as we know it today was born!
KEA is developing effective solutions for customers in order to support them recycling or reusing used products, aiming at no products ending up at landfill and the recycled materials used in producing new KEA products.
‘ Some of he opportunities that KEA takes advantage of through its sustainability agenda are: * A growing demand for greener products * A growing demand for low priced products. Trends in the current financial climate may result in consumers trading down from more expensive stores * Demand for reduced water usage and lower carbon footprints.
Kike’s weakness includes: * Assembling furniture itself may be unappealing to certain groups of consumers. * Relatively few locations. Store layout – a nasals Tort tense won want a particular Item only. Swells designs may not appeal to all American markets.
Advertising doesn’t appeal enough to target market (young people). * Furniture is not built to last a lifetime. Threats: If a company is aware of possible external threats, it can plan to counteract them. By generating new ideas, KEA can use a particular strength to defend against threats in the market.
Threats to KEA may stem from: * Social trends such as the slowdown in first time buyers entering the housing market. This is a core market segment for KEA products * Market forces more competitors entering the low price household and furnishings markets.
KEA needs to enforce its unique qualities to compete with these * Economic factors the recession slows down consumer spending and disposable income reduces. KEA addresses these issues in many ways. It manages weaknesses and threats to create a positive outcome.
Social trends: KEA is building online help to guide customers to a more sustainable life. Here it can focus on home improvement in the slowing housing market. It supports customers with tips and ideas on its website to reduce their impact on the environment.
This will also save them money. Staffs are trained on sustainability, OTOH on what KEA is doing and how they can take responsibility to become sustainable for themselves. Market forces: KEA is large enough to enjoy economies of scale.
This lowers average costs in the long run through, for example, better use of technology or employing specialized managers. Economies of scale also give a business a competitive edge if cost savings are then passed on to customers in the form of lower prices. This puts up high barriers to entry for smaller companies entering the market.
Economic factors: Kike’s low prices create appeal amongst its customers in tough financial times. It is vital to keep prices as low as possible when the retail sector is depressed. Kike’s pricing strategy targets consumers with limited financial resources.
Its products will also appeal to those with higher budgets through good quality and design. The company must ensure that it is always recognized as having the lowest prices on the market in the future.
Communication plays an important role here. Kike’s major issues faced and may face and its solutions and recommendations: 1 . The high flow of visitors at one time leads to many problems resulted from the lack of manpower who can meet this climax. Solution: KEA has used Bionic’s traffic insight visitor flow system to ensure its checkouts are never short-staffed.
Highly accurate Bionic sensors at each KEA entrance track the number of people entering.
Ensuring that its checkout sales attendants are In position Day ten time customers reach 2. KEA suffers a lack of innovation and faces the possibility of offering a very similar product base. This is due in part to the lack of fresh blood in the organization. Kike’s policy of hiring the same genre of people leads to inhibiting to diversity and innovation to meet change in new markets. Recommendation: KEA should broaden its selection base of hiring people.
Whilst not changing the core competencies required of key staff, new emphasis should be placed on hiring people from a mix of backgrounds and personalities.
This will promote diversity, infusion of new ideas and ensure richness of the culture. 3. Not enough like-minded managers (Swedes) to manage stores. Recommendation: to hire more Swedes with similar work ethos and cultural similarities. To promote successful managers from various countries to expatriate jobs in other geographies and this would achieve strong transplantation of talent but also build strong and committed global managers.
Recommendation: * KEA should establish stores in poor countries since one of their goals have the low price with high quality products and to help people those who can’t afford expensive products. * Introduce more in online selling so that people who love their products can also buy wherever they are in the world. Strategies Used by KEA * Low-cost leadership strategy * Product strategy * Promotion strategy * Market development strategy Competitive Advantage * Low price and good quality more than the competitors. * Good service * Wide varieties