IKEA Case Study Argumentative

IKEA, one of the world’s top furniture retailers was officially founded in 1943 when 17 year old Ingvar Kamprad started a local catalog company using some money his father gave him (Moon, 2004, p.1, para.1). The company started selling furniture in 1947 and over the years has grown to establish a global presence to include the United States (U.S). Success in the U.S. didn’t come immediately for IKEA when it opened in first store in Philadelphia, PA in 1985. Applying market research the company adjusted its product lines and selections and advertising strategy to be one of the top furniture retailers in the U.S. (Moon, 2004, p. 7, para.6). Things which distinguish IKEA from its competitors include: the concept of self-service in which customers select their products and, take them home, and assemble own their own; playrooms for children, and Swedish cafes (Moon, 2004, p.1, para 1.). IKEA’s plans for U.S. expansion from the early 2000s through 2013 require the company to find ways to appeal to a broader market.

Problem

With IKEA’s focus on cost efficiency, it seems they may be putting their longevity in the furniture business in jeopardy. Although cost-efficiency is a part of the company’s marketing strategy and can be attributed to some of its success, if IKEA is seen as a company with low costs, self-service, and lack of overall quality, this could jeopardize their brand in the long-run. It is common for IKEA to redesign products multiple times for cost-efficiency purposes or “to maximize the number of products that could be squeezed onto a shipping pallet”, even after it ends up in the stores (Moon, 2004, p.4, para. 5.). This has the potential of creating more of a burden on the consumer who has to assemble the product, according to the article. With this approach, it seems the company is focused more on cost-efficiency rather than what is best for the consumer. In my opinion, when you lose focus of what is best for the consumer, you lose in the long-run. Without the customer there is no business and I believe the company is opening itself up to long-term risks if this is not addressed. There simply has to be some balance between focusing on reducing costs and thinking about what is best for the consumer.

Analysis/Recommendations

In today’s business world, organizations need be creative in order to stay ahead of the competition and many use cross-functional sales teams, allowing an organization to utilize the diverse skills and knowledge from different departments to maximize results. Cross functional sales teams have grown in popularity and typically apply when a high-priced product is being sold and when knowledge from different departments is needed to help develop a highly marketable product and drive sales. Depending on the needs of the consumer, the sales team may be made up of people from sales, product development, engineering, customer service, finance, human resources, marketing, etc. (Donnelly & Peter, p. 146). Cross-functional sales teams are growing in popularity because companies over time have figured out that taking experts in various departments can create a team that is focused on a well-rounded company with a standard goal in mind. Not only can this help with problem solving, but many times with such a team in place, issues can be addressed and solid plans can be developed before leaving the think tank. The cross-functional team helps to send one standard message to the clients as well and helps to focus clients rather than to confuse them (Donnelly & Peter, p. 146).

Utilizing a cross-functional sales team is something IKEA did well. It seems they had a team oriented environment and involved different departments to make decisions about products as it related to investigating consumer trends and determining price. When developing new products the company had an established council to oversee the process. This council included senior managers who established priorities for the new product lineup (Moon, 2004, p.3, para. 2.) The company also involved the cross-functional team to survey and benchmarked the competition to establish a price 30-50% below competitor prices. This process also involved identifying market opportunities that could be filled. In my opinion, the company did a great job of using cross-functional teams from product-development to managing the sales and distribution process. IKEA established great relationships with their suppliers to get the best pricing, determine the best ways package their products to ease shipping costs to the stores, and transportation ease for the consumer. This process relates to the transactional and logistical functions for distribution. The transactional function focuses on the buying and selling of products to consumers to maximize profitability.

IKEA maximized profitability by focusing on low prices, and having their suppliers bid for certain opportunities when designing new products. The logistical function relates to when goods are received, stored, sorted, and transported to the consumer (Donnelly & Peter, p. 155). IKEA also considered how goods were packaged to make it easier for shipping to stores and transporting of goods by the consumer to their homes. IKEA seemed to have this down to a science. The information we didn’t have about IKEA’s methods of distribution related to the facility function which relates to post-purchase service (Donnelly & Peter, p. 155). This is an important aspect of success for a company and if IKEA doesn’t have something in place already, I would suggest having a process which includes a service aspect to their customer service. For example, they could have maintenance tech check-in with the customer to ensure the product is assembled correctly or to provide service when needed. This creates the opportunity for repeat business where consumers feel they are being taken care of.

Recommendations

To address some of the problems or opportunities facing IKEA, I believe the company should focus more on the closing and follow-up involved in the sales process and not so much on cost-efficiency. Although being mindful of costs is very important for the success of a business, without happy customers, there are no costs or business to be concerned about. IKEA might consider implementing a service team to follow-up with consumers to ask a variety of marketing questions to determine the customer experience and use the information gathered to improve customer satisfaction, and provide some aspect of service as it relates to product assembly. The company should develop a strategy around customer satisfaction to ensure they don’t lose in the long-run and that they are able to maintain longevity in the furniture business. Many companies such as Ford and General Motors failed because they lost sight of the customer. These companies were focused on production and not as much on building consumer relationships or the post-purchase aspect of sales. Not taking care of customers will get any business, large or small into trouble sooner or later as we have seen in the automotive industry. IKEA can continue to have success; it just has to be more mindful of the customer in order to continue to reap the benefits of its success.

References
(Examples of Correct APA Format)
Moon, Youngme. (2004, September 14). IKEA Invades America. : Boston, MA: Harvard Business School Publishing. Donnelly, J and Peter, J. (2013) A Preface to Marketing Management (Thirteenth Edition). New York, NY: McGraw-Hill.