ABSTRACT

This brief report will give an overview of the several

marketing strategies of IKEA. The different marketing
strategies are PESTLE analysis, SWOT analysis,
Marketing Mix, STP Strategy, and Digital
Communication Strategy. The report evaluates all
these strategies and give plausible and feasible
suggestions where needed.

IKEA Name:
Roll No.:
Course:

“Transforming the Retail Sector” Instructor:

Contents
An Introduction to IKEA ................................................................................... Error! Bookmark not defined.
Segmentation, Targeting and Positioning of IKEA ........................................................................................ 3
Segmentation and Targeting Strategy of IKEA ......................................................................................... 3
Positioning Strategy of IKEA...................................................................................................................... 4
Mono-Segment Positioning ................................................................................................................... 4
Adaptive Positioning ............................................................................................................................. 4
PESTLE Analysis ............................................................................................................................................. 5
Political factors: ........................................................................................................................................ 5
Economic Factors: ..................................................................................................................................... 5
Social factors: ............................................................................................................................................ 6
Technological factors: ............................................................................................................................... 6
Legal factors:............................................................................................................................................. 6
Environmental factors: .............................................................................................................................. 6
SWOT analysis ............................................................................................................................................... 6
Strengths ................................................................................................................................................... 7
Good Quality, Affordable Products with Modern Designs .................................................................... 7
World Class Supply Chain Management ............................................................................................... 7
Weaknesses............................................................................................................................................... 7
Opportunities ............................................................................................................................................ 8
Threats ...................................................................................................................................................... 8
IKEA’s Marketing Mix .................................................................................................................................... 8
Product ...................................................................................................................................................... 8
Price........................................................................................................................................................... 9
Place .......................................................................................................................................................... 9
Promotion ................................................................................................................................................. 9
Digital Media and communications ............................................................................................................ 10
Social media ............................................................................................................................................ 11
LinkedIn ............................................................................................................................................... 11
Surviving the Pandemic: IKEA’s Strategies .................................................................................................. 11
Conclusion ................................................................................................................................................... 12
IKEA: A Brief Introduction
Founded by 17 year old Ingvar Kampard in 1943 in Sweden, IKEA specializes in home appliances
and currently has the largest retail network within the particular industry throughout the world.
IKEA is one of the successful retailers that is operating in more than 50 countries throughout the
word (Alzghool, 2020). IKEA is currently producing 9500 different kinds of diverse products and
home appliances. The 2020 statistics of IKEA’s financials shows that the company is currently
worth $18 billion. In 2019, according to statistics published in the research work by Alzghool
(2020), almost 950 million people visited IKEA’s store and almost 2.6 billion people visited IKEA’s
website.

As IKEA is one of the pioneering retailers that has successfully adopted and implemented massive
digital transformation in almost every operation of its business, therefore IKEA has been in the
headlines and has achieved marvelous attention of the business analysts and researchers. The
digital innovations that started in the beginning of 21st century transformed the business models.
(Marr, 2018). More and more companies shifted from traditional brick and mortar business
models to digitalized business models. Realizing the changes in the market brought up by digital
transformation, IKEA started to adopt digital transformation in 2005 (Marr, 2018). The digital
transformation strategy was quite visionary and proved beneficial for IKEA in various aspects.
From giving customers a virtual depiction of their products in the rooms and houses through
‘Augmented Reality’ to the development of Internet of Things, Smart Homes, robotic furniture’s
and implementation of AI based Reverse Logistic System; IKEA has transformed its business
model through the adoption of digitalization. Another reason because of which IKEA has been
the center of focus for the business analysts is their effort for introducing sustainable products
and adopting environment friendly and sustainable business operations. The minimization of
waste during production, recycling and reuse of waste products and maximum utilization of solar
energy are some key processes through which IKEA is adopting a sustainable business model.
Segmentation, Targeting and Positioning of IKEA
Segmentation and Targeting Strategy of IKEA
The IKEA’s business report-2020 gives a comprehensive overview of the strategies regarding
segmentation and targeting of customers. IKEA uses a differentiated segmentation strategy. A
summary of IKEA’s segmentation and targeting strategy is provided in the table below:

Segmentation Basis of Targeted Customer Segment

Type Segmentation
“Geographic” Region OECD Countries
Density Mostly Urban/City/Metropolitan Areas
Age 22 and older
Gender Males and Females
Life Cycle Stage “Unmarried young”
“Married couples, no children”
“Demographic” “Married couple, Youngest child under six”
“Married couple, Youngest child over six years”
“Old Married couples, with dependent
children”
“Old married couple, independent”

Occupation “Students, Employees, Professional”

Degree of Loyalty Strongly Loyal customers
Loyal and Profitable Customers
Loyal but least profitable customers
“Behavioral” Customers that constantly switch brands

Benefits Sought More Value and minimum Cost

Personality Relaxed and single-minded
 User Status “Non Users, Potential Users, Regular Users,
First Time users”
“Psychographic” Social Class “Lower Class”
“Working Class”
“Middle Income Class”
Lifestyle Customers who have unchanging values
Customers who are just concourse about the
present. They say “there is only one life”.
Customers who desire to apt with society.
Give high value to money, and struggle for
security.
Customers who want change, who want to
discover and explore new things.

Positioning Strategy of IKEA

There are several positioning strategies that companies usually use. The two significant
positioning strategies that IKEA has adopted are described below:

Single-Segment Positioning Strategy

This sort of positioning is linked with orienting the efforts of marketing strategies and marketing
mix towards a unique target segment of customers exhibiting a unique and distinct set of needs
and preferences (Ayodele, 2013). “IKEA focuses on a customer segments that are cost conscious
and prefers to get value for their money, therefore it can be inferred that IKEA uses a single-
segment positioning strategy” (Ayodele, 2013).

Adaptive Positioning
This sort of positioning is linked with “periodical repositioning of products and services in order
to reflect and incorporate the changes in customer preferences in the business model” (Ayodele,
2013). IKEA continuously updates and modifies its products and services according to the change
in the preferences of its customers. The massive digital transformation that IKEA has adopted is
one the best incidents which exhibits that IKEA has been incorporating adaptive positioning
strategy in its business model.

PESTLE Analysis of IKEA

PESTEL analysis is one of the key frameworks to analyze external environment of an organization.
This model is extensively used by organization for strategic purposes to make different key
strategic decisions. Although the organizations to do not have capability to control the external
environment but a good understanding of the factors of the external environment can help in
making better decisions and reduce the risk for a business organization.

The components of PESTLE include political, economic, social, technological, legal, and
environmental factors which are explained in the detail.

Political factors
Political factors determine to the extent to which a government can influence a business industry
or the economy. These factors may include the economic policy of the government, tax
imposition or subsidiaries, fiscal policy, or trade tariffs. Since IKEA operates in more than 40
countries, the political environment, state’s policies, and other political decisions are very crucial
for the performance of the company (Alzghool, 2020). If a country is business friendly and have
good policy it can be help for the growth of the company, therefore political factors should be
investigated before landing into a new market.

Economic Factors
Economic factors are also crucial because a country’s GDP, average income and inflation has
direct impact on the buying decisions of the consumers. For example, if IKEA thinks of starting its
operations into a third world country, it is less likely to succeed because of the bad economic
condition of that region.
Social factors
Social and cultural factors are significant for the company because cultures are related to people
and people directly impact an organization. Therefore, it important for IKEA to understand the
culture, norms and values of the country when entering it (Alzghool, 2020). The different culture
and values should be respected and given importance. It is also important to understand social
factors in order to understand the consumers because the consumer preferences are directly
related to the social factors.

Technological factors
IKEA is rapidly adapting information technology in all its business components from the market
research to the distribution of the products. The company invests heavily in research and
development to come up with advanced technological tools and practices. Since technology helps
the company to be more efficient and sustainable, therefore its important to understand all the
technological factors that can favor the company and help it getting the competitive advantage.

Legal factors
As discussed earlier, IKEA operator in more than 40 countries and have its operations in many
countries as well. Therefore, it is important to understand the legal requirements, employment
laws and other operational companies to avoid any legal repercussions.

Environmental factors
The companies such as IKEA who consumes natural resources in their production, environmental
concerns are crucial. The company should not only follow the environment compliances for legal
reasons but also for the sustainability of people, planet and for the profit. The company has been
focusing a lot on sustainability as major part of its energy is produced through solar source, such
efforts should be encouraged in all the regions where company operators and sustainability
should be the priority.

SWOT Analysis of IKEA

Since its emergence, IKEA has gone through a phase of evolutionary change, in which it has
glorified its strengths, optimally utilized the opportunities, minimized the threats and efficiently
worked on its weaknesses. The SWOT analysis of IKEA described below mentions the SWOT of
IKEA in 2020.

Strengths
Good Quality, Affordable Products with Modern Designs
IKEA has implemented a “Democratic Design” strategy in its production processes. This strategy
includes five key elements: form, function, quality, sustainability and low price (Frue, 2020). Every
product at IKEA is produced keeping in view these five concepts. The designers of IKEA
incorporates feasibility of the products in the very initial stages by working closely with suppliers,
manufacturers and even customers. This allows them to make high quality products with
minimized cost. The quality of the products are ensured at different stages during the production.

World Class Supply Chain Management

In order to gain a control over the suppliers, IKEA has been using the backward integration
strategy. This has allowed IKEA to have an efficient control over the cost, quality and quantity
(Frue, 2020). For the sustainable supply of wood, IKEA leases most of the forests, from where its
own employees then directly manage the supply of wood. In addition, IKEA seeks to source of
wood close to the market (Frue, 2020). Moreover, most of the furnishing products are directly
supplied from the suppliers to the customers. These strategies also help IKEA to reduce the
transportation cost.

Weaknesses
Following are few of the weaknesses in the business model of IKEA that could affect it in the long
run:

 “Although IKEA has been thriving to expand its own manufacturing capacity, however
more than 50% of its furniture are produced by third party manufacturers” (Kim, 2018).
 Most of the products of IKEA are sent to the customers in an unassembled form such as
beds, shelves etc. This may make these products of IKEA unattractive for few customers
group.
  Leasing the forests is a feasible option for IKEA to have a control over its supply chain,
however it is a costly option as lease option are associated with high fixed costs (Kim,
2018).

Opportunities
 90% of IKEA’s sales are generated from OECD countries. According to Euro monitor report,
India, China, Pakistan, and other developing countries in Asia are rapidly growing markets.
Therefore IKEA should focus on expanding in these virgin markets as well (Kim, 2018).
 IKEA should focus on producing sustainable products that could give the company a
competitive edge in the future. Similarly, the company should think of using renewable
products in the manufacturing of its home furnishing appliances.

Threats
 The outbreak of COVID-19 throughout the world has severely affected almost all the
business sectors. At the Macro level, it has impacted the economies of country and has
also brought a shift in the preferences of customers. Currently, there could not be any
more bigger threat than this deadly virus.
 Another emerging threat for IKEA is the issue of locating sustainable sources of wood and
recycling of wood in the market (Kim, 2018).

IKEA’s Marketing Mix

The term ‘Marketing mix’ is also used as ‘Marketing communication’, where the 4Ps of marketing,
that are Product, Place, Price, and Promotion, convey a lot of important information regarding a
product or service on offer, the marketing communication sticks specifically to ‘Promotion’, i.e.,
planned communication.

Product
IKEA targets a wide range of products in its marketing mix within a broad product category.
Company’s offerings can be divided into categories such as outdoor furniture, bathroom, kitchen,
baby and children, decoration, cloths storage, sofas, bedroom furniture, cabinet appliances,
lightning, tools, and hardware (Burt et al., 2011). This is just an overview of the product categories
as there are hundreds of more subcategories within main categories. These products can be
accessed at the official webstore of the company.

Price
IKEA’s pricing strategy is to compete with the global chains and with the local supermarkets.
Therefore, the company’s vision is to offer products with affordable prices while maintaining the
high quality so that it could capture the market through increasing market shares (Burt et al.,
2011). The company focuses on its operational efficiency and creates internal strengths to
provide low price products to wider audience (Burt et al., 2011). This helps the company to
achieve its objective to become a high-quality affordable brand. Although, the company is known
for its low prices but they offer state of the art innovation and are known as the pioneer of
innovative designs and product development.

Place
IKEA has both global and local distribution networks to reach the potential consumers in all the
regions. IKEA focuses on high volume and it helps the company to achieve economy of scales
(Han & Zhong, 2012). The company has more than 25 distribution centers in different regions
and operates its stores in more than 40 countries. The key regions of the company include
Sweden, UK, and China, and for the manufacturing company is more focused in India because of
the cheaper manufacturing costs (Han & Zhong, 2012). This global supply chain helps the
company to distribute products effectively but also help in reducing the costs.

Promotion
IKEA uses a variety of promotional mix for the promotion and communication. In traditional
media, the company uses print, TV commercial and newspaper, while for the digital marketing
campaigns it uses company’s official website, blog posts and other social media channels such as
Facebook, Twitter, YouTube, Instagram, and LinkedIn (Han & Zhong, 2012). IKEA’s LinkedIn
handle alone has more than 2 Million followers which is an evidence of the effective promotion
of the company. There are hundreds of videos on IKEA’s YouTube channel, which have millions
of views. The company is able to engage, interact and communicate with its audience effectively
and it has been able to achieve it through high quality products and effective promotional
strategies.

Digital Media and Communications

IKEA is a tech-driven retail company and it extensively use information technology in different
business processes from market research to product design, product development, distribution,
and marketing. Although, IKEA has been able to gain huge market shares and have strong brand
awareness and consumers loyalty, it constantly invests in marketing efforts to expand the
market. The company uses digital media for its integrated marketing communication across the
different markets because it focuses on the standardized communication in the all the markets
such as UK, Sweden, and China (Burt et al., 2011). Integrated marketing communications (IMC)
can be defined as “the coordination and integration of all the marketing communication
components, sources, and tools within a company into a more convenient program of marketing
communications” (Sally Dibb, 2019). In today’s business environment, marketing managers
operate across multiple marketing channels and constantly use digital marketing, therefore IMC
helps the manager to ensure consistency and efficiency across the different marketing channels
and platforms. The use of digital media and integrated marketing communications help the
company to keep the communication standard and effective across the markets. While the
company focuses on standardization communication, it replicates the same communication
concepts rather than communication activities (Burt et al., 2011). For example, when the
company creates a communication strategy for the Chinese market, it uses the same concept in
the UK market but not the same activities, because it adapts the communication strategies
according to the cultural and other psychological dynamics of the market.

Integrated marketing communications leads to numerous benefits for IKEA. The cost of
marketing decreases because of this integration, which leads to better impact on consumers and
the business (Kim, 2018). Inherently each component of the promotional mix was operated
separately, which made the marketing process less efficient, expensive, redundant and time
consuming, but with the help of IMC all the components are connected, and different managers
can access the data, monitor the progress of a campaign and other variables in the real time and
can make the decision accordingly. Although, the company still takes help from the external
marketing agency for traditional marketing campaigns, but the company has been shifting
towards digital marketing because of its promising returns and effective results. The company
uses the following digital media channels to communicate with its clients and to run
advertisement campaigns.

Social media
The company relies on such media channels such as Facebook, Twitter and Instagram to keep
engage with the consumers, answer their queries and inform them about the new products or to
make any other announcements. The consumers can also reach to the support team using these
platforms and they do not necessarily have to use the traditional website of the company or to
visit the stores. These social media channels have a very flexible support team that is available
for the maximum time of the day. The company have an accumulative audience of more than
400000 users on Facebook, Instagram, and twitter. The digital media not only helps the company
to communicate but it also helps it to connect with the relevant and target audience which is not
possible with the traditional media.

LinkedIn
LinkedIn is a famous platform used by businesses and employees and to connect with each other
or other businesses for marketing purposes. This digital platform is mainly helpful for businesses
to business transactions and communications. IKEA has been able to effectively use the platform
as it has more than 2 million followers on Linked which is a good manifestation of the power of
the digital media. The company manages B2B sales and communications through this platform,
these can be offices, home interiors suppliers or other retailers.

Surviving the Pandemic: IKEA’s Strategies

The outbreak of COVID-19 has severely affected the retail sector. Hundreds of retailers who had
traditional brick and mortar business model were compelled to file for bankruptcy and thousands
of them are still struggling with losses continuously piling up. However, the timely and strategic
decisions made by the management of IKEA enabled it to survive through the pandemic. As IKEA
had been trying to give unique digital experience to its customers, however the process was
expedite during the pandemic. Amid the pandemic, IKEA partnered with Google Cloud “to deploy
a number of cloud services to help it respond to the pandemic and create a more affordable,
accessible and sustainable future”. In addition IKEA also embedded AI and ML across all business
areas thereby improving its data analytics capabilities so that they could better understand the
needs and preferences of the customers. IKEA also launched new Omni channel functions
thereby setting up contactless click and collect services. This enabled IKEA to manage large
volumes of traffic on their websites. IKEA also transformed all of its stores to fulfillment stores
that helped them to successfully deliver the click and collect services. In short, the pandemic has
accelerated the process of digital transformation of IKEA that it has been aiming to achieve since
2005.

Conclusion
The analysis of the business strategies of IKEA sheds light on the fact that only those companies
survive and achieve marvelous growth that remain adaptive to changes in the market. The
changes can be in any form such economic changes, changes in customers preferences, changes
in technological advancements, and change in the form sudden and unexpected outbreak of the
pandemic. The analysis also hints that dynamism and digital transformation are inevitable and
are the only guarantee of success of businesses in the future.
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