On the other hand as seen on the table below in 2004 the retailer used for purchasing furniture is IKEA with 16% followed by Argos with 10% and department stores being 3rd with 5%.
Source Mintel report
Although IKEA may have counteracted with difficult situations in the past such as the “the deadly poisoned bookshelves” where formaldehyde was found after a tests were conducted by an investigative team from Germany. They have taken immediate action with stopping production world wide showing how the values of the customers were important to them. There may also be difficulties for the shoppers with no transports, with IKEA stores located in retails parks out of the city; however they do ensure transport via train and buses along with the offer to deliver.
Position mapping
After completing a research travelling the stores, browsing the catalogue and websites, it has helped to analysing the variety of products IKEA produces in comparison to its revelries. This has enabled us to compare prices and position them on the map as seen below. The map is designed to show where the companies stand in relation with its competitors with one line marked as the design/style of assortment the company has and the second line is to measure the value/pricing with both indicating the low and high levels. With approximately 10,000 assortments of furniture the consumer would know that there are varieties to choose from at reasonable prices with quality. This also helps the positioning of IKEA to be the 1st in the market place. `The UK is Ikea's third biggest market, generating 12% of group sales, or pounds 800m last year. Germany is biggest, with 21% of sales. In addition, Brent Park is the busiest Ikea store in the world.’
We can see that IKEA has the highest assortment of all 5 companies with 10,000 products at reasonable pricing. Whereas Habitat was placed on the map for the lowest design yet high with pricing. On the other hand although Argos was the cheapest company the assortment was also much less than IKEA with 3,500 furniture products. John Lewis was positioned on the map to be the third least expensive with the third in line for the variety of assortments in its product range, whereas MFI was placed to be 4th in line of varieties but 3rd with higher prices compared with IKEA.
High
IKEA
Argos
John Lewis
LOW HIGH
MFI
Habitat
Low
Swot analysis
This is a tool used to measure the strength, weakness, threats and opportunity of a company in the market upon competitors as shown in Appendix B
One of the major strengths of IKEA is that it a wide variety of products therefore giving them a competitive edge in comparison to their competitors.
IKEA strengths come from storing their products under one roof and producing catalogues in various languages and delivers to homes. “Last year, a total of 145 million copies were printed in 48 editions and 25 languages “
“The idea was to produce and sell simple, practical items of furniture that were easy to install” The flat pack packaging is another one of IKEA strength with easy to install instruction.
Another weakness of IKEA is the number of outlets with in UK and in order to strengthen that weakness it would be advisable to open further outlets which would be to their advantage. Although MFI has more outlets, unfortunately most of their furniture’s are made as units which are one off to order that requires few weeks of delivery time “where the likes of MFI or Courts may make money selling to the customer on a one-off basis”.
An opportunity for IKEA is that it does not do e commerce as it is missing out on a great opportunity with large market segmentation, which is one of Argos strengths “ On the company’s website it states that trade through the Internet is small but growing. However, in the UK IKEA does not offer home shopping either through its websites or the catalogue. Customers must make a trip to one of the stores to actually make a purchase”
One other weakness of IKEA is as stated by Mail on Sunday is the queuing system” It is reckoned that customers often spend an hour queuing to pay at the checkouts of a busy store. And that helps explain why it wants to build 20 more”.
Factors effecting IKEA
There are a few factors which affect Ikea in a positive and negative perspective such as the change in fashion “If you bought a new coat or boots this winter, the chances are it was not because your old ones had worn out but because you wanted the latest style, label or colour.” Below listed are few other factors that effect IKEA and the consumer before buying the product.
- Change in fashion and taste
- Busy life schedule
- E – commerce
- Retailing mistakes/Delivery issues
- Marital status
Factors in selecting a retailer
-
Flexibility “Buying furniture is an emotional process. Customers require time, flexibility and support from their retail outlets when making such important decisions. We have to respect their needs”.
-
Quality and Price “We are the ones who make the selection of the products ... by the quality, variety, and also by the price. It doesn't work if we pay a high price”
- Assortment of Product range
- Location/ packaging
- Media Pressure
- Fashion change
- Customer loyalty and perception.
.
Summery
By using the swot analysis and the mapping tools we can see that all companies have their strength and weaknesses however, although IKEA has the most assortment unfortunqtely it has few weaknesses and opportubity it can improve. The factors effecting us to choose a retailer can vary from taste, fashion, experience, location, location etc.
Although innovation may not be easy e commerce is a large market to be segmented as there are not as many outlets. Many people without transports would have to travel to the stores, therefore this could cause the consumer to change direction and choose an alternative store “Antique dealers will not disappear from the High Street, but this sea change in public taste and attitudes is forcing a radical rethink in the way that they run their businesses. Those who refuse to change will struggle to survive”.
An opportunity for IKEA would be to open further outlets which are smaller and that would create problems with planning permission. How ever I do believe that more outlets is a must to make it easier for consumers in order to persuade them to shop from IKEA.
Although MFI has more outlets than IKEA it is not as popular with their assortments.
APPENDIX A
THE IKEA WAY ON PURCHASING HOME
FURNISHING PRODUCTS
1. Our Code of Conduct
This document “The IKEA Way on Purchasing Home Furnishing Products” is our Code
of Conduct in our relation with suppliers of products for the IKEA range. The Code of
Conduct is our minimum requirements on Social & Working conditions and
Environment.
It has been established in order to make the IKEA position clear to suppliers and their
co-workers, as well as any other parties.
It is based on the eight core conventions defined in the Fundamental Principles of
Rights at Work, ILO declaration June 1998 and the Rio Declaration on Sustainable
Development 1992.
Further IKEA recognises the Fundamental Principles of Human Rights, laid down by
the “Universal Declaration of Human Rights” (United Nations 1948).
We believe that our daily business has an impact on Environmental and Human Right
issues, in particular, in relation to people's working and living conditions.
A complete specification of our minimum requirements is stated in the IWAY Standard
document. (see appendix 2)
2. The IKEA Concept in a Nutshell
Our Vision
To create a better everyday life for the many people.
Our Business idea
We shall offer a wide range of well-designed, functional home furnishing products at
prices so low that as many people as possible will be able to afford them.
This shall be achieved through
▪ a rational product range development and by adapting product design to production
conditions.
▪ a rational distribution idea in combination with a caring meeting with the many
people.
▪ a strict cost-consciousness in all areas.
3. Customers and Suppliers in Focus
We have decided once and for all to side with the many. This is an objective that carries
obligations.
We want to offer our customers low prices for well-designed and functional home
furnishing products of good quality, manufactured under acceptable working conditions
IKEA Services AB • 2002 2(3) IWAY
by suppliers that care for the environment.
IKEA is a production-oriented retailing company. We strive to build long-term
relationships with suppliers that share our commitment to promote good practices, and
who want to grow and develop together with IKEA.
Suppliers can expect from IKEA:
- to be reliable,
- to adapt our products to production,
- to contribute to efficient production,
- to care for the environment,
- to support material- and energy saving techniques,
- to take a clear standpoint on working conditions,
- to respect different cultures,
- to have clear and mutually agreed commercial terms.
4. Producing for IKEA Includes the Following Requirements
Legal Requirements
Suppliers must comply with national laws and regulations and with international
conventions concerning Social & Working Conditions, Child Labour and the protection
of the Environment.
Social & Working Conditions
IKEA expects its suppliers to respect fundamental human rights, to treat their
workforce fairly and with respect.
Suppliers must:
– provide a healthy and safe working environment,
– pay at least the minimum legal wage and compensate for overtime,
– if housing facilities are provided, ensure reasonable privacy, quietness and personal
hygiene.
Suppliers must not:
– make use of child labour, (see appendix 1),
– make use of forced or bonded labour,
– discriminate,
– use illegal overtime,
– prevent workers from associating freely with any workers’ association or group of
their choosing or collective bargaining,
– accept any form of mental or physical disciplinary action, including harassment.
Environment and Forestry
At IKEA, we shall always strive to minimise any possible damaging effects to the
environment, which may result as a consequence of our activities. Therefore, IKEA and
its suppliers shall continuously reduce the environmental impacts of operations.
IKEA Services AB • 2002 3(3) IWAY
Suppliers must:
– work to reduce waste and emissions to air, ground and water,
– handle chemicals in an environmentally safe way
– handle, store and dispose of hazardous waste in an environmentally safe manner,
– contribute to the recycling and reuse of materials and products,
– use wood from known areas and, if possible, from sources that are well managed and
preferably independently certified as such.
Suppliers must not:
– use or exceed the use of substances forbidden or restricted in the IKEA list of
“Chemical Compounds and Substances”,
– use wood originating from national parks, nature reserves, intact natural forests or
any areas with officially declared high conservation values, unless certified.
5. Implementation
The supplier shall effectively communicate to all its sub-suppliers, as well as to its own
co-workers, the content of the “The IKEA Way on Purchasing Home Furnishing
Products”, and ensure that all measures required are implemented accordingly.
Via a network of Trading Service Offices, IKEA supports their suppliers to improve
their operations. Believing in long-term relationships, IKEA does not break off relations
due to non-compliance only, as long as there is a willingness to improve in the right
direction with an agreed plan of action to comply with the IKEA requirements within an
acceptable time frame. Repeated violations of IKEA’s requirements will result in the
termination of the co-operation.
6. Support and Monitoring
The IKEA Trading Service Offices has the direct responsibility to support and monitor
the suppliers. To ensure compliance with the requirements, IKEA has also formed a
global compliance and monitoring group in order to support and follow up developments
on a global basis.
IKEA always reserves the right to check suppliers with the help of independent
organisations.
List of Appendix
Appendix 1 The IKEA Way on Preventing Child Labour
Appendix 2 IWAY Standard
This is a living document, and as we gain more experience and learn, it will be revised.
APPENDIX B
Swot Analysis
References
Canals, J (2000) Managing Corporate Growth Oxford, Oxford University Press, p67
12.03.2005
12.03.05
Mintel- Housewares Retailing- Retail intelligence, (May 2003) p49
Mintel, Furniture Retailing, Retail Intelligence, (August 2004) p61
Nattrass, B (1999), Nothing Is Impossible, Journal of Business Administration and Policy Analysis, (1999), 429
Zinkhan, M (1999), `Evolving Patterns of Retail Institutions’ Journal of Consumer Affairs, volume 33. Issue 1
Purves, A, (January 5, 2000) `Who gets the top chair in the furniture trade?’ The Independent, London, England
Hilton, M, (January 5, 2000) `Who gets the top chair in the furniture trade?’ The Independent, London, England
Laurance, B (June 25, 2000) `Still part of the furniture’, The Mail on Sunday London, England
Cannon, H (December 15, 2000) Business & Media, The Observer London, England
Finch, J (June 1, 2002) ` Democratic by design’ The Guardian, London, England
Gracie, S (March 14, 2004) `Furnishing plans for extension’ The Sunday Times, London, England
Bennett, W (June 19, 2004) ` Antiques in Decline as Fashion Favours the Ikea Look’ The Daily Telegraph, London, England
The Herald (August 24, 2004) `How Ikea and plywood killed the Victorian furniture trade’ The Sunday Herald, Glasgow, Scotland
Mintel- Housewares Retailing- Retail intelligence,( May 2003) p49
Mintel, Furniture Retailing, Retail Intelligence, (August 2004) p61
Nattrass, B (1999), Nothing Is Impossible, Journal of Business Administration and Policy Analysis, (1999),p429
Finch, J (June 1, 2002) ` Democratic by design’ The Guardian London, England
http://www.ikea.com/ms/en_GB/about_ikea/facts_figures/ikea_in_the_world.html
Gracie, S (March 14, 2004) `Furnishing plans for extension’ The Sunday Times, London
Mintel, Furniture Retailing, Retail intelligence, August 2004 p61
Laurance, B (June 25, 2000) `Still part of the furniture’, The Mail on Sunday London, England
Cannon, H (December 15, 2000) Business & Media, The Observer London, England
Hilton, M, (January 5, 2000) `Who gets the top chair in the furniture trade?’ The Independent, London, England
Zinkhan, M (1999), `Evolving Patterns of Retail Institutions’ Journal of Consumer Affairs, volume 33. Issue 1
Bennett, W (June 19, 2004) ` Antiques in Decline as Fashion Favours the Ikea Look’ The Daily Telegraph, London
