Download - Ikea Presetation v4.1
Ingvar Kampar & IKEAVicky Huichi YangPun SiriattChokphiphat ChaikitkosiNatthakul IntramisukAjjana ThairungrojAkira Kitado
2012/11/21
Outline1.Company history• 1943-1973 - Start up• 1973-1988 – Expansion in Europe • 1990-current – major issues
2.Business model• Activity System map• Logistic process• Marketing Strategy• HR-The IKEA way• CSR-Limited customer service
3.Globalization strategy• How we expand• Expansion in Japan• Expansion in China• Expansion in Asia
4.Financial status in recent yrs• Revenue performance• Pricing strategy• Debt structure
5.Conclusion
CEO Vicky Huichi Yang
Mkting Akira Kitado
HR Ajjana Thairungroj
CSR Natthakul Intramisuk
Globalization Chokphiphat Chaikitkosi
CFO Pun Siriatt
About IKEA
1943 - Ingvar Kamprad founded IKEA1945 - Furniture is introduced into IKEA 1958 - First IKEA store opened in Sweden.1965 -Largest IKEA opened in Stockholm, Sweden.
1940-1960:The roots of business
1970sContinental Europe
1969 - IKEA arrived in Denmark1973 - IKEA arrived in Switzerland1974 - IKEA arrived in Germany1976 - IKEA arrived in Canada1977 - IKEA arrived in Austria1979 - IKEA arrived in Netherland
1981 - IKEA arrived in France1984 - IKEA arrived in Belgium1985 - IKEA arrived in USA1987 - IKEA arrived in UK1989 - IKEA arrived in Italy
1980sEntering USA
About IKEA
1990 - IKEA arrived in Hungary1991 - IKEA arrived in Poland1996 - IKEA arrived in Spain1998 - IKEA arrived in China1999 – New CEO/President Anders Moberg
1990sIKEA in Asia
2000 - IKEA arrived in Russia2004 - 200 Stores opened2006 - IKEA arrived in Japan
- Focusing more on social & environmental project- Cooperating with NGOs
2000-Growth & Social impact
Before 1973 (Q2)
Background:•Demand of furniture is growing•Prices are high• 1935-1946, furniture price rose 41%• Inter-association supply contracts between manufacturers & retailer
•Facing limitations given by Manufactures’ & retailers’ cartel
IKEA:Customer targeting Targeting on younger/first buyers
Low price Self-service concept, Explanatory tickets on merchandise, Knock-down kits
Location Suburban stores, Ample parking space
Short waiting time Cash and carry concept
Low cost Buying outside the cartel
Before 1973 (Q2)
Age Children Status Income(1K SKr)
Education (yr)
0-25 47% 0 55% married 65% 0-2 6% 0-6 24%
25-35
32% 1 22% single 35% 2-4 31% 7-11
63%
35-45
14% 2 16% 4-6 25% 12+ 38%
45+ 7% 3 7% 6+ 38%
1975,IKEA customer profile
Customer attitude to IKEA Positive Negative Neutral
Design 51% 10% 39%
Price 73% 4% 23%
Quality 27% 29% 44%
Distance 56% 29% 15% 1975,IKEA Buyer Behavior
Targeting on younger/first buyers
Low Price
Before 1973 (Q2)Measure IKEA Large
storeAvg. store
Annual turnover in 1K SKRr/employee
202 114 93
Annual turnover in SK/sq.m
1453 1076 704
Rent as percent of annual turnover
0.6% 3.0% 3.4%
Annual Stockturn 3.2% 2.9% 2.3%
1961,Swedish furniture retailer
Productivity
Location:Suburban aria
Personnel Occupied with
IKEA Furniture stores
Furniture sections in
department store
Selling 29% 42% 65%
Clerical 44% 13% 6%
Warehouse 17% 11% 16%
Transportation 5% 13% 5%
Workshop 5% 21% 8%
1961,Swedish furniture stores personnel functions
Self-service concept
1973-1988, Europe (Q2)
1.Oil shock2.Swiss furniture industry: extremely traditional, highly fragmented 3.German furniture industry: Largest mkt in Europe • Retailer
• Order takes from manufactures • low inventory-long waiting time for customers
• Vigorous response- legal actions against IKEA
Location Suburban stores, Ample parking space
Innovation Contemporary, simple designSelf-service, cash-and-carry concepts
Marketing Distributing catalogsHumorous, off beat advertisement
Service Immediately delivery
Low price Attract young/first buyers
Background:
Purchasing decision based on IKEA
Prior visits to store 37%
Visits to other store 72%
Information from catalog 78%
1975, Buyer behavior
Buyers’ behavior
1973-1988, Europe (Q2)
1990 IKEA’s major issue (Q3)
•Need to expand in a rapid speed(5-6 stores/yr) in order to reach sales goal
•Market changing-• Targeting on young buyers • low-middle income family is shrinking
•Maintaining Company culture value• 1000 new recruits added annually• Increasing geographical spread• Homogeneous managing group
•IKEA way vs. American way• Obedient vs. Creativity
How much we should adapt?
About IKEA-Current situationProduct Categories•9500 kinds of products•Houses/Offices/textiles/children’s section
Sustainability, energy saving and community• LED light bulb, Eco-friendly textile, energy saving solution• Reducing CO2 emissions• Working with NGOs- WWF(2002),UNICEF, Save the Children •Operating in more than 38 countries, with 287 stores..
co-WorKers per region
Europe
North Amer-ica
Russia, Asia & Australia
Region co-WorKers /region Sales /region
Europe 106,500
79%
North America 16,500 14%
Russia, Asia, Austrelia
8,000 7%
sales per region
IKEA website.
Business Model (Q1)
MoreImpulse buying
Most itemsIn inventory
Year-roundstocking
100% sourcingFrom long-term
suppliers
High trafficStore layout
Suburban Locations with ample parking
LimitedSales staffing
Increased likelihood of
Future purchase
In-house designfocused on cost
of manufacturing
ExplanatoryCatalogues,Informative
Display/labels
Ease of transport
and assembly
“Knock-down”Kit packaging
Wide varietywith ease of
manufacturing
Self-transportby customers
LimitedCustomer
service
ModularFurniture
design
SellAssembly
By customer
Self-SelectionBy
Customer
Ample InventoryOn-Site
Low Manufacturing
Cost
Michael Porter <What is strategy>
Business Model-Logistic
1.DC delivery process
3.Diret delivery
2.Transit delivery
Supplier
Supplier
+ Distribution Center
Store
•Supplier (Factories)• Low price material• All over the world
•Distribution center (Warehouse)• Control inventory• Control package
•Key to low cost• High efficiency of logistic• Global suppliers
Business - Marketing
Business - Marketing
You don’t have to purchase• Café and restaurant• Play area for children• Nursery and baby-changing facilities• Attracting customers is more important than selling furniture
Business - Marketing
Reverse marketing- USAIt’s possible even to change customs - “Many of you feel bad for this lamp. That is because you are crazy. It has no feelings. And the new one is much better.”
-----from one of IKEA’s TVCM
The IKEA way
“The true IKEA spirit is founded on enthusiasm, on our constant will to renew, on our cost-consciousness, on our willingness to assume responsibility and to help, on our humbleness before the task, and on the simplicity in our behavior.”
Corporate environment
The IKEA way
• Egalitarian Culture• People-oriented management• Informal• Creativity encouraged, bureaucracy discouraged • Younger, open recruits• “humility, modesty, and respect for one’s fellow man”
“To create a better everyday life for the majority of people.”
“simplicity, attention to detail,
practical common sense.”
The IKEA wayAchieving objectives through HR management
IKEA’s unique philosophy• Kamprad’s thesis, Testament of a
Furniture Dealer• Spreading “company legends” to
perpetuate image• IKEA ambassadors as role models• Effective quality-control
Taking care of employees• Workers more productive with basic
needs fulfilled• Company cafeteria• Medical insurance• Coverage of higher education
Cost consciousness• Kamparad’s personal cost-
conscious lifestyle• Company policies on expenses• Low turnover cuts costs
The IKEA way
Achieving objectives through HR management
Incentive-based• Promotion• Raise motivation• “unbelievable confidence in its people” • Encourages ability rather than status; establishes equal opportunities for
everyone• Line-management
“The environment puts pressure on management to perform.”
The IKEA way
Possible Challenges Regarding HR
Rapid growth & globalization• Spreading philosophy• “keep the old spirit of frugality.” • Maintaining unique “thesis” within different social cultures• Different management styles in America & Asia • Intolerance towards difference
•More flexible management style•Consider adapting to each country’s social codes•Open-mindedness
Limited customer service
Personnel Occupied with
IKEA Furniture stores
Furniture sections in
department storeSelling 29% 42% 65%
Clerical 44% 13% 6%
Warehouse 17% 11% 16%
Transportation 5% 13% 5%
Workshop 5% 21% 8%
•Explanatory tickets•Lowering selling personnel •Self pick up at warehouse•Self transportation•Self assembly
•Does not lead to unsatisfactory•Different service scale in different country
A way to keep the cost and price low
Low selling personnel cost
1961,Swedish furniture stores personnel functions
Limited customer service
Our website•Request/View Catalog•Stock Available•Store Location•FAQ•Helpful buying guide•Assembly Instruction
•Warranty information•E-shopping•Online Shipping Rate•Attach File to Order•Return Policy
Our service•Picking With Delivery•Home Delivery•Kitchen Services•Assembly
•Online Planning•Office Planning•Home Furnishing Advice•IKEA Gift Cards
Strengths•Strong internationally known brand•Unique business model, little direct competitors
•Offering innovative but functional products with low price.•Diversity franchise management
Opportunities•Moving from international to global through the development of Asia and Eastern European models.
•Ecommerce can be the additional transactional capability•Huge market in Asia
Weakness•Whilst an international brand there is a level of reliance on European markets
•lower level of customer service due to the business model•Less flexible organizational culture•International environment less sensitive
Threats•Growing competitiveness •Mainstream retailers are beginning to mirror the model of low cost value flat packed furniture
•Economic concerns over rising living costs and depleting disposable income
Inte
rnal
orig
inEx
tern
al o
rigin
Helpful
GlobalizationHarmful
Globalization- structure
•Allows rapid growth•Propel top managers to position•Pioneering spirit
OrganizationsPotential Competitors•Local furniture firms• Copy good ideas• Counterfeit goods
•Unique business model•Low price-large purchase•Good quality•Service•New design
Expansion in Japan(Q4)St
reng
ths
Wea
knes
s
Opportunities Threats
•Style sensitive market•Low Price furniture mkt growing•Stable politics
•High competition in furniture market(ニトリ、 Muji)•High age society•Inflation
•Establish flagship warehouse in JP•Establish retail venues in JP
•Low cost positioning•Offer senior’s products and special services •Spaces for smaller business
•Joint venture with furniture retailer in JP
•Hire Japanese manager•Adopt more global environment sensitiveness
•Focus on it’s “low price” and “style” positioning•Reevaluate it’s global position•Response to geographical management problems
Expansion in China(Q4)Opportunities Threats
•Low manufacturing cost•High young new generation •Big Low Price furniture market
•High competition in low price mkt•Bubble economy•Deflation
•Establish a regional factory in China•Establish retail venues in China’s major cities
•Focus on quality & style in mkting and ads
•Joint venter with local furniture firm•Integrate backward
•Compete in long term values•Quality & style•Offer recreational spaces
•Use China as a production base for Asia•Penetrate competition in China with acquired information •IKEA price should not be too low
Stre
ngth
sW
eakn
ess
Expansion in Asia(Q4)Opportunities Threats
•Low manufacturing cost•AEC free trade area•Price sensitive market•Growing economy
•High competition in furniture market•Unstable politic
•Establish a regional factory in one of ASEAN countries; Malaysia, Thailand or Vietnam
•Low cost and style market positioning.•Focus on innovation and product R&D
•Establish regional distribution unit•Joint venture with local firm
•Have secondary distribution channel in case of political turmoil
•Need to focus on “price” and “style” image in Asia•AEC can facilitate higher sale ASEAN
Stre
ngth
sW
eakn
ess
Year Revenue (EUR M)
Revenue Growth
Rate Net Profit Margin
2009 21,846 N/A 11.60%
2010 23,539 7.75% 11.42%
2011 25,173 6.94% 11.78%
• Revenue growth rate slowing down• Maintaining net profit margin• Chose to lower price
Pricing strategy
Financial status in recent yrs
20012003
20052007
20092011
05
1015202530
Total revenue
Reve
nue Strong results and growth
•Continuous growth•Able to maintain revenue growth in econ crisis •A new wage of globalization starting from 2003•Sub-prime crisis from 2008•Euro crisis from 2009
IKEA data 2011, EUR billion
IKEA data 2011, EUR Million
Financial status in recent yrs
Debt Management and StructureCurrent Ratio Debt-Equity
2009 1.77 87.64%
2010 1.76 80.60%
2011 1.96 64.81%
54%
3%
20%
23%
2001
Group Equity
Other non-current liabilities
Long-term liabili-ties
Current liabiilities
61%
4%
7%
28%
2011
A consolidated balance sheet•Current ratio increase•Debt-Equity ratio decrease
Conclusion(Q5)
•Unique business modela. Keeping price lowb. Low costc. Limited service
•Globally spreading the “IKEA way”
•Modular furniture design•A continuously growing firm•Social Responsibilities
Reference
•The IKEA website•IKEA 2011 annual report•University of Galve, Zhi Li <Competitive advantage of IKEA & IKEA in China>
•Harvard Business Review July22, 1996
<Ingvar Kampard &IKEA>•Bloomberg Businessweek April.25.2006
<IKEA’s new plan for Japan>