MARKETING ANALYSIS

OF

PESTEL Analysis of IKEA

POLITICAL

There are no data about the political influence over the industry. Though it is
anticipated that the organizations are heavily supervised by the government.
There are many departments involved in the process of controlling and
managing the corporations.

The political situation is stable and the political parties respect the
agreements made between the MNCs and the government. This ensures a
healthy business environment.

In Poland after the fall of communist government the political situation

changed drastically.

The relationship between the supplier and IKEA deteriorated as the suppliers
tried to raise price, tore up contracts and denominated new technologies
provided by IKEA.

ECONOMICAL

The financial recession is clearly the greatest economic factor for IKEA. As
mentioned in the New York Times the recession of 2008 was not getting any
better.

Moreover IKEA was unable to understand the effect of floating rate of

currency cross-countries. As the Swedish Kroners was getting strong against
US dollar the importing cost of raw materials from Sweden was getting more
expensive.

SOCIAL

The cultural differences of Europe/Scandinavia and USA may play a significant

role on the business strategy of IKEA.

As the Scandinavians emphasis on the design and the perfection ofthe

products, on the other hand the Americans emphasize on the functional
ability of the product.

People in all the countries tend to inherit furniture from their forefathers.
Furniture may last for generations.

This practice is more common in Sweden. In USA this culture has been
changing recently.

TECHNOLOGICAL FACTORS

Technological factors can lower barriers to entry, reduce minimum efficient

production levels, and influence outsourcing decisions.

Technological factors include R&D activity, automation, technology

incentives, and rate of technological change.

IKEA developed some unique features in the furniture industry like selfassembly. This feature enabled IKEA to ship its products in flat-packs reducing
the damage while transporting.

MARKETING MIX OF IKEA

4 ps
1.PRICE
2.PLACE
3.PROMOTION
4.PRODUCT

PRODUCT

IKEA has a wide range of furniture for childrens rooms, kitchens, bedrooms
and living rooms. Products include coffee tables, side tables, TV solutions,
DVD storage, shelves, sideboards, bookcases, sofa beds, armchairs, leather
sofas and fabric sofas, as well as many other products. So within these
segments IKEA then subdivides again. For example in childrens bedrooms
there will be play accessories, beds, changing tables, nursing equipment and
so on. IKEA has in excess of 10,000 products.

PRICE

The basis of pricing for IKEA is value i.e. low prices or no-frills pricing. They
are not a premium pricer or a skimmer. So products are designed, raw
materials sourced, the products are manufactured, they are distributed, and
they sold by retail, within this no-frills low-cost framework.

Home delivery is available

PLACE

The IKEA group is an international business, which sells furniture and

accessories in Europe, North America, Asia and Australia.

IKEAs main business relates to its retail stores. Many of these stores are in
out-of-town locations and do not benefit from the footfall of primary and
secondary locations. The stores themselves are very large. Many of the stores
even have restaurants, food shops and a Swedish market. Some stores even
have a bespoke play area.

IKEA has more than 300 stores.

PROMOTION

IKEA is one of the worlds largest furniture retail brands. The brand itself is
based upon the concept of offering home furnishing products at value prices.

The promotions mix includes TV advertising, sponsorship, newspaper and

magazine advertising, and many other elements. Some of its TV advertising is
considered controversial whilst others see it as pretty plain. Recent
campaigns include the IKEA kitchen party advert Be Happy Inside campaign
and the kitchen party advert.

Obviously their iconic yellow IKEA logo serves to support the brand.

PEOPLE

The IKEA brand is based upon strong relationships with customers and customer
satisfaction. So serving and working with people is central to IKEAs business
philosophy.

In 2011 its then president Mikael Ohlsson made a statement in their annual
report outlining his view on the business and its future. In his view the business
would be launching many energy-saving alternatives to conventional light
bulbs. He commented that their kitchen range would offer many smart, ecofriendly solutions which would include water-saving taps, appliances and a
special system that would sort household waste ready for recycling.

Ohlsson made a commitment to reduce the impact of his business on people,

as well as the environment. The business would act responsibly, resources
would be used efficiently and costs would be reduced. He also wanted
sustainability to become more visible to customers and employees.

PROCESS

The furniture is made by IKEA itself whereby IKEA makes its own wood-based
furniture and wooden components. So for example the business owns forestry
sawmills.

The customer drives to the store, selects a product, orders, it, and then
collect it, only then to have to drive the product home themselves. This is all
part of the low pricing commitment.

PYSICIAL EVIDENCE

Interestingly IKEA was a business that encompassed sustainability quite early

in its strategy. Many of its products are recyclable IKEA has invested in very
green energy solutions such as solar power.

Physical evidence for IKEA is its very large stores. They are out of town and
offer a huge selection of furniture products. Stores tend to be well-equipped
with restaurants, very large car parking, the space to move around and
modern display technologies.

STP ANALYSIS

Segmentation

Middle-class population, All age group.

Advanced Economies Europe, USA, Australia

Emerging Markets China

Positioning

Cost Leadership

Differentiation