1. INVADES AMERICA
IKEA
ADITYA IYER | BRUNA FURLAN | DENIS SMIRNOV | MONICA CANCINO | RENATA SILVA
1985
Youngme Moon, Harvard Business School | Sep 2004

2. TABLE OF
CONTENTS
3 | Company Overview
4 | Case Synopsis
5 | History
6 | Timeline
8 | Furniture Market in the USA
9 | Competitors
10 | Ikea’s positioning
11 | Product Development
13 | Key Issues
14 | Ikea enters USA – expansion strategy
15 | Product & Service Management
16 | Action Plan
17 | Brand Positioning
19 | First Results
20 | SWOT Analysis
28 | PEST Analysis
29 | Porter’s 5 Forces Analysis
31 | Problem Statement
32 | Scenarios: Pros & Cons
37 | Recommendation
38 | 2015 Ikea USA
39 | Learnings

3. OVERVIEW
IKEA AT A GLANCE
World’s leading
home furnishing Co.
• Swedish Company
• Owned by a Foundation
• 328 Stores in 28 countries
• Offers well-designed products at
low prices
• Mission: home furnishing that
many can afford
• € 31.9 Billion Revenue
• € 1.6 Billion in Food
• € 1 Billion in Online Sales
• 9,500 Products
• 155,000 Employees
• 978 suppliers in 50 Countries
• 51% Production in Europe

4. SYNOPSIS• In 1985 Ikea opens its first store in the USA
• Struggles with low sales and acceptance of its Scandinavian essence
• The successful European formula needed to be revised
• The POD didn’t seem to appeal for Americans
• Issues with product, lack of service and shopping experience
• USA furniture retailing market very fragmented
• Difficult for Ikea to disrupt standardized market habits
• Ikea changes its strategy to reinforce its reverse positioning
• Strengthen economy of scale to achieve the goal of 50 stores by 2013

5. HISTORY
I K E A
INGVAR KAMPRAD ELMTARYD AGUNNARYD
Ambitious, focused
and patient since
young boy
Didn’t spend money
on toys
Not a good student
Received money
as reward
During school years
was looking for
ways to make
money
Moved from his
house at 17
Opened his own
company with
money borrowed
from father
Name of the farm
He grew up in
Spent childhood in
Parent’s farm
Name of the
village he lived
nearby
Where he first
stablished Trade
Of Essentials – pen
selling business
Lessons of
advertising
and necessity
of free food

6. 1960
in Älmhult IKEA opens
the first restaurant1965
The largest store opens in
Stockholm (self-service
system)
1980 - 1984
stores were opened in
Saudi Arabia, Kuwait and
China
1970
Opens more than 20 stores in the
world, from Europe to Australia
1948
The business expands
into furniture
TIMELINE
1943
IKEA is founded as a pen
business
1953
Furniture showroom
opens in Älmhult, Sweden
1958
The first Ikea Store
opens in Stockholm
1951
First IKEA catalogue
is published
1956
Designing furniture for flat
packaging and self-assembly
1985
Ikea opens the first store
in the USA

8. FRAGMENTED
·$67 Billion
sales in 2002
·Highly
disjointed
market
COMPETITIVE
·Modest
competition for
Home furnishing
·Big for General
retail
· Main retailers
responsible for
just 14.2% of
market share
GAP BETWEEN
HIGH END &
LOW END
·Customer service
· Payment options
·Trained
salespeople
· Huge inventories
·Super Centres
·Small Shops
HIGH COSTS
· Marketing costs to
reach people
· Land and
construction
· Staff costs, social
security & turnover
· Manufacturing
industry weak -
import
FURNITURE
MARKET INTHE USA

9. HIGH END
GAP
o Ethan Allen
o Thomasville
o Jordan’s Furniture
multiple-brand retailers
With sales consultants and
interior design services
o Wal-Mart
#1 furniture retailer
o Office Depot
o Costco
o Small shops
targeted college students
LOW END
COMPETITORS

10. POD: LOW PRICE WITH
MEANING #1
Unique combination of form,
function, and affordability
Design & Aesthetic
Low Priced furniture
Right Quality – perceived
as not long lasting
Mission: Create a
better everyday life
Saving in all directions and
partnering with customers
IKEA’S
POSITIONING
Store Layout, Childcare
center and Restaurant

11. Stablish target retail
price based in a
product Matrix
Find a manufacturer
to produce it: 978
suppliers
IKEA’s engineers
determine the
materials to be used
in the product:
surface X interior
Design process-
internal and external
professionals
Flat transportation,
product in flat-
packaged boxes, not
assembled.
PRODUCT
DEVELOPMENT 1
2
3
4
5

12. MATRIX
SCANDINAVIAN MODERN COUNTRY YOUNG
HIGH
MEDIUM
LOW
PRICERANGE
STYLE
IKEA
IKEA
IKEA
IKEA
the company would set its own price point 30% to 50% lower that its rivals.
• Target Competition: finding gaps in the market
• Intern gaps within their own portfolio
• Identify gaps in the product lineup
• Identify market opportunities by looking at the product
offering on the grid and looking of empty spaces
ETHAN ALLEN ETHAN ALLEN
WALMART
WALMARTTHOMASVILLE
THOMASVILLECOSTCO
COSTCO

13. EXPANSION STRATEGY
The USA invasion didn’t consider local habits & culture
Specific aspects of the market ignored
Copy & Paste of Ikea’s European Business Model
Lack of Market Research
 .
 HGHHJKKJJL
 KJKJKJLL
 JNKLMLM
 NKNLM,
 KLMLML
Lack of appropriate assortment and level of service
to match new consumer’s needs.
Scandinavian design and DIY culture were
unfamiliar for new target
BRAND POSITIONING
Trying to change customer behavior instead of
adapting its products and services to local demand
Target & Niche positioning that wouldn’t
sustain the growth needed
KEY ISSUES
PRODUCT & SERVICE MGT

14. IKEA ENTERS USA
EXPANSION STRATEGY
Market Test in Canada in 1976
Market strategy for medium-
long term growth
Need of economy of scale
Strong Self Confidence from
Europe Success
Ikea Struggled from beginning
1985 – 1990 Operating 5 stores
US Market Challenges

15. PRODUCT &
SERVICE MGT
LIMITED STYLES
COMFORT
SELF SERVICE
DIMENSIONS
SIZE
DYI
LIFETIME FURNITURE PICK UP

16. PRODUCT
Align US range with
overall Ikea Strategy
Bedroom & Kitchen as
engine of sales growth
ACTION PLAN
PRICE
Align the price strategy
with overall Ikea
Strategy
Aggressive sales price
reduction
OPERATIONAL COSTS
Upgrade stores and
open in better locations
Reduce turnover of staff,
stable working
environment and
improve operations
GROW SALES
Add a substantial # of
stores and increase in
existing ones – economy
of scale
SUPPLY CHAIN
Build local production
More stable profit to
fight volatility of
exchange – margins
fluctuating with
dependency on
importing
MARKETING
Needed all this steps to
make it possible to
afford investment in
marketing

17. BRAND POSITIONING
• Campaign: New ad agency based in Miami – Budget $45 million (US)
• Award Winning: Cannes | Direction of Spike Jonze (Being John Malcovich)
• Target: Americans compulsion to keep outdated furniture
• Key message: Commitment free approach to furniture
• Furniture as fashion: Adoption of a disposable concept to meet lack of longevity
• Results: Continued until 2005 and increased sales in 8% between 2002/2003
Unboring Campaign
Ikea Lamp, USA 2002 | first TV spot

19. FIRST RESULTS
1985
1 Store
$ 50 Million
1992
11 Store
Bought a
competitor
1999
12 Stores
16 in Market
Share
1993 - 1998
No store
opening
$ 600 Million
2002
14 Stores
14 in Market
Share
2001
14 Stores
$ 1.27 Billion
GOAL
2013
50 Stores

20. STRENGTHS
SWOT

21. STRENGTHS
1. Global Brand Identity & Strong Brand Image
2. Strong and differentiated Area A as compared to competitors
3. Wide product range and styles
4. Hip, Swedish designs
5. Cheap and affordable products
6. Furniture easy to assemble and ship
7. One stop shop for home furniture
8. Friendly atmosphere/ store layout.
9. Facilities – Restaurant and day care center.
10.Strong global sourcing capabilities

22. WEAKNESSES
SWOT

23. WEAKNESSES
1. Consumer perception of cost vs. quality
2. Locations not accessible or relatively few
3. Assembling furniture may be unappealing to certain groups of consumers
4. Store layout is a hassle if you want just one particular item
5. Swedish designs may not appeal to the North American consumers (USA)
6. Advertising and communications fail to attract the younger minds
7. Furniture are not built to last a lifetime
8. Shortage of inventories for the new market
9. Niche positioning not enough to bring revenues needed
10.Dependent on importing products - weak USA industry and no partnership
11.Currency and exchange rates: products coming from different places

24. THREATS
SWOT

25. THREATS
1. Economic slowdown, global economy crisis and recession have
decreased store traffic
2. Barriers to enter new profitable markets
3. Indirect threats from Walmart , Home depot etc.

26. OPPORTUNITIES
SWOT

27. OPPORTUNITIES
1. Shifting trend towards greener, sustainable products and lower priced
products
2. Increase ONLINE presence and sales and take advantage of the recent
boom in IT and internet (late 90’s)
3. Educate and attract younger consumers through better IMC tools.
4. Convert few, large stores to more, smaller stores
5. Minimalist trend - clean design, slim forms and plain surfaces - coming
from Europe to western cultures

28. OLITICAL
Constitutional
System
Stability of
Government
Business
Freedom
Trade Freedom
Tax Policy
P CONOMICAL
Economic Growth
Exchange Rates
GDP Growth
Globalisation
Interest Rates
Inflation Rate
(cost of capital)
Labour Costs
Unemployment
Rate
Recession
E OCIAL
Population
Growth Rate
Age
Distribution
Perception of
Safety & Quality
Educational
Infrastructure
Employment
Patterns
Cultural Taboos
Home Decor &
life style trends
S ECHNOLOGICAL
Emerging
Technologies
Impact of
Internet
Reduced
Communication
Costs
IT Boom
Rate of
Technological
Change
R&D Activity
(SEZs)
T

29. THREAT OF NEW ENTRANTS
BARGAINING POWER OF
SUPPLIERS
THREAT OF SUBSTITUTE
RIVALRY AMONG EXISTING
COMPETITORS
BARGAINING POWER OF
BUYERS
PORTER 5 FORCES

30. NEW ENTRANTS
MEDIUM
Competitive market but chances of new
entrants in the cheap furniture business is
HIGH
POWER OF SUPPLIERS
HIGH - EUA weak industry
LOW - EUROPE/ASIA too many
alternatives
THREAT OF SUBSTITUTE
LOW
Furniture at home cannot be
replaced by A substitute
COMPETITORS
HIGH
Major players in discount furniture
business
POWER OF BUYERS
LOW
unique offer for a gap in the market
(high x low end)
PORTER 5 FORCES

31. PROBLEM STATEMENT
“HOW CAN IKEA FIND THE BALANCE BETWEEN
ITS SCANDINAVIAN ESSENCE AND THE LOCAL
USA CULTURE IN ORDER TO EXPAND AND MEET
ITS GROWTH GOALS BY APPEALING TO A
BROADER PUBLIC WITHOUT LOSING ITS
UNIQUENESS?”

32. SCENARIOS
1
KEEP UP WITH THE
CURRENT EUROPE’S
BUSINESS MODEL,
ENFORCING IT TO
U.S PRICE
CONSCIOUS
CONSUMERS, BUT
ALSO OPENING A
PREMIUM BUSINESS
IN ORDER TO
ATTRACT A NICHE
TARGET SEEKING
FOR MORE
CONVENIENCE.
CURRENT
MODEL +
PREMIUM
STORES 2
INCREASE THE
INVESTMENT
IN ADVERTISING
AND MARKETING IN
ORDER TO
REINFORCE IT’S
REVERSE
POSITIONING AND
CHANGE
CUSTOMER
PERCEPTION
WHILE
POSITIONING
STORES IN URBAN
DOWNTOWN
AREAS AND
SUBURBS.
+ MARKETING
& STORES TO
REINFORCE
POSITIONING 3
KEEP UP WITH
CURRENT EUROPE’S
BUSINESS MODEL
INTRODUCING
EXCELLENT
CUSTOMER SERVICE
BY STRENGTHENING
CUSTOMER
RELATIONS AND
PROVIDING MORE
CONVENIENCE,
ASSEMBLY AND
DELIVERY OF
PRODUCTS.
CURRENT
MODEL +
CHARGED
SERVICES 4
INCREASE THE
INVESTMENT IN
ONLINE PRESENCE
& CREATE SPECIAL
COLLECTIONS IN
PARTNERSHIP
WITH LOCAL
DESIGNERS AND
LOCAL ENGINEERS
FOR THAT
PARTICULAR
MARKET
INCREASE
ONLINE +
LOCAL
COLLECTIONS

33. 1
KEEP UP WITH THE
CURRENT
EUROPE’S
BUSINESS MODEL,
ENFORCING IT TO
U.S PRICE
CONSCIOUS
CONSUMERS, BUT
ALSO OPENING A
PREMIUM
BUSINESS IN
ORDER TO
ATTRACT A NICHE
TARGET SEEKING
FOR MORE
CONVENIENCE.
CURRENT
MODEL +
PREMIUM
STORES
CONS
• High costs to implement
• Lack of trust in quality
• Big efforts to build brand positioning and awareness
• Loss of cost efficiency & loss of mass production
• Loss of core company values
PROS
• Positive brand association
• New target and niche market, broadening the public
base
• Test market
• Trend social inclusion by premium purchase

34. CONS
• High cost for frequent advertising.
• Consumers are not open to new products and
designs which are not local
• Consumer perceptions of Ikea being a brand with
low quality products (difficult to change perception)
• The real state prices in downtown areas are high -
increase fixed costs
• Ikea’s theme park style is difficult to fit in downtown
area
PROS
• Reverse positioning increases product life cycle and
help increase sales
• Improved brand identity, retention and awareness
• Attract innovators and early adopters
promote Scandinavian design
• Easy access to stores will increase store traffic
and may increase non-drivers visitors
• Stimulate small item sales which is a big part of the
business
2INCREASE THE
INVESTMENT
IN ADVERTISING AND
MARKETING IN
ORDER TO
REINFORCE IT’S
REVERSE
POSITIONING AND
CHANGE CUSTOMER
PERCEPTION WHILE
POSITIONING
STORES IN
CRITICAL URBAN
DOWNTOWN
AREAS AND
SUBURBS.
+ MARKETING
& STORES TO
REINFORCE
POSITIONING

35. CONS
• Consumers won’t pay extra
• Expensive to implement, train and manage the
operation ·
• Loss of cost efficiency and loss of profit margin
PROS
• Local acceptance – Customized for US
• Faster results vs consumers changing their behavior
• Attracting non-drivers and non-DIY consumers
3
KEEP UP WITH
CURRENT
EUROPE’S
BUSINESS MODEL
INTRODUCING
EXCELLENT
CUSTOMER
SERVICE BY
STRENGTHENING
CUSTOMER
RELATIONS AND
PROVIDING MORE
CONVENIENCE,
ASSEMBLY AND
DELIVERY OF
PRODUCTS.
CURRENT
MODEL +
CHARGED
SERVICES

36. CONS
• No assistance and specialized staff
• People like to look and feel items
• Expensive online shipping
• Risks of delivery damage
• Returns can be an issue
• Products more expensive due to loss of mass
production & efficiency ·
• Different styles might impact the whole operation
• Loss of brand identity and Scandinavian style
• Impact on their uniqueness & essence·
PROS
• Good supply chain to facilitate deliveries
• More convenient for consumers
• Worldwide presence with small investment
• Bigger product portfolio
• Reduction of staff costs
• Direct appeal to local consumers
• Customized offer & local strategy
• Market test, can be expanded to other areas
4
INCREASE THE
INVESTMENT IN
ONLINE PRESENCE
& CREATE SPECIAL
COLLECTIONS IN
PARTNERSHIP
WITH LOCAL
DESIGNERS AND
LOCAL ENGINEERS
FOR THAT
PARTICULAR
MARKET
INCREASE
ONLINE +
LOCAL
COLLECTIONS

37. RECOMMENDATION
+ MARKETING
& STORES TO
REINFORCE
POSITIONING
CURRENT
MODEL +
CHARGED
SERVICES2 3+
We strong believe in the potential of 4
alternatives presented, but being
realistic, considering budget limitation
Ikea would be facing after more than a
decade struggling with low sales &
profitability in the US operation we
recommend the combination above.

38. • Ikea opened 15 new
stores in 2015 – 2 in USA
• Total Ikea 2015 Revenue
€ 31 Billion – USA
represents 14%
• USA is the 2nd top selling
country after Germany
• America is the 2 biggest
regional market, only
after Europe
• 3% of total purchases are
made in the USA
2015 | IKEA USA

39. LEARNINGS
• Be consistent and true to the core values
• Put consumers in first place – pass cost
savings instead of only improving profit
margin
• Think locally and adapt your offer instead
of trying to change consumer behavior
• There’s no one size fits all in marketing and
business strategy
• The control of the value chain can give
more competitive advantage and
consistency to everything the company
does