International Market Strategies Chosen Company IKEA

Question: Describe about the International Market Strategies for Chosen Company IKEA. Answer: Introduction The project focuses on the international market strategies of the chosen company IKEA. It is one of the largest furniture retailer founded in 1943 and has more than 300 stores in 27 countries over the globe. The huge business size thus requires effective strategies within the organization to provide further growth and development (IKEA, 2016). The nature and the role of marketing of the organization regarding the local (UK) and the international level (UAE) are discussed in the project. The focus has been laid on the product, Solar PV system or the residential kit, which was launched in 2014 and was sold at 14 stores of IKEA. The marketing approaches of the organization are analyzed that helps to understand the topic in a better way. The SWOT analysis, the PESTEL analysis, and the porters five forces help to evaluate the internal and the external market of the company. The 4 Ps for IKEA are discussed along with the market segmentation, targeting, and positioning of the company. The i nnovation and the future trend of the company are discussed to understand the performance of the company. Nature and role of marketing based on local level and international level Marketing is one of the essential concepts in an organization that consist of a set of activities, which are formed in order to gain a profit for the organization. In the opinion of Armstrong et al. (2012), effective role of marketing helps to create value for the customers and thereby creates customer satisfaction. The company needs to identify the various trends and the influences that affect the behavioral pattern of the customers, which affects the local as well as the international levels. Czinkota and Ronkainen (2013) mentioned that the different markets have different requirement for the adaptation of the approaches of the company. The performance of the company depends on the culture of the market on which it operates. Therefore, the success of the business of the IKEA cannot be determined from beforehand. However, the marketing strategy of IKEA in UK and in UAE resembles each other. IKEA operates in both these countries as both UK and UAE are industrialized. The marketing strategies of IKEA in UK as well as in UAE are to increase the level of profit by enhancing customer satisfaction. It is thus necessary for the company to develop efficient strategies that support the company in achieving the competitive advantage at both local and international level from its competitors (Terpstra Foley and Sarathy 2012). While analyzing the marketing approach of IKEA, it can be stated that the product price of the Solar PV system is the same in the websites of IKEA, UK and IKEA, UAE. Thus, it can be opined that the marketing system in UK and UAE is similar and successful. However, the expectations of the customers of IKEA vary from each other in the local level and in the international level, which alters the marketing approaches. As the geographical area of UK and UAE is different, there is a need of different physical locations. Moreover, larger population in UK uses internet than the population of UAE. Therefore, IKEA can target the customers in UK through E-commerce. SWOT analysis The SWOT analysis is an effective tool in the strategic management that helps the organization to develop appropriate strategies for IKEA Company by analyzing its strength, weakness, opportunities, and threats. Strength Global branding Low-price strategy Diversity in products Knowledge about the customers Weakness Reduction in the quality of the products Less flexible Intricacy Opportunities International market opportunities Investment in sustainability Innovations Customized surface Threats New substitutes Increased competition Changes in the customers taste Legal regulations IKEA Company has several strengths, weakness, opportunities and threats that can be analyzed I order to develop strategies for the organization. Identifying the strengths helps the company to understand the reasons behind the success of the company that can be enhanced further in order to grow and develop. The low price of the products, diversity in the products and the knowledge about the customers helps the company to increase the level of customer satisfaction and profitability. However, the company has certain weakness such as lower flexibility and drop in the quality of the products. The managers of the company need to develop strategies that will help to deal with the weakness of the company using its strengths. On the other hand, the company has several opportunities such as operating in a new international market, invest further in the sustainability of the business. The company will be able to minimize its threats of increased competition, changing customer taste and an introduction of the substitute if it is able to form strategies keeping the strengths and opportunities in concern (Papadopoulos and Heslop 2014). PORTERS five forces analysis The Porters five forces model is a strategic tool that helps IKEA to analyze the competition faced by the company and the factors affecting the business of IKEA. The factors of the company as described by the model are as follows: The threat of new entrants- The threat of new entrants is one of the important factors that affects the performance of the IKEA. Therefore, IKEA needs to determine the intensity of the barriers present in the entering into the market. However, it can be stated that IKEA has no real threat as the company is a large company operating in low-price segment. A new company entering the market is not able to compete without adequate starting capital. Moreover, the companies are unable to expect high-profit margin and market growth. Bargaining power of the buyers- Determining the bargaining power of the buyers is also crucial as it influences the business of IKEA. In order to achieve a higher market share, the competitors try to underbid each other, as the customers are price-sensitive. This forces IKEA to reduce its price whenever possible. As the power of the buyers is more, little changes in the market can affect the position of the company and the loyalty of the customers. Bargaining power of the suppliers- as per the yearly report of IKEA, the bargaining power of the suppliers is low. This helps the company to replace the suppliers whenever they find a better deal. This allows IKEA to enjoy a remarkable power towards their particular network. The threat of substitutes- IKEA is able to meet the needs and expectation of its customers as it offers a wide range of products. The improved technology and the low price is a useful way of attracting the large mass of customers towards the brand. This helps to reduce the threat of substitutes. Industry rivalry- IKEA has a number of rival companies in the furniture industry such as the Tesco, Sainsbury. IKEA has a threat from these companies that signifies innovation, new products, and lower product prices in IKEA. PESTLE analysis The PESTEL analysis helps IKEA to analyze its macro environment that includes the political, economic, social, technological, environmental and legal environments. Political- From the political point of view, it can be stated that there have been no remarkable changes in the political institutions of the areas in which IKEA operates. This helps the company as its organizational activities in the market are secured since there are no major changes in the government regulation, politics and business laws. Economic- The performance level of IKEA is significantly influenced by the GDP growth of the market in which it operates and the financial crisis along with the demand for the products. IKEA is able to make the correct decision about the business by analyzing these factors. Social- The development of the society and the growth in the population helps IKEA to enjoy higher profit as the company is able to select effective target groups. IKEA focuses on the younger people living in the economy and the students that enhance the sales. Technological factor- The investment in the technological process helps IKEA to enhance its future plans and become more successful and achieve its organizational goals (Schlegelmilch 2016). This delivers a stable and sustainable position to the company in the competitive market. Environmental factor- The booming economy helps IKEA to increase its production and respond to the increasing demand of the customers (Park and Ungson 2016). The customer further accepts higher quality of the products. Therefore, it is necessary for IKEA to produce the product that is of higher quality and environment-friendly. Legal factors- The presence of the income tax, rights of the consumers and the other business laws affects the performance level of IKEA. The employment laws regulate the labors and the rights of the individual working in the company (Demangeot Broderick and Craig 2015). Marketing mix and Solar PV system The marketing mix is described as a tool that every organization uses in order to increase its sales. The marketing mix of IKEA is the 4 Ps of marketing that are as follows. Product- IKEA has over 9,500 products that provide the company a competitive advantage. However, Chung, Lu Wang and Huang (2012) stated that a large number of products is not enough to meet the demand of the customers. IKEA needs to have adequate information about the taste and preference of the customers and has to operate according to the customers feedback to gain customer loyalty (Ikea.com. 2016). IKEA offers similar products to its local as well as international market in UK and UAE respectively. Price- IKEA has been efficiently dealing with the pricing strategy of the company. The company sets low prices for the furniture that attracts the customers easily. The company has been able to increase its revenue by lowering the price of the products (Hultman et al. 2012). However, the price of the Solar PV system is same in UK and in UAE. Place- IKEA has been successful in operating stores all over the globe. The company has expended its operating area with the help of the effective strategic management followed by the managers of the company. IKEA has physical stores and online stores in both UK and UAE. Promotion- IKEA uses various methods to promote its business and to distribute the products. One of the important techniques used by the company in order to achieve effective promotion is the direct marketing method (Grant 2016). The promotion of the product in UK is mainly carried out through direct marketing in the process of advertisement. On the other hand, the promotion in UAE is carried out through direct approach, which is beneficial for the UAE market structure. STP marketing The needs of the customers changes frequently, therefore it is beneficial for the company to divide the market into different groups, which helps to meet the demand of the customers. Three stages that support the building of customer value are segmentation, targeting and differentiating (Ghauri et al. 2016). The segmentation process begins with the identification of the different segments that prevail in the market. The multivariable segmentation is used by IKEA to analyze the factors of demography, psychographic and geography (Rothaermel 2015). The demographic segmentation is carried out by analyzing the data regarding population, age, national income of the target market. IKEA, therefore, provides low price products in the markets where the customers have the lower budget. Further, analyzing the social class, lifestyle and the personality of the target audience is important to understand the nature of the market. IKEA offers wide ranges of products that help to meet the demand of the various target audiences (Gilligan and Hird 2012). Evaluating the different segments and determining the number of segments IKEA will be able to serve is an important part of targeting. IKEA has been able to make its customers believe that although the company is unable to deliver the best price yet, it is successful in offering the best price. The new projects carried out by the company attract a number of customers in the market that increases the revenue earnings. IKEA is one of the largest retailers of furniture and is a well-known brand with the help of cost-leadership strategy. However, IKEA requires a more elaborated differentiation strategy as the competitors fight for larger market share and impose the threat on IKEA (Zeriti et al. 2014). The strategy helps IKEA to minimize the product price and remain innovative. Customer acquisition and retention Acquisition and retention of customers is an important task that includes reaching out to new customers using effective marketing channels. However, retaining the existing customers is necessary by providing new and innovative products (Verbeke 2013). IKEA is renowned for creating perfect furnishing within the low and affordable range. In order to increase customer satisfaction and retain customers, IKEA provides free coffee, family offers including free membership of IKEA (Ikea.com. 2016). The company keeps its customers aware of the corporate social responsibility to turn its potential customers into loyal customers. Innovation and future trend It is crucial for IKEA to keep the future availability of resources, consumer behavior in mind in order to survive in the competitive market. Thus, IKEA identifies the changes and carries out activities of producing next generation of furniture. Considering the Solar PV system, if IKEA innovates the product, the system will be able to meet all the necessary regulations and increase the feed-in tariff payment (Elg et al. 2012). The company further tries to expand into new markets all over the world. The high economic growth, technological growth of the markets creates opportunity for IKEA to develop further. As reported by IKEA, a new sustainable strategy called People and Planet Positive has been adopted by the company for CSR to develop its innovation and other aspects. Conclusion The study helps to understand the marketing activities of IKEA with the help of the strategic management tools such as SWOT, PESTEL, and Porter's five forces. It is necessary for IKEA to use effective marketing channels such as social media and the internet to attract more customers and increase brand image. The effective strategies will support IKEA to achieve its goal and maintain sustainability in the competitive market. 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