The Ikea case study analyzes the company’s marketing strategies and how it has enabled them to become the successful business they are today. Ikea is a global leader in furniture sales and this is greatly due to the effectiveness of their marketing and inventory strategies. One thing that Ikea is doing right in regards to their business strategy is that they are paying close attention to the interest of their consumer market. It was well noted in the case study that Ikea puts an emphasis on their consumers’ local taste by visiting them periodically and analyzing what interests them. Ikea takes their findings in the consumer market and uses this information to conform the company outlets to their specific interests. (Kotler, 2012)
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This is an important part of their marketing strategy because it deals with direct communications between the company and their consumers. Maintaining products and services that are based on the desires and interests of the immediate consumer market will generate more customers which in turn bring in more sales revenue. This integrated marketing communication strategy also helps to maintain a loyal customer base for the company. (Friedman, 2006)
Another thing that Ikea is doing successfully is having a well-managed inventory control system. Inventory is expensive, and if it is not sold, it becomes a loss due to obsolescence. On the other hand, not having enough of it will drive customers elsewhere where they can get it. The cost of inventory itself is irrelevant, because if it is not sold, it will remain a cost anyways. The relevant factor is the cost of the inventory that is sold or cost of goods sold (COGS). (Investopedia, 2015)When the inventory or product actually is sold, the cost can then be deducted from the sales revenue to calculate profits (excluding applicable taxes based on jurisdiction). (Mower, 2009)
Ikea is able to minimize their costs of goods sold by locating their outlets on the outskirts of most major cities as noted in the case study. This helps the company to save on property taxes and helps to reduce their overall fixed costs. Most firms within the retail industry would not be able to do this as they can only operate in highly populated areas such as the inner city. Ikea however, has established their reputation well enough that customers are willing to travel the extended distances to shop at their outlets. Ikea also saves money on shipping costs by selling their products boxed up for customers to assemble themselves. (Salami, 2010)
Another thing that Ikea could be doing and might want to consider is putting a little more emphasis on their advertisements. The case study did not mention any strategies that Ikea is using to reach out to the general public in the form of advertisements. Other firms within the retail industry such as Wal-Mart and Target put a great emphasis on their advertisements, despite already carrying such a profound reputation among the general consumer population. Wal-Mart and Target invest greatly in advertisements through commercial ads, sponsorships, and social networking. Although their reputation is already carrying them in a strong way, there is always room for new customers and Ikea should invest more in their advertisements. (Friedman, 2006)
There are both pros and cons in the way that Ikea sells furniture to the consumer market. Most of the pros have been discussed such as saving money for the company while at the same time pleasing the desires of the consumer base. Some cons however, might be that Ikea is essentially cut off from the more populated areas. This however, does not seem to be a significant issue as the case study notes that customers are still making their way to the Ikea outlets. Another con might be the fact that customers mostly assemble their furniture themselves. Most are not qualified to do so and inadequately assembled furniture may be a safety hazard.
Friedman, H. H., 2006. Market Segmentation and Targeting. [Online] Available at: http://academic.brooklyn.cuny.edu/economic/friedman/mmmarketsegmentation.htm
Investopedia, 2015. Inventory Management. [Online] Available at: http://www.investopedia.com/terms/i/inventory-management.asp [Accessed 28 March 2015].
Kotler, P. &. K. K. L., 2012. Marketing management. Upper Saddle River, NJ: Prentice Hall.: 14th ed..
Mower, A. M. a. A., 2009. Inventory System: A Workflow System for Institutional Repositories, s.l.: Taylor & Francis Croup, LLC.
Salami, A. a., 2010. Inventory Management:. Journal of Social Sciences, 23(2), pp. 135-142.
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