IKEA Business Case Study 

IKEA is one of the most popular and biggest furniture companies globally. It was founded by a carpenter named Ingvar Kamprad in the year 1943. Today, everyone knows that IKEA offers its products at a meager price without actually compromising the quality of the product. It has invested around 800 crores in India and has more than 9500 products.

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Furthermore, IKEA has more than 350 stores in approximately 35 countries, and the new store, which opened in Hyderabad, is spread across 400,000 square feet. This IKEA store plans to invest 105 billion rupees in the country. IKEA is a non-profit company and employs around 135,000 people. Due to the tax rules for non-profits, it pays about 33 times lower taxes than its for-profit competitors. IKEA also has an IKEA app with almost 9,60,333 monthly downloads, and it is also the lead investor in four companies. 

There was a massive traffic jam in 2018, held in the city of Hyderabad. A traffic jam is not new to a city like Hyderabad, but the reason why this traffic jam happened is something very, very amusing. It was not because of a car or a jeep accident, it was not because of a truck broken down, but it was merely because of the opening of an IKEA furniture store. A Furniture store had opened up in the city of Hyderabad. It resulted in such a massive traffic jam that a person who would usually take just twenty minutes to go from office to home took directly about more than four hours because of the traffic jam. It almost appeared as if the entire city had taken a break from their daily routine to visit this furniture store. Furthermore, the Hyderabad Police put out traffic advisories, and radio jockeys advised against venturing near the area. The IKEA \ furniture store itself had put out a billboard saying: 

‘Hyderabad- We are here to stay!’

What Is So Special About The Ikea Furniture Store?

Explified

The IKEA furniture brand is none other than the world’s largest furniture seller. For those, who do not have an idea about it, IKEA is a Swedish furniture company, and it is so massive that it has about 445 stores worldwide. IKEA has more than 2.17 lakh workers and generates a revenue of more than 40 billion dollars. No matter in which city an IKEA store opens up in, no point which country the IKEA store opens up in, the whole population of that city falls head over heels to visit the store. If you look at the top 10 furniture brands worldwide, IKEA stands at the top with a revenue of 40 billion dollars. And the second competitor to IKEA is not even close to 10 billion dollars. What is so special about IKEA is that it has built a forty billion dollars empire merely by selling furniture, which is not considered a scalable business in the conventional world.

Why Are People So Crazy About This Furniture Brand?

 The answer to this question lies in one of the most beautiful case studies done by Harvard Business Review, which dates back to the 1950s. In the American culture, people in the 1950s, mothers used to bake cakes for their kids, and they considered it to be a gesture of love and devotion to their family. However, the cake-making process was very tedious, and sometimes, it took more than a day for a woman to bake a cake. Therefore, a company called General Mills came out with the idea of actually minimizing the efforts that mothers were putting into baking a cake. So, they came out with the idea of instant cake mix, wherein all the ingredients were given in the packet, and just water had to be added to make the cake. This product minimized the customers’ efforts to such an extent that a cake-making process would be done in half a day. But this product failed miserably in the market.

It was not because of the quality of the product. Still, it was because the consumers considered the cake mix an insult to their efforts and came to believe that they were deceiving their family members and children merely by using the cake mix instead of genuinely putting in their efforts to make the cake. 

General Mills came out with another product, and this product came out with a few more hurdles, where consumers had to add eggs and a few more ingredients, which made the process more tedious and could give a perception that they were putting in a lot of effort to make the cake. So as a result, this product became a massive hit.

What Principle Is Used By Ikea To Connect With Its Customers? 

The secret behind customers’ love for IKEA lies in the phenomenon similar to that cake mix mentioned above. If you look at the supply chain of any furniture company, the table gets manufactured, over to the retailer, stored in a warehouse, and then it is shifted to your house. But IKEA furniture was packed so that it could easily fit in your car. 

IKEA furniture comes in pieces, and you have to assemble the furniture in your house, where the concept of ‘DIY- Do it Yourself’ comes into play. Just like the mothers have developed their extraordinary sense of value towards their work of actually baking a cake, customers started to create an excellent relationship, an incredible feeling of value towards their IKEA furniture because they assembled the furniture by themselves. 

Conclusion

It did something revolutionary to the company’s supply chain because when it comes to logistics, one of the most critical factors that result in cost-cutting and efficiency is volume occupancy. IKEA furniture did not come assembled; it came in a box that could be stacked one over the other. Therefore, the volume occupancy of the truck was minimized. That is how the entire supply chain of IKEA became super-efficient. And when it comes to IKEA storage, it is also very feasible that customers can take their furniture in their cars. Therefore, as a result, the cost was reduced to such an extent that IKEA was able to deliver high-quality furniture at a meager cost and found its recipe of providing low price high, value products that are highly affordable for the customers and can create an extraordinary sense of value for their customers. And this is the reason why IKEA is a 40 billion dollar company operating in different countries.

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