IKEA MARKETING PLAN (ANSWERED)

QUESTION

Marketing Strategy, Planning & Control

Assessment Information

This assignment is an individual marketing report which requires you to produce a marketing plan on a Home Improvement product/service of your choice. You can choose any existing company/ brand. The report must utilize the marketing planning process and recommend future strategic and tactical marketing plans for a medium term (at least 3 year) period in a geographical market of your choice. While developing your plan, you need to apply and critically analyse various theories, concepts and tools of marketing strategy and planning.

The Marketing Plan should include:

Brief overview of the company, outlining the companys mission and vision
Marketing audit (e.g., PESTEL, SWOT)
Objectives (financial and marketing)
Relevant Marketing strategies (STP analysis, Marketing Mix Decisions, Market expansion etc.) to achieve the objectives
Organisation, Implementation, Control and evaluation process
A quantitative forecast of the key performance indicators (e.g., sales, revenue, expenses, profits, market share etc.) for the upcoming years

The individual marketing report must follow the standard report structure and include Title page, Executive summary, Table of contents, List of References and Bibliography. Appendices can also be included (if needed).

This assignment is designed to assess learning outcomes:

Apply and synthesise principles of marketing in operational marketing planning functions.
Critically evaluate short-term and long-term marketing and financial data for strategic decision making.
Analyse and critically assess the implementation, control and evaluation of the marketing planning process.
Demonstrate a critical ability to evaluate competitive marketing strategy.

Word Count

The word count is 3000

There will be a penalty of a deduction of 10% of the mark (after internal moderation) for work exceeding the word limit by 10% or more.

The word limit includes quotations and citations, but excludes the references list.

ANSWER

IKEA Marketing Plan

Executive Summary

IKEA is one of the leading companies in the home improvement industry. The company uses the franchising system and operates 433 stores across 50 countries. However, the company needs to increase its visibility in the Chinese market, particularly among the middle class living in middle-sized cities and rural areas. This marketing plan aims to help IKEA improve its brand awareness, customer acquisition, and retention rates in the target market. To achieve its market and financial objectives, IKEA will target well-educated, 25-54-year-old working-class individuals living in middle-sized cities and rural areas in China. It will expand into these markets through brick-and-mortar and acquisition strategies. IKEA will position itself as an upscale discount store whose prices are just above the lowest prices. It will offer trendy, posh, eco-friendly furniture to achieve this upscale brand image. IKEA will differentiate itself in the market through product differentiation. Its product will be affordable but high quality. The material finishing will entail aesthetically appealing patterns and designs. IKEA must also abandon its low-cost strategy and adopt the best-cost strategy to achieve these objectives and sustain a competitive advantage in the market. The marketing team will monitor and evaluate this plan through established KPIs to ensure its effectiveness and efficiency.

Company Overview

IKEA is one of the leading companies in the home improvement industry. The company offers well-designed home furnishing products at low prices to appeal to a diverse customer base (Al-Zghool, 2020). IKEA typically uses the franchise system to internationalize and expand its services to foreign markets. IKEA has 433 stores, 1,800 suppliers, and 210 000 employees across 50 countries (Al-Zghool, 2020). In 2019, it generated sales worth $41.3 billion, making it the 39th brand worldwide (Al-Zghool, 2020). The company’s vision is to create a better life for its customers and everyone impacted by its business operations. Its mission is to offer diverse, well-designed, and affordable home furnishing products to allow many people to afford them. This marketing plan is designed to help IKEA expand its business operations in China.

Marketing Audit

SWOT Analysis

Strengths

IKEA has a strong global brand image. This reputation can help IKEA attract new customers in China. Additionally, the company’s innovative and functional designs give it the competency it needs to compete in the Chinese market (Al-Zghool, 2020). IKEA also has a strong international experience, a large automated distribution network, strong supplier relationships, and strong sustainability efforts (Al-Zghool, 2020). The low-cost strategy and economies of scale help the company achieve a competitive edge and excellent profit margins.

Weaknesses

The company’s consistent demands for lower prices for high-quality products are weakening its relationships with suppliers (Fenton, n.d.). This situation indicates a poor balance between quality and costs at IKEA. Other weaknesses include complicated furniture assembly processes and high assembly and delivery prices (Al-Zghool, 2020). According to Al-Zghool (2020), many Chinese customers prefer to have their furniture assembled for them. This preference forced IKEA to charge installation and delivery services. These prices are considered high for the Chinese market. Furthermore, IKEA has poor visibility in remote areas, and its promotion and marketing strategies are not strong enough to increase its presence in these areas (Al-Zghool, 2020). IKEA needs to increase its visibility in various remote areas in China.

Opportunities

IKEA can improve its market visibility by strengthening its marketing activities. The company can also create a platform to train customers to assemble furniture. Due to the global demand for greener products and services, IKEA’s sustainability efforts present massive business opportunities (Al-Zghool, 2020). There is also a high demand for low-cost products in China. IKEA’s cost strategy can help the business appeal to new customer segments (Al-Zghool, 2020). Due to advanced technological systems in China, there are also various opportunities to venture into R &D and innovation. The middle class in China is increasing, and as the country’s GDP grows, consumers’ purchasing power is also increasing (Al-Zghool, 2020 & Silverstein, 2013). This economic growth opens up new markets for IKEA. Furthermore, IKEA’s growth strategy aims to move into middle-sized cities. These circumstances provide new market opportunities for IKEA.

Threats

There are many threats to IKEA in the Chinese market. These include increased competition, trade barriers, product substitutes, the lack of differentiation, a change in customers’ taste, and a damaged reputation resulting from quality issues (Al-Zghool, 2020). The Chinese government favors domestic firms hence, might create trade barriers for IKEA. Online merchants providing similar products in China are also gradually increasing and might intensify market competition. Also, fake IKEA stores selling counterfeit products are emerging in China (Fenton, n.d.). These imitators threaten IKEA, given that the laws protecting intellectual rights in China are weak.

PESTEL Analysis

Political	○ Chinese policies are unfriendly or hostile to foreign brands. The government creates barriers that help support local or domestic firms at the expense of foreign firms (Al-Zghool, 2020). ○ Stable/unstable political relationship with neighboring countries affects the business. For example, the China-Taiwan relationship- China claims Taiwan is part of the country. IKEA has been harshly criticized for indicating that Taiwan is an independent country.
Economic	○ GDP is growing. The country had a 6.6% annual growth in 2018 ○ The growth of the middle class and the rise of disposable income due to the country’s economic growth (Silverstein, 2013). ○ Exchange rate: 1yuan=0.12 eur. Exchange rate fluctuations affect IKEA’s revenues.
Social	o Living standards in China are improving o China supports the adoption of western culture in China o The Chinese Mianzi culture, i.e., preoccupation with feelings of self-worth, prestige, and honor that an individual feel in social settings or circles. According to Wu (2020), the Chinese value their Mianzi and would want to present beautiful furniture to their guests. This culture presents opportunities for a profitable furniture business in the country. o Citizens are environmentally conscious.
Technological	o Increased use of e-commerce systems and mobile Apps in China o A high demand for online services and interactive platforms o Growing trend of smart homes o The development of payment and distribution systems
Environmental	o o Demand for sustainable business practices o o Demand for a green supply chain o IKEA uses local Chinese resources. The locals are environmentally conscious. Hence, IKEA must consider its carbon emissions, waste disposal practices, recycling behaviors, and other green issues.
Legal	o The lack of strong copyright laws makes it easy for local manufacturers to use the company’s catalog as a cookbook for fake IKEA products (Fenton, n.d). o Legislation differences between the West and China can create legal problems for IKEA. o The unwillingness of local authorities to support the firm o Corruption. o Legal restrictions related to using chemicals in home furnishings and furniture.

Financial and marketing Objectives

Financial Objectives

Increase IKEA’s revenues by 25% in the Chinese market in the next three years through online sales.
Increase the company’s profit margin by 25% in three years through cost optimization.

Marketing Objectives

Increase IKEA’s brand awareness in remote areas in China, evidenced by a 20% rise in social media and 15% brand recognition in the target population.
Improve consumers’ satisfaction rates by 25% in the next three years, measured by customer surveys.
Increase consumer acquisition and retention by 30% in the next three years, measured by the number of new registered customers and repeated purchases.

Marketing strategies

STP analysis

Segmentation

IKEA’s target market consists of the middle-class living in China. The market segmentation theory assumes that each market segment has different needs. To better understand the target market’s needs, IKEA should segment middle-class consumers into five categories: demographic, behavioral/psychographic, geographic, and product-related groups.

The relevant demographic variables are age, income level, family size/marital status, education level, and occupation. A study by Xiaolei et al. (2014) found that age, income, family size, and educational level significantly influence consumers’ decisions to purchase furniture. Gender was not statistically significant. Therefore, IKEA will target the middle class of all genders living in China. The company will also target well-educated, 25-54-year-old working-class individuals as this is the prime working age in China. Also, Xiaolei et al. (2014) indicates that this age group is the one most interested in home furniture in China.

The target market’s behavioral and psychographic characteristics are also relevant. According to Wu (2020), due to the Mianzi culture, the Chinese middle-class aspire to elevated lifestyles and comfort. Therefore, IKEA will create posh and stylish products for this customer segment to meet their psychographic needs.

Lastly, product-related factors also affect consumers’ purchase intentions. Xiaolei et al. (2014) surveyed customers’ kitchen furniture preferences in China. Of the eight product features used in the research, the authors found that eco-friendliness was the most important to customers followed by price. (Xiaolei et al., 2014). Regardless of income and demographic characteristics, products price and its environmental quality significantly influenced customers’ purchase intention.

Targeting

The marketing analysis showed that IKEA needs to increase its visibility in middle-sized cities and remote areas. The company will target the middle-class living in middle-sized cities and rural areas by offering customized and environmentally friendly products. Because IKEA is already one of the leading firms in China, it should seek to differentiate itself from its competitors through product differentiation. Tanwar (2013) indicates that the best way to match the demand side (characteristics of the market segment) with the supply side (product strategy) is by combining product differentiation and marketing segmentation strategies. For this reason, IKEA will target the middle class by offering unique products widely valued by these customers.

Positioning

IKEA will position itself as an upscale discount store whose prices are just above the lowest prices. It will offer trendy, posh, eco-friendly furniture to achieve this upscale brand image. Unlike other stores, IKEA will sell trendy and up-to-date stylish furniture at a low price. Xiaolei et al. (2014) indicated that price was the second most important factor influencing customer purchase intention. However, the customers were willing to pay premium prices for environmentally certified wood products and high-quality furniture materials, e.g., resistance to abrasion, weather resistance, easy-to-clean, and high-strength furniture (Xiaolei et al., 2014). This study indicates that Chinese customers look for value for money. Therefore, IKEA should position itself as an eco-friendly firm, offering affordable, trendy, posh furniture to the Chinese market.

Marketing Mix Decisions

Product

IKEA’s products are functional, stylish, affordable, and high quality. IKEA will adopt furniture with modern aesthetics and avoid those with country or classical European styles. Xiaolei et al.’s (2014) study found that furniture with modern aesthetics was the most popular among Chinese consumers, while country and classical European styles were the least popular. Furniture countertops will have artificial quartz, stainless steel, or marble material, as these are customers’ preferences (Xiaolei et al., 2014). Table and bed furniture will have rustic designs and natural finishing. IKEA’s material finishing will be high quality and entail esthetic appealing patterns and designs.

IKEA will differentiate itself from competitors by offering wooden-only furniture. Xiaolei et al. (2014) reveal that Chinese consumers are willing to pay premium prices for solid wood furniture. Apart from wood furniture, IKEA will offer custom-made furniture. Lihra et al. (2012) investigated the value consumers of household furniture place on customization when buying furniture. The study found that price was the most important factor, followed by product customization, the time needed to customize the products, and delivery time (Lihra et al., 2012). To this end, IKEA should offer furniture customization but not at the expense of product price. It should also reduce customization and delivery time to improve customer satisfaction.

Price

IKEA pursues a competitive advantage by offering lower prices to its customers. However, this cost strategy will not give IKEA a sustainable competitive advantage because market competitors typically compete on price (Tanwar, 2013). IKEA should consider a value-based pricing or best-cost strategy for a more sustained competitive advantage. The best cost strategy involves offering customers the best value at a low price.

For this strategy to be successful, IKEA will need to control the costs of its business operations tightly. These cost-control efforts must be consistent. IKEA must also strive for sustained and preferential access to cheap capital, e.g., raw materials, labor, components, etc. Tanwar (2013) claims that competitors cannot easily imitate a company with these advantages. Also, because the company will be controlling the costs of its business operations, IKEA can still offer its customers the best value at relatively low prices.

Promotion

IKEA has three promotion goals: to increase brand awareness in rural and middle-sized cities in China, persuade customers to buy their products and develop relationships with customers and suppliers. According to the classical conditioning theory, repetitive promotional campaigns can help customers retain the brand’s memory and promotion message (Gerber, 2011). A marketing campaign is the best way to help customers retain brand memory and promotion message as it involves sending a promotional message centered on a single theme.

IKEA will create an online marketing campaign targeting the Chinese middle class. Gerber (2011) indicated that emotional content accentuates the effects of advertisements. Therefore, the marketing campaign must incorporate emotional and lifestyle appeals to strengthen its effects on customers. The Ads must also emphasize the company’s sustainable business practices because environmental quality is the product feature customers value the most. IKEA can focus on showing customers how their products are green, how their manufacturing & distribution align with sustainability and the initiatives it has undertaken to improve the environment of local communities. The Ads must also incorporate sales promotion to emphasize the low-cost product features. Since the company aims to expand through online channels, the promotional message should be delivered via online banners on websites, blogs, or social media platforms common among the middle class.

Direct marketing involves profiling customers and creating highly-targeted and personalized messages. This highly interactive strategy can help IKEA tap into the behavioral/psychographic characteristics of the middle-class Chinese market. The interactive marketing will share catalogs and consumer reviews detailing the hedonic experiences of using IKEA’s products. This direct marketing aims to persuade the target audience or make them desire the product. To summarize, IKEA will promote its products through direct marketing, advertisements, and digital marketing.

Place

IKEA aims to enter markets in rural areas and middle-sized cities in China. There are approximately 654 middle-sized cities in China. Silverstein (2013) indicates that a company must be in at least 550 urban cities to reach 80% of the middle class in China. The cities with the largest population are Zhengzhou, Fuzhou, Daqing, Changshu, Wuxi, Dongguan, and Tianjin. For example, Wuxi alone has 2.3 million people, and 572,000 are middle-class (Silverstein, 2013). These cities have 6.9 million people and 1.5 million middle-class customers (Silverstein, 2013). Given their population, IKEA will start from these cities before expanding to rural areas.

Market Expansion

IKEA can expand its geographical market through acquisition strategies. According to Thompson (2018), one of the quickest ways to expand one’s geographical coverage is through acquiring rival firms in desired locations. If undesirable geographical overlap exists, the acquisition will help reduce costs by removing duplicate facilities. In cases where acquisition is impossible or undesirable, IKEA should pursue aggressive strategic moves to achieve a competitive advantage (Thompson, 2018). These offensive moves include being a first mover by introducing next-generation products or pursuing production innovation to create new markets and draw sales from rivals.

Through brick-and-mortar strategies, IKEA can expand into new markets (Thompson, 2018). The brick-and-mortar strategy involves operating an online and retail store. All IKEA needs is a web store to display its products and systems to file and deliver customers’ orders. The company can use retail stores or distribution centers personnel to fill and ship customer orders (Thompson, 2018). Once customers have made purchases, the products are shipped to nearby stores or customers’ homes. This strategy is economical because it cuts wholesaler and retailer costs, making it ideal for IKEA’s new best-cost strategy (Thompson, 2018). Also, it provides current and potential customers with new ways of purchasing, resolving customer disputes and service problems, finding product information, etc. IKEA can reach many rural and middle-sized cities through these brick-and-mortar strategies.

Organization, Implementation, Control, and evaluation process

Organization

This marketing will be executed by a dedicated marketing team located at IKEA China. The marketing manager will lead the plan’s implementation and will be responsible for executing the strategies outlined herein. The marketing manager will also conduct the monitoring and evaluation process of the above marketing strategies.

Implementation

Implementation will involve establishing the workflows, activities, and tasks for team members to follow to achieve the marketing plan’s objectives. The marketing manager can use the Gantt chart to document the activities to be completed within a scheduled timeframe. The project activities for this marketing plan include advertising campaigns, sales promotions, monitoring & evaluation, and partnerships with other firms. The team will liaise with other departments, such as the supply chain and product development & design departments, to ensure all marketing tasks and activities align with the business’ goal and vision. The marketing manager will assign the tasks and oversee their execution.

Control & Evaluation

The marketing team will monitor and evaluate the performance of the market plan against established KPIs (key performance indicators). The marketing team will use customer surveys, sales, financial indicators, market share data, brand awareness surveys, and other quantitative measures to measure the impact of the marketing plan and make necessary adjustments.

The first step will be to assess market factors, the current situation, and marketing goals and strategies. The marketing team will consider these factors while establishing the marketing performance indicators. The executives will determine the range of tolerance values and use internal and external data to measure actual values. These executives will compare the actual values versus the targeted values. Based on the results, the team will either prepare new goals or an improvement plan to eliminate deviations or change performance indicators. The following flowchart summarizes the control & evaluation process.

Quantitative forecast of the key performance indicators

Key performance indicators Year 1 to Year 2

Sales increased from ¥20 billion to ¥25 billion, accounting for a 25% increase.
Company revenues increase from ¥22 to ¥27.5 billion, a 25% increase in revenues.
Expenses increased from ¥18 to ¥22.5 billion.
Profits increased from ¥4 to ¥5 billion, a 25% profit increase
The market share in the target segment will increase from 5 to 15%

Key performance indicators for Year 2 to Year 3:

Sales increased from ¥25 to ¥30 billion, accounting for a 20% sales increase.
Company revenues increase from ¥27.5 to ¥33 billion, a 20% revenue increase.
Expenses increased from ¥22.5 to ¥27 billion, a 20% increase in expenses
Profits increased from ¥5 to ¥6 billion, a 20% profit increase
The market share in the target segment will increase from 15 to 30%

Key performance Indicators	Year 1	Year 2	Year 3
Sales	¥20 billion	¥25 billion	¥30 billion
Revenue	¥22 billion	¥27.5 billion	¥33 billion
Expenses	¥18 billion	¥22.5 billion	¥27 billion
Profit	¥4 billion	¥5 billion	¥6 billion
Market share	5%	6%	7%

Reference List

Al-Zghool, M., 2020. An evaluation of IKEA’s global position and marketing standing. https://www.researchgate.net/profile/Mohammed-Alzghool/publication/346059671_An_evaluation_of_IKEA’s_global_position_and_marketing_standing/links/5fb94628458515b7975d11a8/An-evaluation-of-IKEAs-global-position-and-marketing-standing.pdf

Fenton, E. IKEA in China. Academia https://www.academia.edu/download/33386134/IKEA_Business_in_China_Emma_Fenton.pdf

Gerber, A. S., Gimpel, J. G., Green, D. P., & Shaw, D. R. (2011). How large and long-lasting are the persuasive effects of televised campaign ads? Results from a randomized field experiment. American Political Science Review, 105(1), 135-150.

Silverstein, M.J. (2013). China’s Smaller Cities Are Home to Growing Middle Class. [online] Harvard Business Review. Available at: https://hbr.org/2013/01/chinas-smaller-cities-are-home [Accessed 2 Apr. 2023].

Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management, 15(1), pp.11-17. https://www.researchgate.net/profile/John-Yanney/post/What-is-best-research-instrument-to-measure-porters-strategy-of-differentiation-cost/attachment/59d6438579197b807799ef67/AS%3A443993927491586%401482867809983/download/PGS+2.pdf

Thompson, A.A., 2018. Strategy: Core concepts and analytical approaches. Burr Ridge, Illinois: McGraw-Hill Inc.

Wu, Y., 2020, February. The marketing strategies of IKEA in China using tools of PESTEL, Five Forces Model and SWOT analysis. In International Academic Conference on Frontiers in Social Sciences and Management Innovation (IAFSM 2019) (pp. 348-355). Atlantis Press. https://www.atlantis-press.com/article/125934515.pdf

Xiaolei, Cui, Shen Jun, and Liu Bing. “Customer preferences for kitchen cabinets in China using conjoint analysis.” Journal of Chemical and Pharmaceutical Research 6, no. 2 (2014): 14-22. https://www.jocpr.com/articles/customer-preferences-for-kitchen-cabinets-in-china-using-conjoint-analysis.pdf