IKEA Delivery System Management Essay Sample
The founder of IKEA, Ingvar Kamprad, states that any business has to preserve the history of its creation. Therefore, each IKEA employee in different parts of the world knows the saga about the birth of the company by heart. Its headquarters is located not in a luxurious Stockholm, but in a small Almhult, where the first furniture pavilion was opened in 1953. The historical heritage for IKEA is an integral part of corporate culture and business philosophy success. At present, the IKEA Group, which is presented in more than 30 countries of the world, is a large company that specializes in furniture production and home decoration. Being the world’s leader in the furniture production with the successful organizational structure and a number of advantages, the delivery system that started to be developed since April 2015 is IKEA’s weakness.
IKEA made revolution in the sphere of furniture consumption: it created the idle time and elegant design available to the broad masses, as well as started forming the culture of decoration of houses for mass buyers. Due to IKEA, people, who did not think of grace and comfort earlier, as it was expensive and non-affordable, had an opportunity to feel these benefits in their own houses. IKEA made contribution to the development of the furniture style: the Swedes opposed a soft, pastoral Scandinavian modernism to a severe European modernism of the 1960s, and it quickly won popularity. The furniture of IKEA combined the functionality and rationalism. Moreover, the accompanying production, such as vases, lamps, picture frames, rugs, and ware have become very popular and brought good revenues (Lief, 2008).
By the end of the 20th century – the beginning of the 21st century the experts stated the existence of the global IKEA-mania, commitment of millions of people to the Swedish brand, turned into the boundless fanaticism. Some IKEA fans spend nearly all free time in IKEA shops, filling each corner of their houses with the production of this company. IKEA became a cult brand and the fanaticism generated by it turned into a subject of business studies. Moreover, IKEA is known for its Swedish names of goods. All names represent the Swedish toponyms – place names, such as rivers, cities, and villages.
The idea of the Swedish company to offer a complete concept of the arrangement of the dwelling, such as furniture and various accessories, including design advices, was ingenious. The inexpensive furniture was sold also by others, but IKEA offered all range of goods for a house in one huge store (more than 10 thousand product names presented in the form of attractive expositions). The company is guided by various tastes and “purses”: there is a three-level system of prices and one-third of its production is annually updated. The phenomenal success of IKEA is inseparably linked with the identity of its founder. Kamprad taught others to see things through the eyes of a buyer; he inhaled the spirit, which still moves the huge empire forward. Kamprad officially retired, but he still meticulously takes part in the activities of IKEA.
IKEA Organizational Culture
IKEA is one of the most striking examples of the company with a strong organizational culture. The company tries not only to introduce such values as self-criticism, modesty, a permanent self-development at the corporate level, but also to inform consumers about them. The formation of an organizational culture is a long and difficult process, which takes place in several stages. Those stages of culture creation, their contents and chronology are defined by the context of the development of each separate company.
The management of the global company holds the opinion that preservation and development of IKEA’s strong organizational culture are key factors providing the success of the company’s concept at the present day and in the future. For this reason, each new employee who comes to the company “plunges” into the culture of IKEA for several days. Apart from the rights and duties, as well as introduction to safety measures, an employee becomes acquainted with traditions, mission, and values of the company. He also learns about IKEA’s activities directed at environmental protection as well as discovers his new responsibilities in order to take part in the solution of environmental issues. For example, an employee can be responsible for sorting garbage or saving electricity and water during work.
The IKEA culture was established in the process of development and formation of the company under the influence of the strong personality of its founder, Ingvar Kamprad. The first stage of culture development is interrelated with definition of the company’s mission: valuable orientations, internal morals and philosophy, determination of the main basic values. Both real and declared values belong to this stage. At this stage, it is important to inform the staff of the company that they are carriers of this culture. IKEA’s employees work for the sake of improvement of the standard of living of society. Therefore, they like to work for IKEA. They believe that their work helps to improve the world. Their business philosophy based on democratization process is embodied in the company’s main slogan: “To change the everyday life of many people for the better”. The culture of IKEA is based on such values as simplicity, modesty, and control of expenses. The top managers of the company never fly in the business class and do not stay in expensive hotels. The IKEA Catalogue is the most known marketing channel. This catalogue is prepared in IKEA’s PR Department in Almhult. The IKEA’s website, publications, brochures, advertisements in mass media and public relations are among the other important marketing channels (CIPS, 2013).
IKEA Delivery System
IKEA is the company-distributor of the goods of housing and furniture in Sweden. It is engaged in production, delivery and sale in the retail shops or by post orders. The company does not have its own production, but it uses over 1800 various subcontractors and suppliers from all over the world and all continents, shipping production at the wholesale base for the subsequent sale. After receiving the order, the production is taken from the warehouse, prepared, marked, checked and transported to the loading zone. Identification is carried out by means of laser tracking and the shaped codes system. In addition, IKEA has the function of a traffic control of the arriving freights, including purchases and contacts with suppliers concerning planning, deliveries of goods, daily acceptance of motor transport, turns of containers and motor transport and, if necessary, management of external warehouses (CIPS, 2013).
The question of transport is very important for IKEA as this company is dependent on transportations and deliveries. IKEA faces a complexity of transport networks and variety of negative impacts on the environment. It is easy to understand why the reduction of negative impacts on the environment from transport is one of the fundamental goals of this large retailer. The top management of the company realizes that its opportunities for the reduction of the ecological pollution connected with transport are not boundless. Moreover, the company depends on the transport agencies, which, in their turn, are also limited to the existing transport infrastructure, alternative sources of fuel, etc. In this sphere, IKEA builds collaborative relationships to move the whole system of production to the necessary direction.
Despite the great number of advantages the company has, its main disadvantage was presented by the absence of delivery system. The company used the third party, a transport company, for the delivery of its goods. Thus, its customers had to wait for the delivery of their goods for a certain period of time. Moreover, such transport companies could not deliver the IKEA goods to some further cities and provinces. This fact did not allow some people living in remote small places to make all desirable purchases of the IKEA goods. Besides, the majority of the transport companies added 15-20% to the IKEA bill for their services (Lief, 2008).
According to the researches of IKEA, more than 90% of its buyers use delivery service. At the same time, many IKEA customers found inconvenient the need to order the delivery of furniture directly next day after the purchase. Since April 1, 2015, the company has started to improve the quality of customer service, creating the new system of delivery of its furniture and other household appliances. New approach allows reducing the time, which a customer spends on the purchase of furniture. Besides, the new system also simplifies the purchase process in general.
The new delivery system works only upon the purchase of furniture and household appliances. The introduction of new system assumes the storage of the production assortment and household appliances not in a warehouse store, but in an external warehouse. Thus, the delivery is carried out directly from it. Owing to such approach, the IKEA customers should not expect the delivery of goods from a warehouse of the IKEA store, and wait in a queue to pay at the cash desk; the purchase can be paid directly in the department. Besides, at present, a buyer can choose any convenient date of delivery of the bought furniture and appliances for seven days. The storage of the purchased goods before the date of delivery is free.
- Order Processing: The amount of time it takes for us to prepare your order for shipping. This typically takes 1 – 2 days however, some orders may ship within as few as 4 hours and some may take up to 5 days;
- Transit Time: The amount of time it takes your order to leave our distribution center and arrive at the local delivery center (IKEA, 2015).
The customers can use the method of self-delivery to obtain the ordered furniture and household appliances from the shop, but only at certain time, which depends on the time of purchase:
- At payment until 2 p.m. – the same day after 22.00 or next day before closing of the shop;
- At payment after 2 p.m. – the next day during shop hours.
If a customer also buys the other IKEA goods except furniture, he or she can use self-delivery service after the purchase or include them into the store delivery (Lief, 2008).
The Marketing Strategy of IKEA
The production of a cheap qualitative furniture of a simple design and the accompanying goods composes the main competitive advantage of IKEA. The low prices remain due to the lack of such services as credit or furniture assembly. IKEA orders furniture only where it can be produced cheaply. The company independently develops the design of furniture and establishes control over certain kinds of suppliers’ activity. The furniture is projected according to the standard sizes of wood raw materials. Moreover, much attention is paid to the amount of packing and convenience of warehousing. IKEA is a large and experienced developer, which invests into the construction of the largest hypermarkets. This retailer uses a new method of production and distribution of furniture. It includes the production of separate elements, followed by the design of the trade organization, and assembly of furniture by a consumer.
There are three main competitive advantages of IKEA:
- Decision-making. The decision has been always made by the founder of IKEA;
- Long-term cooperation. The company has concluded many long-term contracts, being able to plan the future development;
- The application of new technologies and innovations. For example, the technology of wood-processing was changed, leading to the decrease of production price and low retail prices.
The strategy realized by IKEA should be referred to the group of strategies of creation and deduction of competitive advantages. In particular, it is the strategy of expenses minimization (strategy of leadership in expenses). Thus, the distinctive feature of this approach is the fact that a low cost does not mean a poor quality. In IKEA, all furniture is of high quality and low price. Unsuprisingly, these factors have such a strong impact on the company’s success.
The main elements of the successful IKEA’s strategy include:
- Self-service model: it makes a buyer easily understand everything without assistance;
- A low cost of furniture;
- Special conveniences to customers: convenient working hours; kindergarten situated directly in the store; an opportunity to use the tools for goods delivery simplification;
- No dependence on suppliers;
- Low costs of production, transportation, and materials.
Locating its stores in the country and saving on the rent, IKEA keeps low prices. In each shop, there is a room of a mother and a child, which is very convenient for women with children; after all, 60% of buyers visiting IKEA are women. The company’s stores are built as a labyrinth: there is one road passing through all departments from an entrance to an exit; it is the marketing invention of the company. Besides, the unique corporate spirit is also a competitive advantage of IKEA, which seeks to avoid stamps and look more original than its competitors (Lief, 2008).
IKEA skillfully and unostentatiously forces a buyer to spend more time in its stores. It turns a usual shopping into the pleasant pastime. It is possible to leave children on a playground; graceful expositions inspire and stimulate a customer; the broad passes exclude a crush of visitors. It is possible to take rest in cozy cafes. Self-confidence is a key element of new marketing of the IKEA Group. The top management of the company is attracted by didactic ideas, openly proclaiming themselves generators of genuine values. IKEA is a strong brand, which possesses the same self-confidence as traditions, but gives a new direction to its customers. An old marketing was guided by those who knew what they want; new marketing helps to make a choice.
It is impossible to estimate any fact or phenomenon of IKEA as only a part of the marketing strategy. There is an impression that everything is very closely interconnected. Agreeing to call the things by the IKEA names, its customers become the preachers of the IKEA’s ideas. However, the most important principle of this company is the fact that buyers should be active, but not passive consumers of goods. There is the theory according to which IKEA influences the relations of sexes because it helps men to satisfy the instincts of hunters and collectors in the modern world of equal opportunities. Women are ready to follow men in IKEA and to drag them there for satisfaction of the male instincts. The bases of the IKEA brand lie much deeper than it can seem at first sight.
SWOT-Analysis of IKEA
- IKEA is a well-known world brand, attracting the key demographic groups of customers;
- The business model of IKEA is unique due to its structure and application by the number of the existing competitors;
- The company is aimed at the production of the innovative, but functional goods;
- Despite the big number of departments, IKEA’s employees possess the knowledge in the definite key areas, helping to obtain the full information on the project.
IKEA has all possibilities to be present at the global international level and compete with the world famous corporations.
- IKEA’s marketing strategy is based on low prices, but the company does not pay enough attention to the work with the returning customers. It develops a special loyalty program for the customers buying wholesale for a long time;
- There is no well-developed mechanism of e-commerce of the company. IKEA should compete in the innovative electronic world.
Within the frameworks of the growing competitive advantage, the retail competitors start to copy the model of a low cost of furniture, which will influence the stability of IKEA.
Conclusion and Recommendations
The main goal of this coursework was to cover the delivery system of IKEA. However, except the delivery system, the paper also covered such main points as organizational structure of the company, its marketing strategy and SWOT-analysis of IKEA. The main idea of IKEA’s founders consists in changing everyday life of many people to the best advantage, offering a wide range of convenient and functional goods for a house arrangement. Therefore, the production of the company always combines reasonable prices and modern design. IKEA is the world’s leader in production of furniture and home decoration.
IKEA is the company, which has maintained an individual corporate style for a long time, highly appreciating it. For long years of the leading position in the market, the style of IKEA was fixed in the consciousness of consumers and became recognized almost by everyone. Therefore, at the entry into the other national markets, IKEA tries to change as little as possible. Moreover, both IKEA and its consumers always benefit from such changes. The creative design of IKEA is recognized around the world as a standard of the Scandinavian style, which is distinguished by simple and pure lines, light and saturated colors and natural materials. IKEA offers the complete concept of the arrangement of a house space to a customer. Besides comfortable furniture, it sells everything that is necessary for creation of a fully fledged interior: flowers in pots, frames for photos, wares, candles, chandeliers, curtains, bed linen, toys, and many other things. The company is guided by various tastes and “purses” (the three-level system of the prices), annually updating one-third of the production.
IKEA should grow and develop not only its assortment and design, but also delivery system. The mission of the company is to improve the everyday life of people. The company should expand its possibilities and services in order to remain the leading one in the competitive marketing environment. Among the recommendations for IKEA, it is possible to single out the following points. The top management of IKEA should take the necessary measures for the implementation of its delivery system, which will increase a range of potential customers; the company should pay more attention to the location of its stores and make an emphasis on the opening of stores in the provinces. Thus, the marketing strategy of IKEA is defined as “a soft compulsion”. It reveals that the company turns the usual shopping into a pleasant leisure time and gently forces its customers to spend more money. The secret of IKEA is simple – the managers and designers look at the goods through the eyes of customers.
Why not to check your price right now?
Get a price quote