Introduction 3
Report on marketing process 3
Definition of Macro and micro environment and the factors that affect IKEA 5
Macro environmental factors 5
Micro environmental factors 8
Application of segmentation, targeting and positioning at IKEA 10
Segmentation 10
Demographic segmentation approach 10
Behavioural segmentation approach 10
Targeting 11
Positioning 12
Conclusion 13
Reference list 14
Introduction
Marketing is an imperative aspect within the operational facet of an organisation. Thus as a tool for generating product or service awareness, it is significant that an organisation invests into proper marketing tools. Hence, from the analysis of IKEA marketing plays a significant role in the organisation. Through the inculcation of marketing, IKEA can make proper situational analysis of its environment of operation, inculcate proper approaches towards maintaining profitable outcomes. From the analysis of IKEA, understanding the micro and macroeconomic environment gives way to a plausible strategy towards meeting the demands of the various customers. Hence, towards sustainable and viable operations, inculcation of marketing tools of segmentation, targeting and analysis of the target market is bound to ensure profitability.
Report on the marketing process
Marketing is defined as the process that businesses communicate the worth of their products or services with the aim of selling them. Thus, from the analysis of diverse pundits, marketing entails product, place, promotion and price aspects of an organisation. From the analysis of IKEA, it is imperative that a plausible marketing process is evident through analysis of the aforesaid facets. Nigel (2012 p39-102) defines marketing as the process of creation, communication, distribution and exchange of the several product or service offerings that generate value to the diverse stakeholders. Hence, Nigel (2012 p39-102) asserts that the marketing process at IKEA Company should comprise of a marketing blend of product, promotion, place and price aspects that denote the operational facet of the organisation. Thus, through the inculcation of a marketing mix approach, the following activities denote the marketing process at IKEA;
- Product/service creation: as the first process within the marketing function, the organization generates products or services that are construed towards meeting the consumer demands within its market of operation. As a global leader in furnishing operations, the company operates in 42 countries; product development is imperative towards sustaining plausible performance. Accordingly, the main operational mandate of the organization is to generate a wide range of products that focus on consumer demand. The company invests highly into well designed and functional residential furnishing products. Since it’s commencing in 1940s, the company has been ion the steadfast approach towards ensuring wide-scale availability of goods and services to the prospective customers.
- Communication/ promotion: Nigel (2012 p39-102) affirms that the communication facet within marketing denotes an information relay through the various mediums to the consumer market. Through communication, the organization obtains feedback in the various avenues in which significant changes could arise. From the evaluation of IKEA, communication forms the most fundamental tool towards generation of awareness and increase in sales. An examination of the company reveals the intensive investment into communication emanates from the proper inculcation of public relations campaign and above the line promotion. The above the line promotion approach focuses on mass marketing through the inculcation of TV advertising. As such, TV and radio advertising focuses on sustaining an intense awareness within the consumer market. The public relations campaign focus on sustaining information access on the diverse products evident. Information relay focuses on ensuring that the customers comprehend the product details within information based aspect.
- Distribution/ place: the organization invests significantly into a plausible infrastructure construed towards ensuring convenience to the consumers in terms of obtaining the goods and services offered. From the aforesaid marketing process, IKEA has a formidable distribution strategy that focuses on ensuring widespread accessibility to products and services. The intensive distribution approach by IKEA focuses towards ensuring convenience buying among the prospective customer market. Through a widespread store location, the company is bound to sustain mutually beneficial outcomes in terms of profitability and generation of utility within the consumer market.
- Exchanging value/ price: the last marketing process entails the organization and its target consumer obtaining value through buying and selling of the goods and services offered. As such, the market penetration pricing approach is evident within the organization. The pricing approach focuses on ensuring that the various products are within a cheaper pricing mandate to sustain extensive sales. Through the extensive transactions between IKEA and its customers in the various stores, sustenance of profitability and utility is bound to prevail.
Definition of Macro and micro-environment and the factors that affect IKEA
Macro environmental factors
Macro environmental factors are defined as the aspects that supersede the organizational control and affect its operations and decision-making processes (Baker, 2010 p30-87). From the analysis of IKEA, the macro environment factors denote the issues or operational functions that it cannot control. Macro environmental factors at IKEA require comprehension for plausible approaches to prevail in tackling the evident factors. Through proper analysis of the macro environment, strategy re-evaluation towards successful operations is bound to prevail at IKEA. The use of PEST analysis that denotes the assessment of the political, economic, social and technological factors is imperative towards the evaluation of the aspects that are beyond the scope of control within the organisation. Thus, the diverse factors that affect IKEA Company through a PEST analysis are as follows;
Political factors
Extensive regulations have become evident within UK. Most fundamentally, the enterprise act 2002 has been inculcated focussed on sustaining a more competitive environment. As such, through the enterprise act, organisations such as IKEA have to operate within a plausible mandate without the use of its position in the industry to crush the other smaller companies. Furthermore, the act has set clear guidelines regarding its investment into mergers.
Economic factors
Firstly, EU has generated an environment in which competition is extensive. Organizations within the retail sector, such as IKEA have evidenced an increased market entry of other businesses within UK. Argos, Ashley and B&Q home furniture and other organizations are clear retail rivals that have set up their operations within UK escalating competition within the market (Bradley 2011 p32-76). Thus, to sustain performance, it is imperative that the company invests into differentiated approaches to maintaining relevance in operations and sustain market reach. Competition is highly imperative since it necessitates plausible outcomes for the consumers in terms of cost effective products and services.
Secondly, from the evaluation of Baker (2010 p30-87) UK has been evidenced by highly information based consumer market. The concept of healthy living, need for comprehension of ethics within the operative mandate of the organization has become aspects of concern within organizations. Furthermore, the growth of internet has led to a market of internet users of above 70% thus calling for a shift in performance within organizations. Information conscious consumers denote a need for proper branding and information relay by organisations. Ensuring that customers receive information on the available products available is bound to nurture trust and sustain customer loyalty.
Social factors
The prospect of convenience buying has become an aspect of concern. As such, customer behaviour within UK has mainly grown towards a more convenient mandate in accessibility to the services evident. Admittedly, the investment into a more convenient approach in goods delivery has become an imperative aspect. Hence, for sustenance of operations it is imperative that IKEA invests in highly plausible operational approach to sustaining convenient buying.
Technological factors
Growth in the telecommunication sector has led to the emergence of online business. Online business, in reference to Baker (2010 p30-87) entails transactions undertaken through the internet. Online business is comprehensive and entails marketing, monetary transactions, communicating, and other aspects being conducted within the internet. Argos, Ashley and so forth are some of the significant retail furniture businesses that have maintained dominance within the online business sector. IKEA has had to venture extensively into the online business construed towards sustaining market reach especially in UK.
Microenvironmental factors
Microenvironment is defined as the issues that are within the organizational control and affect its day to day operations. Microenvironment aspects at IKEA denote the various issues that the company can handle or mitigate effectively. Thus, in the analysis of the company the aspects within the controlling mandate require a more dynamic and instantaneous policy change towards sustainable operations. When we are analysing IKEA’s microenvironment, it is prudent that we consider its main stakeholders as well its internal competencies. In order to employ efficiency, it is prudent IKEA monitors constantly the internal elements as well as competencies adjusting as changes arise.
Internal Environment-Resources
As part of IKEA’s marketing strategy, internal environment plays a key role. There is a need to assess IKEA’s competence as an organization. We can measure competence by focusing on its threshold and core competencies. Threshold entails the essential competencies for an organization to compete in the respective market. Core competencies, on the other hand, dwell on the processes and activities through which resources are utilized or deployed with the sole aim of achieving competitive advantages in a unique manner. In order to fully conceptualize the internal environment resources, it is essential to use the stakeholder analysis:
Customers: As a company IKEA relies on the consumer market that generally comprises of homeowners, business firms and institutions. The customers are not an integral part in the sustainability as without them various strategic developments, nor can the organization profitability be achieved.
Local Communities: IKEA as a global brand owes its progress and growth due to the positive nature of the local communities it interacts with at a global stage. Every IKEA outlet globally owes its good business operations to the nature and cordial relations extended by the host community.
Competitors: IKEA as a discount furniture retailer faces positive competition from other local and global furniture retailers. The competition is essential in encouraging innovation and business strategy development at IKEA.
Employees: These are the key IKEA stakeholders. IKEA ensures its employees are highly motivated and at the same time well remunerated. The company employs up to date Human Resource principles which ensure its personnel perceive it as a second home and platform to grow professionally.
Local Authorities: IKEA constantly works in line with rules of the localities it operates within globally. The company understands that there is a need to have a healthy relationship with the authorities as it impacts positively on its reputation and its corporate standing.
An organization can mitigate, monitor and handle their micro-environmental issues effectively. Thus, from the examination of IKEA, SWOT and Porter’s five forces analysis is effective towards the examination of the organisation. The inculcation of the SWOT approach entails a scrutiny of the company’s strengths, weaknesses, opportunities and threats. Thus, through the SWOT analysis, the diverse micro-environment factors that impact it include;
Strengths
The company has wide market reach with diverse countries of operation. As such, its operational investment into numerous countries has sustained a more profitable and performing organisation. Furthermore, its investment into the emerging countries such as Brazil, India and china has been significant towards the growth of the organisational profitability.
Weaknesses
The company exudes significant weakness regarding sustenance of customer awareness. As such, the company’s marketing approach has mainly been based on the below the line approach. The below the line approach, as per Nigel, (2012) highly focussed on a given niche of customers thus resulting into a reduction in customer awareness.
Opportunities
Telecommunication growth has led to the emergence of E-business. E-business, which entails online based transactions, has become a source of organizational performance within IKEA. In order to sustain performance and market reach within UK’s over 70% internet users, it has become profoundly important for IKEA to venture into E-business. E-business is bound to ensure that the organisation taps into the growing online market. The online market in UK is high vast thus, an investment into the online platform is bound to necessitate a wider market reach. A wider market reach will ensure an increase in revenue and customer acquisition.
Threats
Extensive investment into cross-cultural competency has become imperative. Admittedly, the international environment has generated a need for an extensive investment into cross-cultural competency. IKEA operates within an environment that is highly metropolitan. Furthermore, the company’s venture into foreign markets has generated a need for cross-cultural competency. Admittedly, within its marketing functions, it has become imperative to develop marketing packages designed for the cultural environments of operation (White 2012 p102-168). Language, value and beliefs, as some of the cultural aspects impeding marketing, have become highly differentiated to sustain profitability in the various markets. Maintaining cross-cultural competency denotes developing products that meet the individual needs of the foreign market. Individuals within the foreign market exude diversity in culture such as their values and so forth. Hence, aligning to the cultural values is bound to generate a plausible income source within the foreign market.
The Porter’s five forces analysis is essential in deconstructing IKEA environment focussing on its business strategy and competition. The five forces are namely threat of new entrants, threat of substitute products, bargaining power of suppliers, customer bargaining power and the intensity of rivalry.
Threat of New Entrants
This threat of new entrants into the industry IKEA finds itself in is very low. This is because the current market is already saturated, and a substantial amount of capital outlay and expertise are required by any new firm to become a global discounted furniture retailer.
Threat of Substitutes
This threat is low. There are not very many services and products that can substitute the demand for home appliances, furniture and another variety of products offered by IKEA.
Bargaining Power of Suppliers
The IKEA suppliers have a low bargaining power as there are many global factories with resources and capabilities that can partner with IKEA. IKEA currently employs strategy of forming long-term pacts with its key suppliers.
Bargaining Power of Customers
The bargaining power of customers is strong. This is due to the fact that the market is competitive, and there is a wide variety for the customers to choose from. The customers can, with ease, seek alternatives from local and global furniture retailers and producers.
Intensity of Rivalry
The rivalry is intense. There are many global discount furniture players such as Galiformplc, Argos, Wal-Mart Stores and others. As much as the rivalry is intense, it is proper to note that IKEA remains the undisputed market leader in the discounted furniture industry on a global scale.
Application of segmentation, targeting and positioning at IKEA
Segmentation
Segmentation, in reference to Baker (2010 p30-87) entails dividing the consumer market based on the diverse or similar consumer behavioural characteristics evidenced. Through segmentation, IKEA manages to identify and analyse the target customer group in regards to making purchase of their goods and services. As such, the segmentation process is highly imperative within IKEA since it can generate is marketing strategy. Thus, from the analysis of IKEA, the segmentation process is within diverse phases:
Firstly, market segmentation focuses on the collection of information on the various significant facets of consumers, products and the prevailing situational variables. The market segmentation aims towards generating the criteria for dividing the customer market through the inculcation of various approaches. Profile denotes determination of the market and the regions to inculcate the demographic methods of age race and so forth. Social economic analyses the income or social class of the population. On the other hand, the behavioural tactic evaluates the individual that purchases what within the diverse instances and the transactional channel viable for use by the customers. Hence, the three facets of demographic behavioural and social economic basis for segmentation are significant for IKEA however, there is need to invest into other approaches to sustain customer acquisition. As the other focus or approach, the company should embark on analysis of the organisational characteristics through generating consistency in information available. Through ensuring plausible information on age, population density and so forth in the market of operation, IKEA can develop extensive information on buyer characteristics. Buyer characteristic denotes analysis of the information pertaining to decision making.
Targeting
On the other hand, the organisation should examine the target markets. Evaluation of the target market at IKEA aims towards analysis of the attractiveness of a given market. Through evaluation of the target markets, IKEA can inculcate four approaches in analysing the target markets. Firstly, the undifferentiated approach focuses on the mass market in IKEA’s performance mandate. The second approach should be the differentiated approach in which diverse segments are evident and apportioned by IKEA within their operational facet. On the other hand, the concentrated or niche approach, as the third strategy at IKEA should aim towards analysis of the few markets in which it can operate. As the culminate approach, IKEA should invest into customized targeting in which it develops individualised products for each market.
Positioning
Positioning entails the organizational alignment in regards to the products and services offered. Positioning entails the means in which goods and services at IKEA can be differentiated from its competitors to develop uniqueness. As such, there are two approaches that IKEA can inculcate:
- Functional denotes the use of information pertaining to the product features, quality and usage. Investment into proper informational relay regarding the products at IKEA should form the performance approach in marketing at IKEA.
- Expressive approach: expressive approach at IKEA should aim towards analysis of the consumer market and proclaiming the advantages of the product by the inculcation of heritage of the organization in relaying information on performance and longevity of the company.
Organizations can align their products as luxury, affordable, quality and affordable and so forth. Through positioning, an organization maintains a facet of marketing its products and services that are distinctive (White 2012 p102-168). Thus, from the examination of IKEA, the company should position its products as quality and affordable. Quality should base on conformity to the health and safety regulations within UK and EU. On the other hand, affordability within IKEA should be construed towards meeting low, middle and high-income consumer market. The inculcation of the affordability approach is highly applicable for the organisation since market dominance emanates from cost effective measures. Positioning of its products in line with the affordability mandate is bound to capture the price conscious consumer market. The gradual growth in the economic scene in UK has led to price conscious consumers at a high rate. Thus, in meeting the needs of the price conscious market, inculcation of the affordability approach will woo widespread consumers into purchasing the organisational products. On the other hand, quality is highly essential towards customer acquisition. Customers within UK demand high quality based products. Ensuring that the products exude quality in regards to use, IKEA will acquire wide customers thus sustaining sales growth. Quality entails intense investment into proper sourcing of products from the diverse suppliers. As such through investment into proper sourcing of suppliers the company is bound to generate proper production of its products. As such, the performance mandate emanating from quality as per Bradley (2011 p67-90) is bound to sustain profitability and viability in operations.
Conclusion
As analysed above, marketing plays a pivotal role towards generation of sales and organisational relevance. IKEA should invest highly into understanding its macro and micro environment. Through comprehension of the macro and micro environment, clarity in regards to the strengths, weaknesses, opportunities and threats is evident. Hence, the organisation comprehending its diverse aspects of the operation, through marketing environment analysis, proper approaches towards targeting, segmenting and positioning is bound to prevail. IKEA, comprehends its facets of macro and micro environment, the company is bound to incorporate proper operational approaches as evident above.
Reference List
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