This paper compares and contrasts your company IKEA to Walmart and Target. All three of these companies sell furniture at low prices and are considered mega-stores. IKEA has been in existence longer than Walmart (since 1926) and specializes solely in furniture (whereas Walmart is a super-store that sells virtually everything). Target is the oldest company, getting its start in 1902—but like Walmart it sells much more than just furniture. All three stores are giant retailers and each offers something special to the public. This paper will show how IKEA’s best appeal to the public is when it comes to purchasing furniture for smalls spaces, such as rooms or offices, while Target and Walmart both have their own appeal to the public—namely, quality offerings and cheap prices respectively. This paper will also show how IKEA differentiates itself from its competitors and why this is important.

By distinguishing itself from its competitors by way of its approach to personnel and its ability to make and market furniture, IKEA has been able to carve out a substantial portion of the market for itself. However, its retail competitors have their own appeal to consumers and provide them with one-stop shopping outlets, cheap prices, and considerable options.

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Personnel

When it comes to personnel—the public face of the company (the people who work the cash registers and stock the shelves and greet the customers—IKEA is in a stronger position that its two retail competitors, simply by the fact that it pays its workers at the register more than either Walmart or Target do (Glass Door, 2017). This is one of the factors that sets IKEA apart from its competitors: it incentivizes its workers, provides them benefits that create a culture of good will within the workplace, and establish a rapport that is then passed on to the consumer. At the other two retail giants, the worker is considered less highly and that same attitude is then reflected in the manner in which the consumer is viewed. IKEA’s personnel are committed because IKEA is clearly committed to them and that commitment starts with high wages.

Shopping

Walmart is located in 15 countries around the world and serves more than 200 million consumers per day on average. It offers many different types of products (not just furniture) and has an excellent return policy that allows shoppers up to 3 months after purchase to return an item; plus Walmart has a no receipt return policy that allows consumers to essentially shop worry free (Karbastera, 2016). However, because it does not specialize in furniture products, IKEA has a leg up on the competition: it does specialize in furniture products—so for consumers who want only to go out and purchase furniture, IKEA is the company that comes to mind. IKEA’s prices are also very competitive because the products it sells require installation—i.e., the consumer must put the furniture together. Yet, knowing consumer needs is what IKEA does best and for this reason, the company also offers a “wide area of delivery of their products” so that shopping can be easier (Karbastera, 2016). IKEA’s return policy is also as good as Walmart’s in that it allows up to 3 months from the day of purchase for returns. IKEA also has far more scale than Walmart, as it operates in 41 different countries around the world (Loeb, 2012). In short, its footprint is enormous. Target by contrasts operates only in the U.S. and is not a global corporation, though it did attempt to expand its franchise across Canada—though it did not do well in that initiative because it did not bother to study and understand the Canadian character and culture before “charging in” (Pearson, 2015). So when compared to Target and Walmart, IKEA’s scale of operation is much larger: it is truly a global company with stores in many several countries.

Penetration

As Pearson (2015) points out, IKEA’s success across the world has come primarily because it has taken the time to understand and appeal to its consumers. For instance, when IKEA first entered into the American market in 1985, it stocked bed frames that were too small for what American consumers were used to. The company had failed to do its homework. The frames did not sell, and IKEA needed to understand why. In examining the American character and culture and asking questions about what Americans wanted and how they lived their lives, IKEA could better develop a sense of its consumer base, re-orient its products to appeal to that base, and begin selling more effectively and efficiently. In other words, the company learned from its early mistakes and incorporated into its business plan a policy of studying the culture and people of the country where it opened its stores so that its consumers could be happy with the possibilities afforded them. So when IKEA opened in China, it studied the character and habits of the Chinese and developed products that accommodated the Chinese lifestyle. In particular, the company examined morning routine habits (and this is something that it does no matter what the country is because morning routines, how quickly someone prepares to get out the door, say a lot about the people and their furniture needs and requirements). It learned how to market, what to sell, and how to be successful in this manner. Compared to IKEA, Target has not effectively learned this lesson yet, as its struggles in Canada showed. Walmart also equally struggled to develop stores in parts of the world that it never fully understood or was willing to adapt to (Rao, 2014). It failed miserably in Germany and did not connect with consumers in other parts of the world either. IKEA has been far more successful than these two retailers in adapting to the needs and cultures of various nations on the planet.

Pricing

While all three retailers attempt to be competitive with pricing, IKEA’s own approach is based on profit through volume. Its stores are massively huge—like the size of football stadiums. Because of this approach, the company can afford to work with suppliers at lower prices and pass the savings on to consumers. As other companies raise prices, IKEA actually works to lower prices and in 2014, it reduced product pricing by 1% (Pearson, 2015). IKEA also cuts shipping costs by manufacturing in regions where it sells—as in China, for instance, where it can afford to sell products for much cheaper than it would do so in America. Target, on the other hand, has hard far less success in its pricing approach. It failed in Canada because it did not understand how to price effectively. It bumped on prices in the Canadian market without realizing that Canadian shoppers could easily see that American Target stores sold the same goods at a lower price. Walmart was beating Target on pricing—at least in Canada—as well. In Germany, Walmart was overwhelmed and forced to raise prices on basic food items—mainly because the company was trying to underprice its competition and the German courts ruled that Walmart could not do this (Pearson, 2015). IKEA has managed to work within legal frameworks, work with local producers and manufacturers, and create a self-sustaining model that has allowed it to flourish.

Branding

IKEA is also in control of its own products, as everything it sells is IKEA brand. Walmart sells many different brands, as does Target, so neither firm is really in complete control of its products. IKEA, however, is in total control of its products: it handles everything from manufacturing to distribution. This in turn allows IKEA to determine where items will be made, how to hand the supply chain, and how to address demand issues. Walmart and Target have much less flexibility when it comes to these issues: they must work with various producers and distributors. Target suffered from losing its U.S. distribution network when it sought to expand into Canada. Target’s lack of control, for instance, resulted in the company stocking Toronto hockey gear in its Windsor stores (Windsor is right next door to Detroit—so everyone there is a Red Wings fan, not a Maple Leafs fan). Errors such as this have also been experienced by Walmart, which sought to sell American brand products to its German consumers—who had no interest in such things. Instead of working hand in hand with the Germans, Walmart created tension by its impulsive and haphazard management moves (Pearson, 2015). While IKEA has not been perfect in everything it does—too few parking spaces at its South Korea store was an issue that needed to be fixed—it has managed its brand most effectively and stayed in total control of everything it does (Pearson, 2015).

Conclusion

IKEA is a global company that specializes in selling furniture which consumers are able to buy at low prices because they assemble it themselves. Walmart and Target are retail competitors who also sell furniture. Of the three, IKEA is the largest with a truly global footprint. Walmart is second largest, though its expansion efforts have not always been successful. Target is still U.S.-bound, but attempted to expand into Canada. IKEA’s ability to control products, manufacturing, and branding, while giving workers higher wages and more incentive to stay with the company, is what sets it apart from its competitors.

 

 

References

Glass Door. (2017). Retrieved from

http://www.glassdoor.com/Salary/IKEA-Salaries-E3957.htm

Loeb, W. (2012). IKEA is a world-wide wonder. Retrieved from

https://www.forbes.com/sites/walterloeb/2012/12/05/ikea-is-a-world-wide-wonder/#426ce3d127b9

Karbastera, K. (2016). Walmart and IKEA. Retrieved from

http://216108.edicypages.com/blog/walmart-and-ikea-which-is-better

Pearson, B. (2015). Re-assembly required: What Target, Walmart could learn from

IKEA’s expansion. Forbes. Retrieved from https://www.forbes.com/sites/bryanpearson/2015/03/27/re-assembly-required-what-target-walmart-could-learn-from-ikeas-expansion/#7841339a4693

Rao, A. (2014). Wal-Mart in Africa. ICMR.

http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/BSTR428.htm