Current Product New Product

IKEA- illumination Current Market

New Market

Marketing Plan

Product Development

IKEA- illumination will be launched under the established brand name of IKEA and will be a line extension in the form of a new product development growth strategy.

Target Market

Age: 18-42

Gender: Male and female

Income: RM 3,000 +

Social Grade: Socio-economic class: “A & B”

Social status: Upper and Middle class

Heads of household: Male / Female

Occupation: Students, working class, businessmen, professionals.

Marital Status: bachelor, married couples

Geographic: it will be launched only  in  Mutiara Damansara

Psychographics segmentation

Lifestyle: outgoing, high spending pattern, progressive

Personality appearance conscious, bold, colorful

Self-concept educated

Behavioral segmentation

Level of use: it is used on frequent basis either daily or weekly

Occasion of use: usage is not occasional, it is frequent or when need arises

Buying intensity: mostly monthly or quarterly

Competitors

IKEA does not have any direct competitors as far as innovation and creativity is concerned. There are indirect competitors of IKEA namely:

Macy

Teakia

Artilux

Ora-kit

And other small and medium furniture shops

All the competitors cater the niche market as they are working good in the manufacturing but lack innovation and creativity. Therefore the launch of IKEA – illumination will have an enduring competitive edge over all its competitors as this line of product exclusively exhibit creative home accessories.

Market share

Europe (76%) North America (18%)

Asia/Aus/ME (6%)

Marketing Mix

Product:

IKEA – illumination is a product extension of IKEA. The concept of IKEA- illumination focuses on pure creativity and innovation. Most products are related to furniture and home accessories; like lamps, cups, plugs, cloth hangers, tables, chairs, sofas, carpets etc. All these products are innovative and different from each other.

Price

IKEA’s strategy is based on cost leadership.   Across markets where it currently has a presence, products are sold at low prices.   Prices are 30% to 50% lower than competing products. But IKEA – Illumination offers innovative products there for we will use the price premium strategy to grab the market share.

Placement:

IKEA – Illumination will be shelved inside the IKEA store at Mutiara Damansara, with a whole new look

Promotion:

Most of the IKA promotions in Malaysia are done through catalog promotion pages. For IKEA – Illumination we will use aggressive ATL and BTL activities to promote IKEA – Illumination. Innovative print ads and media ads will be used. Beside that creative promotional campaigns will take place in major locations of Malaysia.

Description of Product

IKEA- Illumination offers wide range of stylish, innovative, colorful and trendy home accessories and furniture. The products are categorically designed to provoke young, dynamic and vibrant generation Yers. IKEA – Illumination will give your home an eye catching modern look. IKEA use superior quality raw materials to manufacture its products therefore IKEA – Illumination will be a lethal combination of creativity and durability which is the POD (point of difference) of IKEA – Illumination over its competitors.

IKEA – Illumination will be priced slightly higher than the normal IKEA products and its competitors to achieve the highest market share.

Aggressive advertising will be used to promote IKEA – Illumination by means of newspapers, catalogs, magazines, TV, radio and various creative promotional campaigns.

Distribution of IKEA – Illumination will be done through distribution channel of IKEA and the products will be shelved in IKEA store at Mutiara Damansara.

Industry analysis

Future outlook of Malaysian Economy

2010 will bound to be a very challenging year for Malaysia, although Malaysia’s economy is holding up pretty. The impact on Malaysia this year has somehow been cushioned but many are beginning to feel the economic downturn towards the year-end.

Malaysia has come a long way since the Asian financial crisis in 1997/98. We are different from 10 years ago – economy, corporate and even politically. We learned our lessons during the Asian crisis.

Malaysian banks are deposit-funded and lowly geared. The banks also had sufficient reserves to buffer any credit crunch shocks. Malaysia’s external reserves of US$99.7bil could support 8.1 months of retained imports and 3.7 times short-term external debt. Malaysia had the ability for further pump-priming to stimulate the economy with its current external reserves and account surplus.

It is important that consumers continue to spend. The cycle has to continue to stimulate the economy. Those who can afford it should continue spending as we are facing a serious slowdown next year. However, it is still too early to tell if consumer confidence has been restored.

Inflation would not be a concern in 2009 as soaring inflation is likely to ease next year. Corporate profit forecasts are likely to fall significantly further next year. We should not be too concerned with the 2009 earnings as they are expected to be poor, probably charting low single digit growth. The unemployment rate is expected to remain high as corporate could be downsizing.

On foreign funds inflow, a lot of countries would be competing for the same foreign fund inflows during these times so Malaysia should continue to be competitive and make sure that it had reasons for investors to come in.

Although things are not looking very rosy, there are still opportunities to be tapped during this time of market uncertainty. Investors have to do their homework and understand their risk tolerance level before moving into the market at this time.

Analysis of Industry

Structure of Malaysian Furniture Industry

There are about 2,965 furniture plants in Malaysia, with 2,630 in Peninsular Malaysia, 120 in Sabah and 215 in Sarawak. It is estimated that 70% were small scale plants such as workshops and backyard factories using low level production technology and catering to domestic markets. The remaining 30% were large and medium sized furniture plants which have penetrated the export markets. In terms of ownership, it is estimated that more than 75% of the furniture companies are either wholly or majority Malaysia owned. Generally the Malaysian furniture manufacturers can be categorized into four categories:

Small and medium scale industries established and operating in the furniture village

Small scale industries established and operating outside the furniture villageMedium and Large manufacturing companies-local ownedLarge manufacturing companies-joint venture and foreign owned

Large furniture manufacturing plants are categorized as the plants that have paid-up capital above RM9 million, medium plants are between RM2.5 million to RM9 million while the small plants have paid-up capital below RM2.5 million1.

There are 1,183 Malaysian furniture exporters, 575 were furniture exporters with manufacturing plants, the remaining 608 being trading exporters. Wooden furniture accounts for the majority category, which comprises 87% of these furniture exporters. About 90% of total furniture exports were accounted for by locally owned larger companies and companies with foreign investment. Generally the furniture mills in Peninsular Malaysia are more developed and mostof these mills are located on the West Coast. The highest number of furniture exporters manufacturing plants are in the state of Johor (232), followed by Selangor (171), Perak, (37) and Kedah (27). In Johor, the highest concentration and most productive manufacturing plants are in Muar, while in Selangor they are in the Klang Valley area. The location of furniture establishments in these states are greatly influenced by proximity to the supply, distance to the export exit points, access to labors, and the availability of good infrastructure, supporting industries, and facilities.

Furniture manufacturers composition, comprising medium and large companies with the individual company’s annual sales ranging from RM3 million to RM70 million. The number of workers employed by these plants ranges from 30 to 1,300 workers with 70% of factories employing between 100 to 200 workers. The size of these mills ranges from 1,000 to 130,000 square meters. The majority of these companies have established their business in the export markets.

Malaysian Furniture Market

The United States represents the largest single market for Malaysian furniture. Furniture exports from Malaysia to the United States have been increasing rapidly fromRM82.1 million in 1990 to reach a total of RM837.97 million the United States accounted for 38% of Malaysian furniture exports. The U.S. imports from Malaysia consisted mainly of wooden chairs and miscellaneous wooden furniture, dining tables, and furniture parts.

Japan is the second largest wood furniture importing country after the United States, which accounted for 22% of Malaysian furniture markets in 1994. In 1994, Malaysia controlled 7% of Japanese furniture market, share and ranked seventh after Taiwan, Thailand, the United States, Indonesia, China, and Italy.

Competitor Analysis

IKEA’s competitors can be divided into two broad categories:

Foreign furniture storesMacy’s

2531 Local furniture stores

Furniture manufacturers composition, comprising medium and large companies with the individual company’s annual sales ranging from RM3 million to RM70 million. The number of workers employed by these plants ranges from 30 to 1,300 workers with 70% of factories employing between 100 to 200 workers. The size of these mills ranges from 1,000 to 130,000

square meters. The majority of these companies have established their business in the export markets.

Therefore we can say that IKEA has strong competition in the market, that is why we are launching IKEA- illumination to have an enduring competitive edge on the basis of quality, creativity and price

Customer analysis

Population :25,715,819 (July 2009 est.)

Age structure :0-14 years: 31.4% (male 4,153,621/female 3,914,962)

15-64 years: 63.6% (male 8,210,373/female 8,143,043)- target market 65 years and over: 5% (male 569,245/female 724,575) (2009 est.)

After analyzing the target market, segmentation will be done for the positioning of the product and the consumers with the income level of RM3000+ will be our potential customers.

Projected profit and loss statement IKEA

Executive summary

IKEA is the world’s most successful mass-market retailer, selling Scandinavian-style home furnishings and other house goods in 230 stores in 33 countries and hosting 410 million shoppers per year.  An acronym for founder Ingvar Kamprad and his boyhood home of Elmtaryd, Agunnaryd, IKEA began operating in Sweden in 1943 and continues its original ethos based upon cost obsession fused with design culture. No design, no matter how inspired, finds its way into the catalogue if it cannot be made affordable. With an aim of lowering prices across its entire offering by an average of 2% to 3% each year, its signature feature is the flat packed product that customers assemble at home, thus reducing transportation costs. Yet, unlike some peers, IKEA has sustainability at heart and, through an internal mantra of ‘low price but not at any price’ is a leading example of sustainable innovation and business growth. The company designs its own furniture, which is made by about 1,500 suppliers in more than 50 countries. IKEA was set up in Malaysia in 1999 with its distribution centre being the regional hub for the company's Asia Pacific market to its 16 stores in seven Asia Pacific countries. Malaysia has been chosen for its central geographical position in Asia and it's well developed logistics network and port infrastructure."We found in Malaysia a stable and reliable business and social environment which enables us to focus on our long term expansion goals". Today, IKEA's distribution centre, with a 130,000 pallet storage capacity employs circa 220 co-workers. The key element of the company's logistics network and strategy is to develop its market share in the Asia Pacific in the coming years. IKEA will continue to develop and optimize its logistics hub in Malaysia by implementing Radio-Frequency technology in 2007 to monitor the company's inventory flow and continue to invest in the development of local competence. Malaysia's ethnic diversity and well educated workforce has enabled IKEA to find the suitable manpower to meet the company's human resource requirements. Therefore we have planned to launch IKEA – Illumination in Malaysia .IKEA illumination is a product extension of IKEA which aggressively focuses on modern, creative

and trendy furniture for generation Y. the IKEA illumination concept is based on the market positioning statement. "Turn Life On." focuses on our commitment to product design, innovation and consumer value KEA- Illumination’s marketing communication focusing primarily on printed media which has proven its values and success to the company over the years. Other media now being used to an increasing degree include TV, radio, and internet based communication.