Ikea Case

1.) There are three main factors that account for IKEA’s success in the furniture retailing industry: (a) its unique, Scandinavian designs, (b) its product strategy, and (c) its cost efficiency. a. IKEA’s simple, yet unique designs are undoubtedly a critical factor in its success as a furniture retailing company. In its early years, IKEA’s cost-focused strategy led to its manufacturing of “low-priced furniture [that] was functional at best, ugly at worst” (4). However, over the last decade, the company has deliberately focused on creating products with a more distinct design aesthetic. Today, consumers appreciate IKEA furniture for its both its functionality and appeal, rather than solely for its functionality. Ingvar Kamprad, the company’s founder, first introduced furniture into the IKEA product range in 1947. He solicited local Scandinavian manufacturers in the forests close to his home to design and build the furniture. The history of Scandinavian influence on IKEA’s products and its company culture was a major factor in its success. b. IKEA’s innovative “matrix” product strategy was also critical in the company’s success. Its product-development process was “overseen by a product-strategy council, which consisted of a group of senior managers who established priorities for IKEA’s product lineup” (3). After analyzing consumer trends, these priorities were established, and a product developer would use “the matrix” to set the product’s target retail price. The matrix is a grid that consists of three basic price ranges and four basic styles, and within each price range, the company would survey the competition and set benchmarks of prices 30% to 50% lower than those of its rivals (3). The matrix also used to identify gaps in IKEA’s product lineup, because there was a separate matrix for each type of product the company sold. The “matrix” product strategy was very successful and has generated massive amounts of revenue for the company. c.