Ikea Invades America Case
Ikea Invades America
1. What factors account for the success of IKEA?
a. Low priced functional furniture, thanks to a strong cost efficiency policy. IKEA’s global sourcing presence and the volumes they trade as the worldwide leader in furniture retail, provide them with economies of scale.
b. Scandinavian innovative and democratic designs.
c. Unique distribution concept, based on self-service, to make the customer save delivery time and money. All their furniture come unassembled in flat packaging, which reduces storage space, labor costs, shipping cost and transportation damages. Thus the company can offer price at least 30% to 50% lower than competition, to people who are willing to assemble their furniture by themselves.
d. IKEA offers a pleasing shopping experience the way they set up their stores and arrange their catalogues, with different themes of bedrooms, kitchens, bathrooms etc. that appeal to customers.
e. Amenities such as playrooms for children and a restaurant that serves Swedish delicacies increase the convenience and the quality of the shopping experience.
2. Discuss the product/service strategy and product range
The product/service strategy is a unique combination of functionality, affordability and form.
This is mainly dependent on the Product/Price matrix which contains 4 basic styles and 3 price ranges. This looks at different competitor’s products and ensures that IKEA sells it at a price point of 30-50 % less than the market price. The manufacturers are selected after establishing a retail price for the product. IKEA closely maintains relationship with suppliers from developing countries and creates a sense of competition among them, ensures that there is some internal competition among the designers as well and chooses to best supplier/design depending on the price, functionality and material to be used. IKEA would closely determine what materials go in to product. For instance, they will make sure to use high quality material
1. What factors account for the success of IKEA?
a. Low priced functional furniture, thanks to a strong cost efficiency policy. IKEA’s global sourcing presence and the volumes they trade as the worldwide leader in furniture retail, provide them with economies of scale.
b. Scandinavian innovative and democratic designs.
c. Unique distribution concept, based on self-service, to make the customer save delivery time and money. All their furniture come unassembled in flat packaging, which reduces storage space, labor costs, shipping cost and transportation damages. Thus the company can offer price at least 30% to 50% lower than competition, to people who are willing to assemble their furniture by themselves.
d. IKEA offers a pleasing shopping experience the way they set up their stores and arrange their catalogues, with different themes of bedrooms, kitchens, bathrooms etc. that appeal to customers.
e. Amenities such as playrooms for children and a restaurant that serves Swedish delicacies increase the convenience and the quality of the shopping experience.
2. Discuss the product/service strategy and product range
The product/service strategy is a unique combination of functionality, affordability and form.
This is mainly dependent on the Product/Price matrix which contains 4 basic styles and 3 price ranges. This looks at different competitor’s products and ensures that IKEA sells it at a price point of 30-50 % less than the market price. The manufacturers are selected after establishing a retail price for the product. IKEA closely maintains relationship with suppliers from developing countries and creates a sense of competition among them, ensures that there is some internal competition among the designers as well and chooses to best supplier/design depending on the price, functionality and material to be used. IKEA would closely determine what materials go in to product. For instance, they will make sure to use high quality material
Cited: Anderson, J., Narus, J., & van Rossum, W. (2006). Customer Value Proposition in Business Markets. Harvard Business Review, 84(3), 90–99. Moore, M., & Heilstein, R. (2009). Positioning: The essence of marketing strategy. [Case study]. Boston, MA: Harvard Business Publishing. Treacy, M., & Wiersema, F. (1993). Customer intimacy and other value disciplines. Harvard Business Review, 71(1), 84–93.