IKEA Case Essay

1. ) There ar deuce-ace main factors that narrative for IKEAs success in the article of furniture retailing industry (a) its unique, Scandinavian designs, (b) its harvest-festival strategy, and (c) its cost efficiency. a. IKEAs simple, yet unique designs are undoubtedly a critical factor in its success as a furniture retailing caller-up. In its early years, IKEAs cost-focussed strategy led to its manufacturing of wiped out(p)-priced furniture that was structural at best, ugly at worst (4). However, over the last decade, the connection has deliberately foc usaged on creating harvest-tides with a much distinct design aesthetic.Today, consumers appreciate IKEA furniture for its both its functionality and appeal, rather than totally for its functionality. Ingvar Kamprad, the orders 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 histor y of Scandinavian influence on IKEAs products and its community culture was a major factor in its success. b. IKEAs innovative hyaloplasm product strategy was also critical in the companys success.Its product-development process was overseen by a product-strategy council, which consisted of a group of senior managers who established priorities for IKEAs product lineup (3). After analyzing consumer trends, these priorities were established, and a product developer would purpose the matrix to set the products 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 emulation and set benchmarks of prices 30% to 50% lower than those of its rivals (3).The matrix also used to identify gaps in IKEAs 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 re venue for the company. c. IKEAs cost efficiency pattern was a huge determinant of its success. In 1956, IKEA began designing products so that they could be packaged flat and assembled by customers on their own. This greatly reduced transportation, labor and storage costs, and it enabled the company to charge lower prices to consumers.IKEA estimated that its transport sight was six times less than if it shipped its products assembled (4). Like Wal-Mart, IKEA emphasized cost efficiency in its company culture. Employees were advance to save on electricity by turning off lights and idle computers, and managers always traveled busbar and took buses instead of taxis if possible (3). The company focused on cost-efficiency in engineering its products as thoroughly. IKEA liked to use high-quality materials on furniture surfaces that were high-stress and visible and low-quality materials on surfaces that were low-stress and less visible to the consumer.These cost-cutting measures definit ely helped IKEA become successful. 2. ) I cogitate IKEAs slogan Low price with think abouting perfectly parallels its product strategy and product range. The matrix development system seems overly simple, but it has been proven to work. Of course, there are sure to be approximately discrepancies regarding the competitions prices, but IKEAs product strategy and matrix system does a dear job of targeting potential market opportunities as well as pinpointing areas of changement and gaps in its product range.Overall, I think IKEAs product strategy and its product range are perfectly suited to the companys culture and slogan. The matrix system allows IKEA to deliver to customers the best possible product at low prices. 3. ) There are definitely some downsides to shopping at IKEA. The biggest downside is the realization that the furniture you are purchase probably wont last very long. Some of IKEAs products have been known to drop dead apart after only a few years or during a sim ple roleplay to another apartment. Another glaring downside is the fact that customers must pick-up and assemble their purchases without the help of an IKEA employee.Of course, this is part of what makes IKEA unique and what enables the company to charge its low prices. The final downside to shopping at IKEA is the low ratio of sales reps to customers. Ironically, the companys vision statement proclaims that IKEA wishes to establish a alliance with its customers. On a global scale, IKEA has created a partnership with its customers through selling appealing yet cheap products. But on a smaller scale, and more(prenominal) specifically, within individual IKEA outlets, the company has failed its mission.Its strategy of having consumers purchase products (most likely without the help of a sales rep) and whence immediately drive home to assemble them creates a clear disconnect between the company and its customers. Manufacturing functional furniture does not create relationships, it d rives profits, and if IKEA truly wants to establish a partnership with each of its customers (while creating appealing and affordable furniture), it has to find a way to make consumers feel less disconnected they have to feel as though they are a art of the brand.I believe more sales reps could be a good start to fixing this issue. 4. ) I agree with the concept of mini-IKEA stores. Implementing IKEA Lite shops would expose the brand to a larger and more diverse customer base. IKEA outlets are notorious for being large, cavernous warehouses a characteristic outlet consumes 15,000 to 35,000 square meters. IKEA could create more brand awareness by installing IKEA Lite shops in shopping malls or in large, urban areas where retail space is scarce.Overall, I think its a great concept and would serve the brand well. 5. ) No, IKEA is not being overly optimistic in its growing plan of opening fifty stores in the United States by 2013. Many furniture retailers have cold more than fifty st ores in the United States. Wal-Mart, the leading US furniture retailer, has 4,005 stores in the US, so I think IKEAs goal of fifty stores, while lofty, is perfectly reasonable and would position the company well to gain a greater market presence in North America.I think IKEA could improve its value proposition by providing more after-service support and communicating more with its consumers about who its suppliers are, what its working conditions are like, etc. , because Americans value ethical companies and transparency. We want to buy products from a company we can trust. 6. ) I wear downt think IKEA needs to change a lot with regards to its product strategy in enjoin to accomplish its goal of having 50 stores in the United States by 2013.I think IKEA should make the product matrix more detailed to account for the larger US furniture market. By this, I mean break down the designations of high, medium, and low in the product matrix into specific percentages. Going along with this , the company could add more than four styles to its product matrix to allow for more specificity. I believe if IKEA created more specific price points and furniture styles, the matrix system will continue to work and help the company identify gaps in its product line.