IKEA Case Essay

1. ) thither atomic number 18 three main concomitantor outs that account for IKEAs success in the furniture retailing industry (a) its unique, Scandinavian originations, (b) its growth strategy, and (c) its cost efficiency. a. IKEAs simple, yet unique designs are undoubtedly a critical factor in its success as a furniture retailing telephoner. In its early years, IKEAs cost-focused strategy led to its manufacturing of low-priced furniture that was practicable at best, ugly at worst (4). However, over the last decade, the company has deliberately focused on creating crossings with a to a greater extent distinct design aesthetic.Today, consumers appreciate IKEA furniture for its both its availableity and appeal, rather than solely for its functionality. Ingvar Kamprad, the companys founder, first introduced furniture into the IKEA ware range in 1947. He solicited local anesthetic Scandinavian manufacturers in the forests close to his basis to design and build the furniture. The account statement of Scandinavian influence on IKEAs convergences and its company gloss was a major factor in its success. b. IKEAs innovative hyaloplasm fruit strategy was also critical in the companys success.Its product-development growth 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 use 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 indoors all(prenominal) 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 IKEAs product lineup, because there was a separate matrix for each type of product the company sold. The matrix product strategy was truly successful and has generated massive amounts of revenue for the company. c. IKEAs cost efficiency political platform 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, dig up and storage costs, and it enabled the company to adulterate lower prices to consumers.IKEA estimated that its transport volume was sextuplet times less than if it shipped its products assembled (4). Like Wal-Mart, IKEA emphasized cost efficiency in its company culture. Employees were encouraged to save on electricity by spell off lights and idle computers, and managers always traveled coach and took buses instead of taxis if manageable (3). The company focused on cost-efficiency in engineering its products as well. IKEA wish to use high-quality materials on furniture surfaces that were high-stress and overt and low-quality materials on surfaces that were low-stress and less visibl e to the consumer.These cost-cutting measures definitely helped IKEA become successful. 2. ) I imagine IKEAs slogan little price with meaning perfectly parallels its product strategy and product range. The matrix development system seems to a fault simple, but it has been proven to work. Of course, there are sure to be some discrepancies regarding the competitions prices, but IKEAs product strategy and matrix system does a good business of targeting potential market opportunities as well as pinpointing areas of improvement and gaps in its product range.Overall, I look at 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 buying probably wont last very long. Some of IKEAs products have been known to retort apart after only a few years or during a simple move 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 wreaks IKEA unique and what enables the company to charge its low prices. The final downside to shopping at IKEA is the low ratio of gross revenue reps to customers. Ironically, the companys vision statement proclaims that IKEA wishes to establish a compact with its customers. On a global scale, IKEA has created a league with its customers through interchange appealing yet affordable products. But on a littler scale, and more than specifically, within individual IKEA outlets, the company has failed its mission.Its strategy of having consumers purchase products (most probable without the help of a gross revenue rep) and then immediately drive home to assemble them creates a clear disconnect between the company and its customers. Manufacturing functional furniture does not create relationships, it drives profits, and if IKEA truly wants to establish a partnership with each of its customers ( piece 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 arrest 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 typical outlet consumes 15,000 to 35,000 square meters. IKEA could create more brand consciousness 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 growth plan of opening fifty stores in the United States by 2013. Many furniture retailers have far more than fifty stores 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 communication more with its consumers about who its suppliers are, what its working conditions are like, etc. , because Americans value honourable companies and transparency. We want to buy products from a company we can trust. 6. ) I arrogatet think IKEA needs to change a lot with regards to its product strategy in order 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 m atrix 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 go forth continue to work and help the company identify gaps in its product line.