IKEA INVADES AMERICA
1. What factors account for the success of IKEA?
IKEA successful growth in the home furnishing retail market can be attributed to many different philosophies. The are several success factors that helped IKEA to succeed in the furniture market. The most important are cost efficiency, product strategy, and Scandinavian designs. One of the factors in the IKEA's achievement in cost efficiency plan is its flat packaging. In 1956 IKEA begins testing flat packages for tables and legs. This obvious initiative created more storage space, more items capable to be shipped, reduced labor costs, and less reported damages. For costumers this meant a lower priced product with ...view middle of the document...
Once product priorities became set up, a product developer used the "matrix" to set the target retail prices. The matrix consisted of three basic price ranges and four basic styles. This matrix set benchmarks of its own price point 30% to 50% lower than those of competitors. Each type of goods had its own matrix and this allow the company to recognize product gaps within the lineup. Also, IKEA encouraged suppliers and designers to compete for the contracts to decrease costs and get a border variety of designs to choose from. This seemingly elementary product strategy implemented by IKEA stores has confirmed to present enormous amounts of revenue due to its high level success.
Finally, IKEA's Scandinavian designs are simple but unique. In the early years their designs were useful at best, ugly at worst. Now, due to a deliberate focus on adapting a more design aesthetic , customers started appreciating IKEAâs furniture for the appeal instead of its functionality. The overall success of the company comes from its strategy to produce attractive yet simplistic designs that are made from inexpensive yet reasonably well-constructed components.
2. What do you think of the companyâs product strategy and product range? Do you agree with the matrix approach described in Figure B of the case?
I think IKEAâs current product strategy is unique, when it comes to their products. Since IKEA utilizes a wide range of products, this is another factor that leads to their success. IKEA's product strategy and product range is designed in a way that easy-to-read and avoids any confusion. Within the price ranges and styles, there are sure to be some inconsistencies, but the matrix performs a good job at showing what is lacking as well as market opportunities. The usage of the matrix allows IKEA to research all potentials inside their market, by product type, price, and this can be executed simultaneously. For IKEA this is a very resourceful move on their part due to offering a product mainly in every category at diverse price ranges. A different and most likely the best aspect of the matrix is that it gives IKEA the ability to recognize any weak points in the companyâs product lineup. If a weak point is discovered in the matrix, then the chances for the market are identified. One of the advantages of the product strategy are clear and easy to understand - increased cost savings that are converted into lower prices for the customer, while still marketing your brand as a stylish choice for home furnishings - "Low Price with Meaning." Another advantage of the product strategy comes from the understanding that is inbuilt among the customer and the manufacturer creating the costs lower due to the fact that they are simplistic, medium quality, convenience designs where assembly is required without exception. IKEA has established the benchmark price point of 30-50% lower than those of its competitors, the matrix can provide an uncomplicated yes or no to the...