IKEA sells its products through company owned large scale outlets eliminating the need of dealers or intermediate channels. IKEA also keeps costs down by packing items compactly in flat standardized packages and stacking as much as possible to reduce storage space during and after distribution in the logistics process. Consumers are integrated in the value adding chain as consumers have to transport the product from the stores and assemble it themselves. The cost saved by IKEA is shared with the consumers thus making the product cheaper.
Hip Swedish Designs: IKEA's success also lies in the simple, but striking designs they use. Their furniture is unique, elegant, and appealing. And because all their pieces fit so well together, it has become popular among IKEA’s customers. IKEA’s target markets are young, highly educated white collar customers who had liberal cultural values. This market has fewer cross cultural differences compared to other customer groups and their preferences are not tied to a traditional furniture image. These people are less susceptible to cultural influence on tastes and preferences.
Another factor for its success is availability of wide range of products and styles. Having a wide range of products to choose from appeals to today’s customer. IKEA makes it all available in a single store. Packing items compactly in flat standardized packages enables stacking as many products in the space available in the stores. This makes all the products displayed in the stores easily available to the customers.
IKEA furniture is easy to ship due to its unique flat packages. The furniture is easy to assemble and gives a sense of satisfaction and involvement to the customers.
IKEA stores are family friendly: Customers can drop kids at the play area that is supervised and can shop in peace. Parents who want to keep kids when shopping with them have strollers to carry kids around the stores. The store also carries a wide range of baby and kid’s furniture and furnishings for kid’s room. They also carry a variety of environment friendly toys. The stores also house a family restaurant where customers can have food at really cheap prices that is in line with the company’s brand image. These features prove customers with a complete shopping experience.
IKEA’s “similar product for all markets” concept did not work well in the United States. Some styles were considered too European for American tastes and all products did not match up to the American standards of product sizes. Hence to boost sales, IKEA has redesigned approx. a fifth of its product range to fit into the American market. But at its core, the products still maintained the streamlined and contemporary Scandinavian style. The original concept was still maintained through universally accepted product range with minor local adaptations. Some of the changes that were introduced in the American markets have been replicated in the European markets successfully. Economies of scale are still achieved as the main characteristics of their original formula are still preserved. IKEA is a little more flexible with its original formula and has begun to remix the formula for other markets. The concept “Think Global, act Local” now fits IKEA’s operations as it is now a global marketer. Minor adaptations in the United States to suit the local tastes and preferences do not constitute a defeat in IKEA’s approach.
The “young people of all ages” as IKEA describes share similar features such as knowledge level, preferences and buying habits universally. This allows IKEA to transfer its successful business model in an almost standardized way to its foreign markets. Culture and local customs do not influence “Young people of all ages” as much as the rest of the society. They see themselves as being modern and practical and easily embrace the global trends and fashions promoted by international companies and media. This group of people seeks a wide range of good value products to choose from. Due to lack of time, they would like to have an assortment of products made available in one shop. They are price sensitive and would buy stylish, high quality products that are affordable. They add value by transporting the products to their home and assemble the furniture themselves in order to get a better price. The experience of shopping at IKEA, which includes viewing, evaluating, choosing, pick-up and self-delivery, and self-assembly of furniture is perceived as being modern, creative and more involving compared to other full service stores. This group of people is usually mobile and would like to have lighter and cheaper furniture options. The commonality in features amongst members of this group helps IKEA successfully market standardized products that are contemporary, high quality and yet affordable.
With the convergence of customer’s taste and preferences across the globe, one would like to think IKEA’s international expansion is likely to succeed in all countries. However it depends on how well IKEA is able to adapt to the regional requirements and preferences. International expansion has its own set of challenges. IKEA’s business strategy should take into account the existing cultural differences as well as economic disparity. Due to differences in purchasing power parity, what is perceived as affordable in one country may be considered high price in another. The IKEA concept needs to be slightly modified without having to compromise on their original formula. Sometimes the products need to be changed just to make it functional in a particular country. It will not only be important for them to like the concept but also to be able to afford it and perceive it as good value. Penetration and success seems difficult in countries where culture and traditions are extreme and highly value and is reflected in the choice for furniture.
In societies with anti Western attitudes it may become very difficult for IKEA to establish itself and create and maintain a positive brand image. Cultures that do not believe in self service and assembly will not buy into the concept of IKEA and have a tough time adapting to the same.
To conclude, IKEA can maintain its original formula successfully in many countries with or without any minor adaptation to suit the regional requirements and tastes. However it would not be reasonable to expect that the concept will be accepted and be successful in every country where IKEA cares to establish itself. Completely adapting the product offerings might increase the chances of being globally successful, but that would mean departing from the original concept of IKEA.
