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What factors account for the success of IKEA?

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Introduction

1. What factors account for the success of IKEA? 1. 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. 2. Scandinavian innovative and democratic designs. 3. 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. 4. 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. 5. 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. ...read more.

Middle

Then, IKEA was good at communicating this value offered to the target customer. They have a ?resonating focus value proposition? (Andersen, Narus & van Rossum, 2006). To deliver this value, the success of IKEA is mostly based on its operational efficiency, since cost leadership is enforced at every level of the organization. But they also ensure that they reach a decent level of the customer intimacy (spending time understanding his typical shopper?s needs and wants in each country) and product leadership (innovating new products that suit these needs and are not yet offered by the competition) as well. (Treacy & Wiersema, 1993). We will focus on IKEA operational efficiency: The flat-packaging makes the company save tons of money in shipping and storing their products, as they refuse to ?pay to ship air?. They pay a close attention to the shape and the size of every product?s shipping pallet to maximize the number of products that can be shipped in a limited amount of space. Consequently, they profit from the discount as the volume of shipped boxes goes up. Customers assemble the furniture themselves, generally pick up their items from the warehouse themselves to bring them home. This self-service organization helps the company keep prices down, which is critical to customers' values. ...read more.

Conclusion

IKEA had room to promote its concept. To do it, IKEA changed the American trend to updating furniture based on lifestyle choices, thanks to award-winning TV Ads. Though, in 2013 IKEA has only 38 stores in operations, which is less than the objective of 50 stores 10 years ago. IKEA could use a more aggressive promotion strategy. IKEA found a way to position the brand as a cost leadership one that gives the customer what they want: ?low price with meaning?. The company stays true to tradeoffs that have been making sense to their positioning so far and make the VP impossible for competitors to copy. 4. Predict what IKEAs VP and product line-up will be 10 years from now. We do not anticipate many changes in their strategy. They will still maintain their current successful VP and tweak it according to the market they decide to get into. Though we expect some adaptations such as: 1. Some product would be even cheaper, thanks to lower shipping costs and innovative materials. 2. The products should follow the fashion trends (shape, color, materials), to become popular, trendy and essential for every householder. 3. Their product-line could be extended to low-value electronic or electronic-oriented widgets (iPhone cover, cords, numerical pictures frame?). 4. Their furniture should be even more innovative and functional, to save space, as the real estate prices go up and price-sensitive people are likely to live in smaller and smaller places. 5. ...read more.

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