What are the factors for the success of IKEA?
The factors for success of IKEA can be attributed to many different philosophies woven within IKEA. One thing IKEA always focuses on is seeking to balance cost-effective labor with the company’s product quality standards. To save money on labor and production, IKEA constantly is on the lookout for opportunities to build supplier relationships in developing countries. IKEA also made it so all furniture was designed to ship disassembled, and all of the products were transported flat. The flat packaging not only makes it easier for customers to transport furniture home, it also saves the company on shipping. IKEA also focuses on design or the products it sells.
The company’s corporate slogan, “Low price with meaning,” captures their commitment to offering tasteful, cleverly designed products that do not always make the customers feel cheap. The IKEA shopping process has also been referred to as immensely appealing by customers. Upon entry shoppers are gently guided into a predetermined path through model bedrooms, kitchens, living rooms, and bathrooms. The atmosphere is always bright and inviting. IKEA stores include childcare centers and restaurants. All of theses amenities allow the customer to feel more comfortable and contribute to the success of IKEA.
What do you think of the company’s product strategy and product range? Do you agree with the matrix approach described in Figure B of the case?
I agree with the current product strategy being used by IKEA to evaluate its product lineup. I believe this strategy is the cause of IKEA’S wide product range, thus leading to its success. To evaluate the extent of IKEA’s product range in relation to price categories, IKEA uses the Product/Price Matrix, shown in Figure B. Using the Matrix enables IKEA to explore every possible niche within their market, by not only product type, or price, but both simultaneously. This is a very smart move on IKEA’s part because they offer a product in every category, at every different price range (high, medium, or low). The best feature of the matrix is that IKEA is able to identify any gaps in the company’s lineup. If a gap is noticed in the matrix, the market opportunities available are clearly identified. Overall, I feel this is the best possible strategy for IKEA’s products and evaluating the ranges of these products.
Do you think IKEA is being overly optimistic in its growth plans?
I do not believe that IKEA is being too optimistic about its growth plans, considering they are the “fastest growing furniture retailer in the country”. IKEA views having 50 new stores, in the United States by 2013, as a growth opportunity and a chance to increase their market share. Because of this planned future increase, IKEA feels this will be a way for them to “find ways to appeal to a broader public”.
How would you improve IKEA’s value proposition to make it even more attractive to the American consumer?
Consumer preferences are different in America, than in Scandinavia, Europe, and Asia. IKEA must take this into consideration when trying to appeal to the American furniture market. Americans love quality products that are durable, and those are two things that IKEA does not necessarily focus on. IKEA currently gives up quality for low prices. To accommodate the American market, IKEA should focus more on providing products that will last, and not be disposable after a few years of use. Not to say that IKEA shouldn’t still provide its lower prices items, they should just expand their products in terms of quality.
Another aspect that current American retailers offer, that IKEA lacks, is customer service. During a consumers shopping experience at IKEA, there is little interaction between the consumer and IKEA employees. Instead of a do-it-yourself shopping trip, IKEA should focus on having more employees on the floor to assist customers when help is needed.
Do you agree with the idea of IKEA opening “IKEA Lite” stores? Why or why not?
IKEA prides itself on giving their customers a shopping experience when they enter and come to their stores. They want the customers to take their time exploring and comparing the furniture and prices. A smaller store would not fit with the “IKEA Concept,” “IKEA Range,” or “IKEA Shopping Experience.” (www.ikea.com)
What makes IKEA unique is their concept. Their concept consists of selling a wide range of well designed furnishings that all types of people can afford them. A smaller store would go along with IKEA’s concept of reaching more people, but goes against the philosophy of selling the wide range of products.
This wide range is a huge part of what makes IKEA stand out from their competition. Their range includes everything for the home from furniture to practical products all at low prices. IKEA is able to charge the lower prices due to working with the designers. The designers use low cost manufacturing processes and then the products are purchased in large volumes so the price stays down. IKEA’s products are unique and different from other stores since the products are usually designed to be transported in flat packages, and then customers assemble the products in their own homes.
IKEA continues their concept with their stores. The stores have to be large to carry the wide range of products that customers can transport home that day. IKEA wants customers to be comfortable and take their time exploring all the different options of furnishings. This is created by IKEA setting up realistic settings with the different products. This makes the customers involved in the shopping experience where they choose, collect, create their room, transport, and then assemble the merchandise.
While having a smaller store can offer some of IKEA’s great products it wouldn’t be able to provide customers with the same experience the larger stores create. Even if a customer enters the store to purchase one small item like a lamp, they have fun walking the entire store looking at the wide range of products. This tactic also helps IKEA gain more profit since a customer to pick up more items in the sections they pass to get to the lighting area of the store. However, if this same customer was in the smaller store then it wouldn’t offer as much variety, going against the main concept of IKEA, and prevents adding on to the one purchase due to the store lay out (no real-life room set-ups).