April 2, 2012
IKEA: Furniture Retailer to the World
1. By the early 1970s IKEA had established itself as the largest furniture retailer in Sweden. What was the source of its competitive advantage at that time?
IKEA established itself as the largest furniture retailer in Sweden by the early 1970s by reinventing the wheel of furniture manufacturing at that time. Majority of furniture manufacturers in Sweden produced expensive products with designs that were basic or passed down generation to generation, additionally other manufacturers stores where located in downtown congested areas. IKEA’s strategies which consisted of low cost low priced furniture, brave intricate designs, self-assembly, and stores located in open rural areas all contributed to them becoming the largest furniture retailer in Sweden.
2. Why do you think IKEA’s expansion into Europe went so well? Why did the company subsequently stumble in North America? What lessons did IKEA learn from this experience? How is the company now applying these lessons?
Western European furniture markets were largely fragmented and were served by high-costs retailers located in expensive downtown stores and were not always ready for delivery as IKEA furniture was. The European expansion was fast-paced and IKEA’s furniture had lower prices, offered cleaner lines, and their self-service format which gave European customers a new wave of excitement and choice. Several instances caused IKEA to stumble in America, their beds were measured in centimeters and not the king, queen, and twin sizes, their glasses proved too small for Americans liking, and they were shipping overseas and priced in the Kroner which at the time was strengthening against the US dollar, this drove up the pricing of goods in IKEA’s American stores. Additionally the stores were poorly located (on the coasts) and the stores were not large enough to offer the full IKEA experience as its...