Case Study Ikea
1. What factors account for the success of IKEA?
IKEA’s success was attributed to a number of core competency factors such as its strong brand image, having a well-defined target market, its cost cutting corporate culture which led to flat-packaging of its products, developing good working relationships with its suppliers, creating a “partnership” relationship with consumers and proper understanding of its consumers’ behavior.
IKEA was able to deliver superior customer value based on the above factors which led to customer retention and hence loyalty, which is a long term goal for any business to survive effectively in a dynamic economic environment. IKEA’s brand image has created a value proposition in its market as a low cost furniture retailer with its own niche Scandinavian design which was its point-of-difference that separated it from its competitors. Its brand also created significant barriers to entry as it is very difficult to duplicate its business model.
In terms of income segmentation, IKEA had a well-defined target market, i.e. the price-conscious consumer or those with limited resources, which enabled it to plan its product line and pricing strategies successfully. Insofar as psychographic segmentation was concerned, its customers tended to be strivers who were trendy and fun loving people: they favored stylish products that emulated the purchases of those with greater material wealth (Kotler & Keller, 2012). With this well-defined target market, IKEA was able to execute its product and price strategy which enabled it to offer tasteful furniture at low prices.
Cost-effectiveness was a major contributing factor to IKEA’s success. By being cost-effective and efficient, IKEA was able to work in tandem with their manufacturers and produce a product that was functional, durable and affordable for their target market, i.e. the price sensitive consumer, low to middle income, who want
IKEA’s success was attributed to a number of core competency factors such as its strong brand image, having a well-defined target market, its cost cutting corporate culture which led to flat-packaging of its products, developing good working relationships with its suppliers, creating a “partnership” relationship with consumers and proper understanding of its consumers’ behavior.
IKEA was able to deliver superior customer value based on the above factors which led to customer retention and hence loyalty, which is a long term goal for any business to survive effectively in a dynamic economic environment. IKEA’s brand image has created a value proposition in its market as a low cost furniture retailer with its own niche Scandinavian design which was its point-of-difference that separated it from its competitors. Its brand also created significant barriers to entry as it is very difficult to duplicate its business model.
In terms of income segmentation, IKEA had a well-defined target market, i.e. the price-conscious consumer or those with limited resources, which enabled it to plan its product line and pricing strategies successfully. Insofar as psychographic segmentation was concerned, its customers tended to be strivers who were trendy and fun loving people: they favored stylish products that emulated the purchases of those with greater material wealth (Kotler & Keller, 2012). With this well-defined target market, IKEA was able to execute its product and price strategy which enabled it to offer tasteful furniture at low prices.
Cost-effectiveness was a major contributing factor to IKEA’s success. By being cost-effective and efficient, IKEA was able to work in tandem with their manufacturers and produce a product that was functional, durable and affordable for their target market, i.e. the price sensitive consumer, low to middle income, who want
References: Kotler, P. & Keller, K.L. (2012). Marketing Management. New Jersey, NJ: Pearson Education Inc. How the Disposal Sofa Conquered America, (Dec. 1, 2002), John Leland, New York Times