1. What factors account for the success of IKEA?
Three factors account for IKEA’s success in the furniture retailing industry: First, their Scandinavian designs are simple but unique. In the past, IKEA’s designs were functional at best, ugly at worst (Moon, 2004). The company had gradually but deliberately adopted a more distinct design aesthetic (Moon, 2004). Second, IKEA is cost efficient. As back as 1956, IKEA began testing flat packages. IKEA designs products so that they can be packed flat and then, customers can assemble the furniture, thus reducing costs. It also creates extra storage space and the capability of shipping more items, while labor costs are reduced and transport damages are avoided (Moon, 2004). Third, their product strategy provides IKEA with a competitive advantage. IKEA has a product strategy council that establishes product priorities and a product developer that uses “the matrix” to set targets for their retail prices, that are usually 30-40% lower than its competitors (Moon, 2004).
2. 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? What is most important about IKEA’s product strategy and product range is their matrix, which is simple enough, yet very useful at creating market opportunities. The matrix also creates a way of accepting or declining a product, manufacturer, or designer, thus cutting costs (Moon, 2004).
3. Despite its success, there are many downsides to shopping at IKEA. What are some of the downsides? IKEA’s vision statement in Figure C of the case describes how the company seeks to build a partnership with its customers. What do you think of the vision statement? Probably the most important downside is the life span of the furniture. When you shop at IKEA, you know that their furniture would not last more than a couple of years (if you are lucky). Another downside is that the customer has to assemble...
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