Ikea Invades America

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IKEA is the worlds largest furniture retailer (in 2002), with sales approaching 12 billion dollars. They operate in 22 countries and have 154 full service distribution stores. IKEA is a highly differentiated service and product provider, emphasizing high-quality product at the lowest prices via non-traditional positioning strategies. In order to provide these low costs, the product came with virtually no customer service and ‘put it together' and ‘transport yourself' directions. In addition to these "strictly self-service" outlets, IKEA offered various amenities including, Swedish cafes and playgrounds for kids.

IKEA's decision to enter the US market was an easy one, especially with 67 billion dollars a year in sales and highly fragmented market- the top 10 retailers only combined to make up 14% of market share. The issues that come up out of this decision are the factors that could make or break such a wonderful business model. Aggressively, IKEA plans to have 50 stores in the US by the year 2013. Now whether these lofty goals of a foreign company to achieve in the US market, given their international success- mainly in Europe, still remains to be seen. With proper analysis of the case, one can ascertain that IKEA needed to realign their value proposition with this new market segment, just altering their existing and fully functional strategy to fit the needs of the everyday American and to prepare for growth in a very large market. Value propositions define how product and service features as well as complementary services are packaged and offered to fulfill customer needs, the American's needs in this case.

Relevant Facts and Issues

In order to fulfill the American consumers' needs successfully and ultimately achieve their goals of 50 stores in 10 years, one must identify the failures they committed in their first 2 years in the US market and align the needed change with a growth strategy. Michael Porter's core...
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