Ikea Specific Advantages

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1. What are IKEA’s firm-specific advantages? Country - specific advantages?

IKEA’s firm and country specific advantages could be the following:

IKEA sells the same furniture all over the world, so IKEA rips huge economies of scale from the size of its stores and the big production runs necessary to stock them. IKEA also offers a low competitive price because of the economies of scale (30% lower than competitors) Exclusive relationship between IKEA and its suppliers, offering modern and exclusive designs for IKEA. Designers also work closely with suppliers, keeping the costs low. Ready-to-assemble kits help to stack products in shelves in order to maintain larger inventories. The cash and carry shopping formula; you can go to the rack directly to collect the product and go home to build it by yourself. Successful use of the word of mouth and the use of catalogues in order to reduce the advertising costs. IKEA has simple and plain staff levels, lowering the fixed costs and giving more freedom to its employees. This management structure also helps making decisions in a faster way.

2. What are the cultural factors that make expansion abroad in retailing difficult? What has made it possible in IKEA’s case?

Ikea has encountered many problems when entering the U.S. market because it had to adapt its products and its shopping style to the American standards. IKEA had to redesign its beds because the American citizens were not buying the European size beds (Beds in America are wider than in Europe). We can see an adaptation to the American shopping culture in the installation of new cash registers to avoid long checkout lines. IKEA also modified store layout to conform American shopping styles, and now has a more generous return policy and next-day delivery service available for the US market.

IKEA also had to create a stable chain supply. IKEA now produces about 45 % of the furniture sold in its American stores locally, in order to reduce the dependence...
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