Low Pricing Strategy

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Executive Summary

The IKEA Group, one of the world’s top furniture retailers, has emerged as the fastest-growing furniture retailer in the US. To become one of the leading furniture retailers in such huge and promising market, it has set an ambitious goal to have 50 stores around the US by 2013. IKEA has 4 branches in Los Angeles alone. From 1997 to 2001, the revenues of IKEA doubled from $66 million to $1.27 billion in five years. Looking at the growth rate over the past decade, it seems possible for IKEA to reach this goal. However, IKEA faced several challenges: American’s mind-set, competition from established furniture retailer and different customer’s preference. To address to these challenges, IKEA needs to apply market leader strategy expanding total market size, defending and developing its market share to achieve this goal.

IKEA Brand: lasting advantage

One of IKEA’s lasting advantages is its brand. To many consumers, IKEA means low-priced furniture, Scandinavian design and style, shopping convenience. IKEA’s cheap furniture does not make consumers feel cheap but rather beautiful, convenient and well-designed. IKEA has a unique shopping culture that makes consumers feel a “real Scandinavian design and style” when they shop. Thus, brand awareness gives IKEA a great power in the US market. However, IKEA’s motto is “low price with meaning”. “With meaning” for US market is different from the other markets. If IKEA can not capture what US customers want, its offerings will become “low price and no meaning”. IKEA already listens to US customers’ needs but it should focus more on local market point of view.

Challenges in America

- Reluctance to change furniture: mind set of Americans
Americans typically have the mind-set that furniture should last a life time, which is not in-line with IKEA’s value that does not include durability in its products. Thus to increase market share in America, IKEA must change the American’s attitude towards...
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