Retailing and Value Proposition

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What factors account for the success of IKEA? What is its value proposition to American consumers? IKEA's success in the retail industry is attributed to its product differentiation, and cost leadership. Keeping the cost between manufacturers and customers down was the important factors which contributed to its tremendous success. Costs were kept under control starting at the design level of the value-added chain, by packing items compactly in flat standardized emblazes and stacking as much as possible to reduce storage space during and after distribution in the logistics process. Besides IKEA’s outlets were also designed on strictly self-service theme. In order to maintain low cost customers were required to transport and assemble the products themselves. In addition to these IKEA strategy of offering various amenities including, Swedish cafes and playgrounds for kids also accounted for its success. IKEA’s value proposition “Low price with meaning”, was the key to its market penetration. However in USA, IKEA used a little different approach, while retaining its original value proposition, cost-based tactics such as self service which allowed them to provide the lowest possible price to its consumer, it made some modifications its contemporary "Scandinavian" design products with local minor changes to fit the needs of the American customers. Apart from this it targeted young and urban professionals who were more favorable to change than the traditional conservative Americans. It also approached US market with its unique shopping ambience and differentiated itself from middle-tier furniture stores, low-end warehouse stores and big US retailers.
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