Success of Ikea

Topics: Product management, Marketing, Price Pages: 4 (1262 words) Published: February 19, 2013
What factors account for the success of IKEA?
Ikea’s Success can be attributed to many factors, but can be classified into two broad categories: product differentiation and cost leadership.
Product Differentiation

Ikea’s simple yet elegant yet elegant Scandanavian designs reflect solid consumer awareness, as its designs resonated well with the consumer.
Cost Leadership
In our opinion, IKEA’s cost leadership was the strongest contributor to its success. Its MORE FOR LESS positioning strategy appealed both to consumers and itself. Through innovative cost cutting methods, IKEA differentiated itself successfully from its competitiors (Ethan Allen, Thomasville, or Jordan’s Furniture), who compete heavily on selection, with numerous product types boasting substyles, which lead to huge inventories, on top of offering delivery and set up services to consumer homes. The most significant cost innovation involved outsourcing significant cost drivers directly to the customer, culminating in its Flatpack model of flat packaging and final assembly by the customer. _

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?

The company’s product strategy is that of overall cost leadership under Porter’s Four, targeting a broad target at lower cost. Constantly trying to lower their production and distributive costs, they can afford to partake in below-market pricing as shown by their target of pricing products up to 50% lower than competitors. Their product range is extensive, appealing to a large variety of people. With their top management constantly looking out for new priorities in relation to consumer trends, they not only remain modern but remain very practical in usage.

There are many advantages to using the matrix approach. This includes identifying gaps in the company’s product lines to identify and target new market opportunities. Having a matrix for each product type...
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