1. What factors account for the success of IKEA? Three factors account for IKEA’s success in the furniture retailing industry: First, their Scandinavian designs are simple but unique. In the past, IKEA’s designs were functional at best, ugly at worst (Moon, 2004). The company had gradually but deliberately adopted a more distinct design aesthetic (Moon, 2004). Second, IKEA is cost efficient. As back as 1956, IKEA began testing flat packages. IKEA designs products so that they can be packed flat and then, customers can assemble the furniture, thus reducing costs.
It also creates extra storage space and the capability of shipping more items, while labor costs are reduced and transport damages are avoided (Moon, 2004). Third, their product strategy provides IKEA with a competitive advantage. IKEA has a product strategy council that establishes product priorities and a product developer that uses “the matrix” to set targets for their retail prices, that are usually 30-40% lower than its competitors (Moon, 2004). 2. 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?
What is most important about IKEA’s product strategy and product range is their matrix, which is simple enough, yet very useful at creating market opportunities. The matrix also creates a way of accepting or declining a product, manufacturer, or designer, thus cutting costs (Moon, 2004). 3. Despite its success, there are many downsides to shopping at IKEA. What are some of the downsides? IKEA’s vision statement in Figure C of the case describes how the company seeks to build a partnership with its customers. What do you think of the vision statement?
Probably the most important downside is the life p of the furniture. When you shop at IKEA, you know that their furniture would not last more than a couple of years (if you are lucky). Another downside is that the customer has to assemble the furniture themselves. IKEA does not offer an assembly service as many other furniture stores and this can be troublesome. As for their vision statement, it seems a little too far out. The company wants to create a long lasting relationship with its customers, but many of them will not come back for more. This is due, as explained above, because the ustomer has to assembly the furniture with the help of instructions that sometimes can be hard to follow for the beginner. The company should implement an assembly team, for those that may need that extra help. 4. IKEA plans to grow in the United States by 50 stores in operation by 2013 which is an indication of how optimistic the company is about the viability of its value proposition in this country. Do you think IKEA is being overly optimistic in its growth plans? How would you improve IKEA’s value proposition to make it even more attractive to Americans? 0 stores by 2013 do not seem to be an overly optimistic number. By opening more stores, the company will be reaching more customers, will be closer to existing ones, and will be in the minds of more people. I would also say that Americans have a long history of purchasing products that last, so placing more attention to durability can help the company. They can also offer more services, better customer service for their stores, and easier to find merchandise (their system may say that a chair is found on section 4, when in reality, the chair is in another section). 5.
To achieve the kind of growth IKEA is hoping for, should the company change its product strategy? If so, in what way (s)? What about its product range–are there limitations to the matrix approach? Should the company expand its product lineup to include a greater number of styles and price points? In what other ways should the company change its product lineup? I believe that their strategy has been working for a while and its core should not be changed. The product matrix does not specifically state what qualifies a product as a high, medium, or low price, there can be percentages applied for the price ranges (Moon, 2004).
Subcategories can be added to the matrix. The company can expand its product lineup to include a greater number of styles and price points, thus providing the company with complete reports to help them gain advantage over their competitors. 6. If you had to predict, what do you think IKEA’s value proposition and product lineup will look like in 10 years? In ten years, their value proposition can encompass more services to buyers after their purchases. They have to keep with new trends in the industry as well as more products for its customers. 7. Some industry observers have suggested IKEA open a umber of smaller, satellite stores across the United States in shopping malls, strip malls, etc. offering a limited range of IKEA products. These IKEA “lite” stores would give the consumers who do not have access the full-size IKEA stores the opportunity to experience the brand. In addition, consumers who live near a full-size IKEA store could use these smaller stores to make minor purchases such as mugs or dishes as opposed to an entire living room. Do you agree with the idea? Why or why not? The idea of opening smaller or satellite stores across the US can help IKEA to reach more customers.
Some customers live in areas where the closes IKEA store is miles away, and these smaller stores can be of great convenience to them and more profits for the company. Some items, as the Ticka alarm clock and clothes hangers (Moon, 2004) are items that are used daily by households and that if offered in more places, the revenues for the company should go up. Both parties will benefit from this idea. 8. Toyota, Nissan, BMW, Honda, and other automobile companies have built manufacturing plants in the United States. IKEA imports all of its furniture from sources outside the United States.
Does IKEA have a responsibility to add the manufacturing of furniture in the United States, assuming its store expansion takes place? IKEA does not have the responsibility to add manufacturing of furniture here in the United States, but it is an idea that will benefit not only the company and its customers (by having lower prices for production and thus, for the final product) but also will generate much needed jobs. 9. People are used to buying furniture that lasts a long time. Do you think it is ethical for IKEA to sell furniture that doesn’t last a long time?
What if the customer of IKEA is not aware of the position IKEA takes that furniture is not forever? Should they make the customer aware that their furniture is not intended to last a long time? I do not believe that it is unethical to sell lower quality products, if the price matches what you are paying for. Most consumers are aware that if they pay low prices, the quality is going to be compromised. IKEA can include on their product instructions a prediction of the life p of it, reducing the risk of being looked as cheap and of bad quality.