Ikea Case Study

IKEA, the famous Sweden furniture retailer, opened its first store in United States in 1985. After ten years diligent practice on advertising and adjusting its products to fit the U.S. furniture market, IKEA were admitted by the U.S. customers and its sales began to increase. It ranked fourteen in 2002.

America furniture market was highly fragmented. It consisted of many low-end and high-end retailers. Low-end retailers, e.g. Walmart, offer low price but poor designs and services. High-end retailers, e.g. Ethan Allen, provide high quality products and services with high price. IKEA’s competitors are more low-end rather than high-end retailers. IKEA’s strengths are affordable price with fascinated design, cheaper and easier transportation for products, customer involvement from product selection to final assembly, and amenities such as Scandinavian Cafй and Childcare Center within stores. IKEA, however, is also weak on poor product longevity, increased self-service assembly burden and limited selection style.

IKEA’s objective was to have 50 stores in operation in United States by 2013, i.e. taking more furniture market share in U.S. Following its objective, IKEA had 14 stores in 2002 and currently has 26 stores in 2006 (closer to its objective). That makes it being the fastest growing furniture retailer. IKEA is planning to open another eight stores next year. If IKEA continue its development pace, its expansion objective is financially sound.

In order to achieve the expansion objective, IKEA needs to continue its strategy of low price but not-cheap design. Product/Price Matrix helps IKEA locate its target price. Global selection for manufacturers through competition helps cost efficiency.

IKEA transports its products using the flat packages, which only costs about 1/6 of the usual transportation expense. With the increasing oil price, the saving on transportation becomes more significant. Flat packaging also decreases the inventory space, therefore, saving the cost and lowering the final price. Low price does not necessarily mean cheap design. IKEA has built up a system of internal competition to select qualified designs.

The other way is to enlarge customer groups and differentiate products. IKEA describe its customers as the sort of persons who like trying new products. They are usually young people. To enlarge its customer groups, IKEA could design some classical (or traditional) as well as durable products to attract old people. Furthermore, IKEA focuses on the home furniture at present. IKEA could design more styles of office furniture to attract the buyers from companies.

Another option is to provide