Ikea Harvard Business School Case
Invades America International Business Management case no. 2 1. What factors account for success of Ikea? * Positioning in the “Scandinavian” – style niche , putting simplicity, design, space –efficiency and low-price in the core of IKEA’s business * “Experience shopping” – creating a unique experience to customers that makes it fun to spend time in one outlet the whole day and enjoy it; including childcare centre, restaurants they created an entertaining, restful and rejoicing centre, like Disnayland park for grown-ups. Also an experience as putting the furniture together and spending time with family and teaching kids how to do it -;gt;turning disadvantage into advantage * Identifying customers * Price- and design- sensitive customers; appeals to students and young people who rent apartments and like to change their surroundings (design) * Cost-efficiency that includes:Suppliers management: organizing competition between suppliers for the orders based on price and basic details of the products * Designer internal competitiveness – getting the freelancers to compete altogether with staff designers to come up with the best mix of design, price and materials * Transferring costs to customers: do-it-yourself, no after-sale service and just basic customer advice provided at the store , saves costs * Reducing transportation costs thanks to smart product design (flat boxes) * Corporate culture focused on reducing waste Mixing high quality for the exterior and low quality for the interior materials * Global supplying extended to developing countries to benefit from low prices as well as ability to coordinate parts assembled in different places * Marketing strategy * that managed to promote the Swedish simple and space-effective style expanding the niche to a mass market; * Ad campaigns that managed to hange customers habits turning the weakness of IKEA furniture (low durability) into advantage: “don’t get attached to your furniture, you can always change it to better one”* Adjusting to market needs of customers (sizes in the US) * Charges extra if customers want shipment or want the staff to put it together : The case of IKEA Taiwan * Making is impossible to copy their style because of the Scandinavian heritage * Taking advantage of the existing market gap between low-end not appealing furniture and high-end, very expensive, full-service providers in the US to introduce the IKEA solutions. .
Despite its success, there are many downsides to shopping at IKEA? What are some of these downsides? * Low durability of IKEA products * Issue of outlet distance: Although the stores are huge and serve a lot of customers, this is designed to make the customer to do the measurements beforehand and not have to drive to IKEA back and forth, whereas a lot of customers like to choose the design first and than take measurements.Then the distance and the cost associated may discourage some customers from going to IKEA stores * The furniture is not tailor-made, it’s only offered in 3-4 sizes and cannot be adjusted to specific needs (what local stores can) * Minimum customer service (not many store advisors, no after-sale service, etc. ) * Self-service when shopping: May not be efficient to less confident customers * Making customers put the furniture together themselves may not appeal to or busy customers * Providing only Scandinavian style products only All lines are similar and do not provide uniqueness, bases on mass-production (in Europe) * BUT: in Asia it proves that you have a unique taste3. How do you think of the company’s product strategy and product range? To achieve the kind of growth that IKEA is hoping for, should the company change its product strategy? We believe that the product strategy IKEA is pursuing is really good and they should keep up with the good work. They have chosen a very wide customer base that allows them to maximize revenues, they adapted cost-efficiency very well and their marketing strategy is just lawless (especially managing to change customers’ habits is impressive). They managed to create a fashion for IKEA, so that every young couple, student goes straight to IKEA when they want to furnish their old or new apartment or just change something about their surroundings for fun.
The product range they created is well-suited for their target customer and adapting more to local market or moving more up-scale might cause dilution of brand. They already managed to adjust their style to American customers’ tastes, so this won’t be an issue.The only suggestion we would give, if IKEA wanted to grow, is to create another brand for high-end customers (like Toyota did introducing Lexus), and adjust to higher expectations of this kind of customers like providing free transportation, tailor-adjustments and putting the furniture together at customers place for them. Yet they should still keep their Scandinavian design.
This way they could take advantage of higher prices, broader market and still take advantage of their cost-effectiveness to some extent.