CASE 8 WRITEUP

By group 5 sec B

IKEA invades America: Case Questions

What factors account for the success

of IKEA?
Scandinavian designs, cost efficiency, and product strategy are the reasons for its success:
1 . Scandinavian heritage is showcased beautifully through IKEAs simple yet unique
designs. In the early years, IKEAs designs were functional at best, ugly at worst. Now, due to
a deliberate focus on adapting a more design aesthetic, consumers began appreciating IKEAs
furniture for the appeal instead of its functionality. The Scandinavian culture is something
that cannot be easily copied, as one must be from Scandinavia to fully embrace its aesthetic.
Moreover, IKEA was able to create relationships with local manufacturers in the forests close
to his Scandinavian home. Also, IKEAs Low price with meaning slogan accelerated
consumers to believe these designs were not cheaply made.
2. IKEAs cost efficiency plan is its flat packaging. In 1956, IKEA began testing flat
packaging for tables and legs. This obvious idea created more storage space, more items able
to be shipped, reduced labor costs, and less reported damages. Ultimately, this meant for the
consumers a lower priced product with easy transportation. Additionally, with the Low price
with meaning slogan, consumers were only affirmed in that they were going to receive
trendy furniture at the best possible cost. Another cost-cutting competitive advantage IKEA
executed was having its customers pick up and assemble their own furniture. In order to cut
costs for the consumer even more, IKEA used higher-quality materials for visible surfaces
and lower-quality materials for low-stress, less visible surfaces.
3 . A product-strategy council, consisting of senior managers, established priorities for
IKEAs product lineup. Once product priorities became established, a product developer used
the matrix to set target retail prices. This matrix set benchmarks of prices 30-40% lower
than those of its competitors. This seemingly elementary product strategy implemented by
IKEA has proven to show massive amounts of revenue due to its high level of success.

What do you think of the companys

product strategy and product range?
Do you agree with the matrix approach
(Figure-B in the case)?
The product strategy and product range is laid out in a manner that is easy-to-read and avoids
any confusion. Within the price ranges and styles, there are sure to be some discrepancies, but
the matrix does a good job at pin pointing what is lacking as well as market opportunities.
Since IKEA has established the benchmark price point of 30-50% lower than those of its
competitors, the matrix can provide an uncomplicated yes or no to the product, manufacturer,
or designer.

How would you improve IKEAs value

proposition to make it even more
attractive to American consumers?
To improve IKEAs value proposition and become more attractive to its American consumer
base, it would have to become transparent. American consumers want to know that they are
not only getting a great deal, but that they are purchasing from a company they can trust.
Being transparent with who their suppliers are, where items are sourced, and the labor
conditions of its employees will give IKEA a competitive edge and ultimately lead to an
attractive value proposition for American consumers.

To achieve the kind of growth that IKEA

is hoping for, should the company
change its product strategy? If so, in

what ways?
To achieve the growth of 50 stores by 2013, IKEA should not stray too far from its original
product strategy plan. If too much is altered, misunderstandings and lack of cohesion may
take place within the company. This simple product/price matrix is laid out in a way that
works for IKEA, but minute modifications can be made. Since the product matrix doesnt
specifically state what qualifies a product as a high, medium, or low price, there can be
percentages applied for the price ranges. Similarly, the styles can be broken down into
subcategories to create more specificity. Certain changes, if made, will provide the company
with comprehensive reports on which products are missing in accordance with its
competitors.