IKEA Case Study

Question No. 1

IKEA has taken standardization approach in its markets around the world. The low price strategy with standardized products is followed in every market IKEA enters. Young buyers in search of low cost, stylish and fashionable furniture and household accessories are IKEA's targeted market. For these customers, the firm offers home furnishings that combine good design, functionality and acceptable quality at low prices. According to the firm, low cost is always a priority. This applies to every phase of their activities. IKEA emphasizes several activities to keep its costs low. For example, instead of relying primarily on third party manufacturers, the firm's engineers design low-cost, modular furniture ready for assembly by customers. IKEA also positions its products in domestic settings. Typically, competitors' furniture stores display multiple varieties of a single item in separate rooms, meaning that their customers examine living room sofas in one room, tables in another room, chairs in yet another location, and accessories somewhere else entirely.

In contrast, IKEA's customers can view different furniture combinations (complete with sofas, chairs, tables, and so forth) in a single setting, which eliminates the need for sales associates or decorators to help the customer imagine how a furniture arrangement would look when placed in the customer's home. This approach requires fewer sales personnel, allowing IKEA to keep its costs low. A third practice that helps keep IKEA's costs low is expecting customers to transport their own purchases rather than providing a delivery service.

IKEA adopted a transnational strategy. Indeed, the company uses products standardization but during its global expansion, some products are customized when it is necessary. Despite its decentralized structure, IKEA has strong control of its headquarters. IKEA's strategy internationalization can be defined, through lowering costs of operations and activities, and learning and innovation. Indeed, IKEA try to transfer a strong corporate Swedish culture has all its employees around the world. Moreover, IKEA's strategy is also to adapt its product at foreign market (USA) and decentralized a part of the decision making power. Indeed, local managers in charge of store's management but headquarters still have a strong-decision power. It is important to say that the main IKEA's strategy is to have a flexible approach. This one is possible thanks to the present of its suppliers everywhere in the world, thanks to its fragmented market.

Global Strategic Advantages of IKEA

IKEA has strong brand, which, in the western world is associated with innovative design, giving it “to cross the road for” appeal, and “street creed” which is reinforced by the continual addition of innovative new products designed for the mass market, IKEA (Stolba, p. 87). With a turnover of €23.1M, IKEA has a critical mass of business that is unmatched by any other single organization in the furnishings / home wares sector. This translates into purchasing leverage which, in turn, allows the Company to offer low prices, though in China, as a result of the inherent low retail prices, the product has to be sold as a premium product (Liu, ...