Ikea Invades America

IKEA has definitely made great strides since coming to America in 1985. The case study points at many areas where idea has made huge impacts on the American furniture retail industry. Looking at Exhibit 1 you can see steady growth in sales, Exhibit 3 shows the United States as the third largest buyer of IKEA’s goods, Exhibit 4 shows the Unites States as having the second most number of IKEA outlets in the world and Exhibit 8 shows them as being 14 in sales in America. Looking around at my friends places there is definitely tons of things bought at IKEA.While all these statistics show a very successful movement into the United States for IKEA I feel that there could be some obstacles IKEA could encounter in the future. As it said in the case study generally IKEA’s products don’t last more than a couple of years and that normally don’t have the endurance to survive a move to a new apartment. With how American’s historically purchase furniture, â€Å" change their spouse as often as their dining room table, about 1. 5 times in a lifetime. † (Moon, 2004), this would seem at odds with the type of product that IKEA offers.The idea that you have to assemble the furniture yourself is something that would seem to turn a large percentage of Americans away from buying an IKEA product. I personally have found some of the things I have bought from IKEA to be very challenging to put together. Another aspect of IKEA is their lack of product depth; it seems that a lack of selection would hurt IKEA in the American market. Outside of these differences in what IKEA has and American tastes there is a lot that IKEA has done very well with in America. IKEA seems to have established itself as the low price leader in the minds of most consumers.As we find ourselves in a time of economic downturn and everybody seems to be trying to save a little here and there that is huge for a retailer. The childcare aspect of the retail outlets is a huge plus to get families to come shopping and buy from you. If you can drop the kids off to play and you end up getting your shopping done in half the time I would have taken if your kids were with you than is a major factor in where you decide to shop. The restaurant in the store is great and the menu items they offer are unique the setting they offer them in.I can remember my parents saying â€Å"let’s go to IKEA and get some Swedish meatballs. † Also the idea that you can walk away with what you bought that day leaves the consumer with a sense of satisfaction that next day delivery doesn’t achieve. Solutions to some of the problems seem to be easily attainable. When looking at the issue of durability you would say that many of their customers don’t go to IKEA to buy a product that lasts generations, so conveying to their customers that they shouldn’t expect to be buying a product that you can hand down to your children would help.The idea that consumers in this generation solve problems by just buying a new product to replace the broken one really helps externally to solve that problem. IKEA could offer an group like â€Å"geek squad† to consumers, for an extra charge, that would bring the product to your home and assemble it could help to attract â€Å"lazy† Americans who don’t want to assemble the furniture themselves. Ultimately the consumers that they market to don’t need any changes to what IKEA does. IKEA provides the experience of buying what is perceived to be a high quality product for an affordable price.It would seem the IKEA experience is something that people line up to do and it seems to be a very successful model for IKEA. I wouldn’t recommend any changes to what IKEA does. Why would you change something that is working so well? Overall IKEA seems to have done a very good job in creating a sector where they can carve out a profit. You are always going to have price conscious consum ers looking for something that looks nice and is affordable and IKEA can offer people that hands down. Ikea Invades America 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 â€Å"the matrix† to set targets for their retail prices, that are usual ly 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 span 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 custom er 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 optimi stic 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 produ ct 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 â€Å"lite† stores would give the consumers who do not have acces s 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 r esponsibility 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 in structions a prediction of the life span of it, reducing the risk of being looked as cheap and of bad quality.