Question 1
The IKEA Company has several advantages that make it a favorite among furniture shoppers in the markets that it is operating. The first advantage is its ability to offer modern designs of furniture at a good value compared to other manufactures. Also, due to the huge sizes of its stores and a huge production team, IKEA can match its competitors on prices while undercutting them on costs by up to 30%. In the German market, for example, IKEA was successful due to their lower prices and the fact that their retailers adopted similar formula in their operations.
Question 2
There are several factors that make expansion abroad in retailing difficulty. These factors include disperse population, cultural diversity and strong domestic competitions. Expansion into markets abroad also presents several challenges such as coming up with the right product that will be accepted in the new market. The IKEA Company has been able to overcome these obstacles by contracting with independent furniture makers and suppliers to design furniture that could be sold as a kit and assembled in the customer’s home. These suppliers and makers also produce innovative modular designs whose components can be mass produced. IKEA was also successful because it ventured early into the Eastern Europe market by building a dedicated supplier network. IKEA’s ability to offer high quality product at lower prices also helped it gain advantage in foreign markets.
Question 3
IKEA came up with a strategy of selling ready to assemble kits that could be stacked conveniently on the racks thus minimizing on space. This strategy re-energized mature markets around the world and changed the competition between these firms. IKEA’s strategy focused on offering high quality product at lower prices, and this has made it gain a competitive advantage among its competitors. Most furniture makers and suppliers are currently trying to adopt this strategy in order for them to match IKEA’s success.
Question 4
The TV advertising strategy by IKEA was an important decision to increase the visibility of the brand of IKEA among the members of the American public. Unlike Europe where they did not need much of advertising, America presented a different challenge that made advertising necessary for them to remain in business. This strategy also helped overcome the barrier of high advertising expenditures that the company might have undergone had it followed other companies. The TV advertising strategy proved more beneficial to IKEA as it helped increase their sales within the U.S. market. They gained more ground in the American market with their total sales moving to over 45% of all furniture sold in America up from 15% just a few years ago.
Question 5
IKEA has been largely successful since it entered into the U.S. market. It is important for a company to maintain its marketing efforts to ensure it remains relevant the American market. It is important to note that they have not yet exhausted the U.S. market, so there is room to expand further. This will be beneficial to the company as it will lead to increased sales and more brand visibility. However, due to the different factors existing in the American market, the company might find it easier to move to other countries at the expense of expanding its presence in America. There is still much more potential for IKEA to succeed in the U.S. but they can also consider moving to other countries withy promising results.
