IKEA 1. What factors account for the success of IKEA?
IKEA was founded in 1943, with an initial purpose of only selling basic household goods and furnishing at discount prices. 60 years later, in fiscal year 2003, the “IKEA group was the worlds top furniture retailer, operating 154 stores in 22 countries and servicing 286 million customers a year”(Moon, 2004). Despite the fact that IKEA has acted upon several smart actions in the past, there are certain factors that can account for their success today. These include their unique Scandinavian design, their low cost products or mentality, their broad segmented market, and their product strategy.
As IKEA was founded in Scandinavia, the inspiration for design comes from their heritage comes through among IKEAs products. The designs are simple, yet unique, which allows IKEA to keep their promise to bring forth low priced, yet functional furniture. “Many competitors try to copy one or two of these things”(Moon, 2004), but “the difficulty is when you try to create the totality of what we have”(Moon, 2004). Not being able to imitate IKEA, makes its unique design and economies of scale a core competency that puts their company at a competitive advantage, stealing market share from their competitors.
Another factor that has contributed to IKEAS success is their low pricing strategy by being cost efficient. The two major players that help maintain expenses down for IKEA is the self-service component and “flat packaging”. Customers pick up and assemble their own furniture, because IKEA “doesn’t charge you for things you can do on your own”(Moon, 2004). For self serve to work, the concept of “flat packaging” was introduced to assist with easier transportation. This saves 6 times more volume space on shipping. In addition, it leads to reduced labor costs, along with less damages to any of the furniture. The convenience of