Date: September 25, 1986

Subject: Responding to Sears “Elements” Line of furniture

Issue/Problem

The Canadian furniture market has brought success to IKEA Canada due to the high quality and low priced “quick-assembly” furniture designed by IKEA’s European engineers. However, this success brought many imitators. Sears Canada has recently published a new catalogue that includes a new line of furniture called “Elements”. The new line of furniture very much resembles IKEA’s knock-down, self-assembled line. IKEA is facing an imitation threat and should tactically respond to minimize its effects.

Recommendations

IKEA is considered to be a low cost, high quality producer in the furniture industry, therefore it is important to spread that image among consumers. IKEA should expand its target market and reach out to more customers. This can be accomplished by increasing the number of catalogues published every year. In addition, IKEA should re-establish its mail ordering system and minimize its mail orders losses. This can be accomplished by adding a convenience fee which covers handling, shipping and packaging.

Discussion

Industry Analysis

Canadian consumption of furniture accounted for $2 billion dollar in 1985 making the industry a mature one with 1,400 manufacturers. Retailers on the other hand are divided into three types: independent such as the Brick and Leaon’s, speciality chains such as IKEA and department stores such as Eaton’s and Sears. Canadian produced furniture typically followed American and European styling, however it was often too costly to produce. Labour costs are much higher than in most competing countries - particularly the US, the source of most furniture imports. Canadian companies also have high transportation costs. Therefore, it is really crucial for IKEA to differentiate its products and keep prices low. The sales growth