Saturday, November 13, 2010

Essay on IKEA

Essay on IKEA

IKEA is a Sweedish concept that provides high-quality furniture at a low cost. Currently there are outlets in 30 countries and IKEA is continuing to expand. As the company expands they must adapt to culture-specific needs while at the same time continuing to be loyal to their original concept.

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Why the Original IKEA concept works universally
• IKEA’s target market, young people of all ages, is a section of society that exists in many different cultures. They specifically seek out consumers who are price conscious but still want quality furniture. The liberal social orientation of their customers also makes them less status-conscious and therefore the IKEA concept appeals to them.
• When IKEA entered the United States market, they immediately established operations in the Northeast and California. Both of these communities are known to be havens for highly educated, young, liberal-minded, white-collar workers: in other words, IKEA’s customer base.
• IKEA offers a wide range of products in a one-stop shopping location. Their stores are a destination offering shopping, childcare and food-courts. Many of their smaller products are accessories, such as dishes and wallpaper that complement their furniture. People all over the world need their products for their homes and enjoy the prices which are 30-50% lower than other furniture stores.
• IKEA keeps its prices low by making their customers into “prosumers.” A customer is required to transport the products home and assemble them. However, for an additional cost, IKEA will assist with delivery, transportation, and assembly.

• When IKEA expanded to the United States they had to adjust several of their products to a larger scale. For example, Americans desired larger drinking glasses, larger cupboards to accommodate their larger dishes and deeper drawers to hold sweaters. Additionally, Americans wanted matching bedrooms sets and sleeper sofas that were not previously offered. In total, IKEA redesigned about 1/5 of their product range to adapt to the American market.
• IKEA’s adaptations to the American market proved to be useful because not only did the American customer base grow to comprise 10.5% of their worldwide sales but also many of the American concepts became popular in Europe.
• To keep down costs in the American market IKEA established a distribution center in Philadelphia and also out-sources manufacturing to local factories.

Challenges to the IKEA Concept
• IKEA depends on customers who are price-conscious and not status-oriented. In many cultures, such as Japan, this will be a challenge because culture is status-oriented. Perhaps this can be overcome through advertising to establish the IKEA brand as a status-symbol.
• Because of the large scale of the IKEA stores, they are usually located in outlying areas. For Urban customers this may present a challenge because there is often not public transportation available to reach the stores and the customers may not have access to cars.
• IKEA’s promotion is centered on their catalogue, so if people do not have access to the catalogue they may not be aware of what is available to them. Additionally, by not expanding their advertising strategies, IKEA is failing to reach several potential customers.

It is evident that IKEA has found a formula that works universally. Most likely their concept works because they have targeted a very similar customer base in each country. If they wish to expand beyond that customer base factors such as status may need to be addressed, but at the same time status-orientation would conflict with their original concept so perhaps it would be better for IKEA to continue to maintain its focus in its existing niche.

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