Q1: What was the source of IKEA’s Competetive advantage at that time? Q.2 IKEA’s expansion into Europe Q.3 IKEA’s strategy prior to its missteps in North America. Q4. IKEA’s strategy towards its suppliers

1. IKEA
Furniture Retailer To The World

2. Q1:What was the source of IKEA’s Competetive
advantage at that time?
The cost of manufacturing products in Poland were 50% cheaper than manufacturing in Sweden.
By early 1960s Polish made goods were found in over half of the pages in IKEA catalog.
This allowed IKEA to manufacture and sell products at much cheaper cost.
Later in an analysis it was discovered that IKEA products were of higher quality than their competitors.
Along with this IKEA products were also immediately available, clean and fashionable.
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3. Q.2 IKEA’s expansion into Europe
IKEA’s elegant
functional designs
for products with
their clean lines.
Low prices.
Self Assembly
functionality, which
customers
accepted in return
for the lower costs.
Strategy to get
quick positive cash
flows from Sweden
before moving out.
Though, they faced
an issue when they
entered UK, due to
a similar
competitor
,Habitat.
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Reasons for IKEA’s success across Europe

4. Q.2 IKEA’s expansion into Europe
Furniture
retailing was
a very
fragmented
business in
US.
Low end market
of Walmart,
Costco, Office
Depot which
offered low
quality products
but at low
prices.
High end markets
such as Ethan
Allen offered high
quality products
and ancillary
services such as
interior designs.
IKEA lacked in this
aspect of interior
designs.
Home delivery
service, free or low
cost installations.
European style
offerings did not
resonate US
consumers . Eg.
Beds, sheet
measurements,
sofas were not
big enough.
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Why IKEA faced an issue when they entered US?

5. Q.2 IKEA’s expansion into Europe
New and larger store locations.
Goods were sourced within US and from low cost locations, this reduced transport
costs.
Promoted quirky hip advertisements aimed at the youth.
The strategy worked, as the revenue doubled from 1997 to 2001.
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How IKEA made amends for the mistake in US?

6. Q.3 IKEA’s strategy prior to its missteps
in North America.
Target market was Upward
Global Middle class, who
looked for low priced but
attractively designed
products.
Stores were configured as
mazes in a bid to induce
impulse purchases among
consumers.
Considerable effort was laid
on finding the right suppliers.
Price of products was set in a
way that, price tags were
designed first and then
suppliers were selected on
the basis of the low cost set
for the product.
A certain proportion of
products used to be made
internally.
As communism collapsed,
IKEA purchased Swedwood
in Sweden for manufacturing
and used it as a vehicle to
buy manufacturing plants
outside.
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7. Q4. IKEA’s strategy towards its suppliers
IKEA demands high quality at low price from the suppliers.
This results in lower price margins for the suppliers
IKEA offers prospects for forging long term high volume business
relationship (This acts as an incentive for the suppliers)
IKEA offers advices in how to seek out the best and cheapest raw
materials, how to set up and expand factories etc..
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8. Q5: Source of IKEA’s Success
Hitting the write
demographic- It’s very
appealing to the GenY.
They have a perfect price
point. It leaves the shoppers
with a feel that they are
getting a good value at
IKEA. Plus it is cheaper
when compared to the price
of competitors likeWest Elm
& Bed and Bath & Beyond.
With its elaborate
showroom and cafeteria,
Ikea has become a unique
destination for shoppers.
Ikea is a standalone store
that shoppers seek out with
a specific goal in mind.
They have a smart neuro
design and their layout
nudges customers to spend
more money.

9. Weaknesses of IKEA
The size and scale of its global business.
This could make it hard to control standards and quality. Some countries where IKEA products are
made do not implement the legislation to control working conditions.This could represent a weak link
in IKEA’s supply chain, affecting consumer views of IKEA’s products.The IWAY code is backed up by
training and inspectors visiting factories to make sure that suppliers meet its requirements.
The need for low cost products.
This needs to be balanced against producing good quality. IKEA also needs to differentiate itself and its
products from competitors. IKEA believes there is no compromise between being able to offer good
quality products and low prices.
IKEA needs to keep good communication with its consumers and other stakeholders about its
environmental activities.
The scale of the business makes this a difficult task. IKEA produces publications in print and online and
carries out majorTV and radio campaigns to enable the business to communicate with different target
audiences.

10. How to overcome?
With its “green” business model, the company
has a huge opportunity waiting in terms of
attracting customers who like to buy such
products.The rise of the ethical consumer or
the process of buying known as “Ethical Chic”
which means that customers would ideally like
to buy products that are environmentally
conscious is an opportunity waiting to be
tapped for the company.
Perhaps the biggest opportunity that the
company has is its cost leadership, which
means a single-minded focus on cost at the
expense of everything else. While this has
raised concerns about quality, the customers
do not seem to mind as they are getting their
money’s worth and the addition of value to
the customers is another significant
opportunity.
The company’s expansion into the emerging
markets and the developing world where it
has an untapped customer base that can be
leveraged for effective profitability. IKEA is
already drawing up plans to enter markets like
China and India with a clear strategy of cost
leadership, which it hopes, would yield
benefits to the company.

11. Thank you
Akshay Anil – K06007
Riya Aseef – K06071
Christy Xavier – K06035
Nikhil John Abraham- K06063