1.
What are IKEA’s firm-specific advantages? Country - specific advantages? IKEA’s firm and country specific advantages could be the following: IKEA sells the same furniture all over the world, so IKEA rips huge economies of scale from the size of its stores and the big production runs necessary to stock them. IKEA also offers a low competitive price because of the economies of scale (30% lower than competitors) Exclusive relationship between IKEA and its suppliers, offering modern and exclusive designs for IKEA. Designers also work closely with suppliers, keeping the costs low.Ready-to-assemble kits help to stack products in shelves in order to maintain larger inventories. The cash and carry shopping formula; you can go to the rack directly to collect the product and go home to build it by yourself. Successful use of the w
...ord of mouth and the use of catalogues in order to reduce the advertising costs.
IKEA has simple and plain staff levels, lowering the fixed costs and giving more freedom to its employees. This management structure also helps making decisions in a faster way. 2. What are the cultural factors that make expansion abroad in retailing difficult? What has made it possible in IKEA’s case?Ikea has encountered many problems when entering the U. S. market because it had to adapt its products and its shopping style to the American standards.
IKEA had to redesign its beds because the American citizens were not buying the European size beds (Beds in America are wider than in Europe). We can see an adaptation to the American shopping culture in the installation of new cash registers to avoid long checkout lines. IKEA also modified stor
layout to conform American shopping styles, and now has a more generous return policy and next-day delivery service available for the US market. IKEA also had to create a stable chain supply.IKEA now produces about 45 % of the furniture sold in its American stores locally, in order to reduce the dependence on imports.
As far as the management is concerned, IKEA had problems in the amount of independence and authority the company gives to its employees who sometimes in the US feel uncomfortable. IKEA also trust on the word of mouth strategy because they had great results in Europe, but this strategy is not too good in the U. S. where a high diversity among the consumers exists. 4. How does the TV advertising campaign initiated by IKEA overcome the entry barrier of high advertising expenditures?IKEA overcome the entry barrier of high advertising expenditures making a creative and daring series of 30 seconds TV spots that catch the attention of the public in general (target market included), thus creating a positive impact on IKEA’s image.
Although these spots impact on the target market, it also has an impact among the advertising critics and in the public in general, so they can spread the message through the mouth to word strategy. IKEA’s spots are very creative and this is very important because in a short TV spot they reach as much people as possible, more than just the target market.
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