Ikea Invades America Essay Example

IKEA's product range within each area is limited in terms of styles offered. Furthermore, all IKEA stores feature playrooms for customers' children during shopping and a cafe serving traditional Swedish cuisine to prevent shopping on an empty stomach.

For achieving strategic fit, it is crucial that a company's supply chain capabilities align with its ability to fulfill the needs of its target customer segments. This alignment necessitates coherence between the objectives of the competitive strategy and those of every functional unit in the company. Both structural decisions (such as vertical integration, process technology, capacity, facility) and infrastructural decisions (such as)

According to Beckman ; Rosenfield (2008), achieving strategic fit requires attention to sourcing, business processes and policies, supply chain coordination, information technology, and capability development. Figure 1 from Beckman ; Rosenfield (2008) illustrates the concept of strategic fit. To achieve strategic fit, a company must find the balance between responsiveness and efficiency in its supply chain that aligns with its competitive strategy (Qiu 2008). Therefore, IKEA, whose competitive strategy emphasizes cost efficiency, must position itself towards the left on the efficiency vs. responsiveness scale and design its supply chain accordingly.

Figure 2 from Chopra ; Meindl's 2007 source displays the relationship between efficiency and responsiveness in a modified form. Cost efficiency is integrated throughout IKEA's value chain, spanning from the development stages to the end user experience. With an emphasis on aesthetics, functionality, and cost efficiency, product development and design is handled in-house. IKEA's guiding principle in creating new products prioritizes designing the price tag first, and selecting materials for specific uses is a carefully considered process.

IKEA utilizes high-quality materials in visible and stress-exposed areas, whereas lower-quality

materials are used in less noticeable and low-stress areas. The company outsources its manufacturing process to countries with lower factor costs, as it does not fall under their core competencies. Customer involvement is a crucial aspect of the IKEA concept, where customers collect flat-packed items from self-serviced warehouses before checkout and then assemble them at home after transportation via personal vehicles. Additionally, since IKEA's furniture is designed to be disassembled and sold in flat-packaged boxes, shipping costs are significantly reduced.

IKEA's motto of "We don't want to pay to ship air" demonstrates their dedication to reducing shipping costs. Their stores are also strategically designed in centralized locations that combine both warehouses and retail spaces, allowing for economies of scale which help reduce expenses across the entire supply chain. This includes facility expenses, inventory expenses, transportation costs, and procurement expenditures.

By implementing their supply chain strategy and concept, IKEA has managed to reduce their pricing. The furniture market in the United States features a mix of low-end and high-end retailers with no clear leaders. The top 10 furniture retailers only hold a little over 14% of the market share.

Low-end retailers such as Wal-Mart prioritize pricing to compete, resulting in reduced profit margins and the need for high sales volumes. Their product displays are inconsistent and customer assistance may be lacking. Conversely, high-end retailers offer luxurious showrooms and personalized guidance from knowledgeable sales staff, with extensive inventories of numerous styles and sub-styles.

With dominance in the high-end market, Ethan Allen is the third largest furniture retailer in the U.S. Both low-end and high-end retailers offer delivery services, with some providing assembly and installation of new furniture at customers' homes.

IKEA positions itself as a mid-range option, offering lower prices than high-end retailers but slightly less service.

Although IKEA is a low-end retailer with no delivery or assembly service, customers are responsible for collecting their own flat-packed items. However, the company focuses on design and functionality to prevent customers from feeling cheap. Despite this, their showrooms and store environment have an elegant and tasteful appearance compared to other retailers. Previously, IKEA prioritized price reduction over design which resulted in "quite horrible design."

IKEA's new focus is on creating products that are both visually attractive and practical, without sacrificing either quality. Their primary goal is to produce well-designed items of high quality while moving away from a strict emphasis on cost-effectiveness as reflected in their corporate motto. Despite this shift, IKEA continues to place great importance on its corporate culture as an essential factor in the company's success within the furniture industry. The founder Ingvar Kamprad instilled a mindset of financial responsibility with an unyielding commitment to progress and innovation.

Ingvar Kamprad is often considered a forerunner of lean operations, constantly seeking ways to improve and minimize waste (Vavra 2008). The company regularly improves the design of its products to make them more efficient, functional, attractive, and transportable. Managers opt for bus travel over taxi when feasible. Such endeavors enable IKEA to approach the cost-responsiveness efficient frontier with the current technology.

IKEA's success can be attributed to their ability to ensure strategic alignment across their supply chain, while remaining true to their established IKEA concept. This has enabled them to create a highly efficient supply chain that supports their overall business strategy. Despite prioritizing cost-cutting measures, they have maintained high

levels of design and functionality in their products. To expand its reach, IKEA could introduce smaller satellite stores throughout the United States, connecting with a more diverse range of customers beyond those near full-sized stores.

Opening "IKEA Lite" stores could improve IKEA's brand recognition in the American market, which is still new to the company. These smaller stores would be closer to the market and help gain a better understanding of U.S. customer needs. Furthermore, they could act as trial runs for evaluating potential market demand before launching full-sized locations in specific regions.

Launching a complete IKEA store in an uncharted market carries risk, but it may be mitigated by introducing "IKEA Lite" stores. Nonetheless, this approach has drawbacks as the company's cost efficiency and pricing strategy hinge on store size and economies of scale that minimize transportation costs.

Expanding the presence of "IKEA Lite" stores in the United States could lead to decreased cost efficiency, which is compounded by the self-service aspect of the concept.

To keep operating costs low, the IKEA concept heavily depends on self-served warehouses. Introducing "IKEA Lite" stores would decrease warehouse efficiency and increase the sales personnel to customer ratio, thus reducing profit margins in order to maintain the same low prices. Although "IKEA Lite" stores may seem attractive, they do not align with IKEA's competitive and supply chain strategies, rendering them an unsound proposition.

Despite the potential benefits, implementing the idea is not viable within the IKEA concept. This is because it hinders the practice of self-service and does not generate sufficient scale to enable competitive pricing. (IKEA, 2008)

On July 30th, 2008, information was accessed from the website ikea. om/showContent. asp?swfId=concept4>. The sources

cited include Beckman and Rosenfield's 2008 book, Operations Strategy: Competing in the 21st Century from McGraw-Hill Irwin in Massachusetts, Chopra and Meindl's 2007 book, Supply chain management: Strategy, planning, & operation from Pearson Prentice Hall in New Jersey, as well as Bob Vavra's 2008 article 'Which way do LEAN' from Plant Engineering, vol.

The citation for Kotler and Keller's Marketing Management, 12th edition, published by Prentice Hall in New Jersey, is available in volume 62, issue 3, pages 31-36 of Academic Search Premier. Accessed on September 2, 2008.