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Ikea Case

Essay by   •  January 1, 2011  •  673 Words (3 Pages)  •  2,354 Views

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Since its creation in 1943, IKEA has created many firm-specific advantages for itself. First, IKEA has standardized the process of offering disassembled furniture to be put together at the consumer's home. This was a groundbreaking concept, allowing for a much larger inventory at each store, and in turn allowing customers to actually obtain their products at the day of purchase. As a result of this new store layout, IKEA has been able to allow sales clerks to focus more on in-store displays and fast-moving lines, rather than loading and unloading large, bulky furniture inventories. Another huge advantage IKEA has created for itself is its global sourcing of 2,300 suppliers in 67 countries. With these connections around the globe, it has been able to cut prices at its stores around the globe, while maintaining sufficient quality standards. Because of these connections around the world, IKEA experiences huge economies of scale, allowing it to match rivals' quality while but undercut prices worldwide. It's creative business model and store layout has created its own advantage for IKEA, as word-of-mouth advertising, along with limited traditional advertising and record-breaking distribution of free catalogues, have created an unmatched worldwide buzz for the company.

IKEA also experiences many country-specific advantages, based upon its location in European-located Sweden. First, IKEA's location in Europe made it relatively painless for the company to spread throughout the rest of Europe. Along similar lines, IKEA has been able to send employees who know the local language of foreign locations to set up stores, bringing the IKEA philosophy and standard practices along with them. IKEA also embraced its advantage of its heritage, focusing on quirky advertising in North America, poking fun at Swedish heritage in commercials. IKEA has done a remarkable job of creating its own firm-specific advantages, while taking advantage of and furthering its country-specific advantages.

There are many cultural factors that traditionally make retail expansion abroad difficult. The first challenge that a few retailers, IKEA included, must overcome is creating a stable supply chain for its products. It is usually difficult and time-consuming for a country to establish an efficient supply chain in foreign nations. Another cultural problem facing many European retailers is difference in furniture preferences. One example is Europeans tending to prefer longer, narrower beds. European retailers also tend to have



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