Case Analysis - Austin Varner IBM 301 Professor Stauble...

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Austin Varner IBM 301 Professor Stauble November 29, 2006 Case Analysis: IKEA 1. In analyzing their past practices, IKEA has incorporated many successful marketing principles into their business. For instance, under Ikea's global strategy, suppliers are usually located in low-cost nations, such as China, with close proximity to raw-materials and reliable access to distribution channels. Not only must Ikea globally integrate operations and centrally design products, but it also must find an effective combination of low cost, standardization, technology, and quality. To fulfill these necessities, IKEA has adopted a standardized product strategy. Retail outlets all over the world carry the basic product range, which is universally accepted. IKEA has designed its stores so that the customers become “prosumers,” which means that they are half producers and half consumers (Stauble 2005, 331). By selling products with an “assemble-it-yourself” concept, IKEA has managed to get around a whole manufacturing element, which reduces the manufacturing costs. In doing this, the store is able to reduce the price of the product. The ultimate consumer does not perceive the fact of assembling furniture on their own as a cost, and therefore added value for the product is achieved. By selling products that are not assembled, consumers are able to create value to their purchase. With the diversification of products IKEA has under one roof, customers are able to purchase other products with the intention of bettering their
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original purchase. For example, if a customer buys an unpainted desk, they are also able to buy paint in the same store. This creates both convenience for the shopper, and increased sales for the store. 2. When considering the California shopper, consumers today are very family- oriented. By offering a video arcade, restaurant, and a playroom for children, IKEA is at a competitive advantage because there is a part of the store for every family member. With an “assemble-it-yourself” concept, IKEA is able to offer its products at considerably lower prices. This is an advantage for the company because consumers are always looking for the best price. Centering its promotion on catalogs to reach their customers, IKEA is also at an advantage. By sending out catalogs to shoppers,
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