Virtually all students have heard of IKEA, but only a few will have ever visited an IKEA store. For that reason, it is a good idea to direct students to the IKEA website or an IKEA catalog prior to discussing the case. It is important that students understand that every aspect of IKEA’s strategy is based on maintaining a downward pressure on costs and operating expenses. Along with the clean, frugal styling that IKEA uses in its product design, the company’s cost control measures are vital to its low retail prices.
As the case points out, IKEA’s frugality will be challenged as it expands its store operations in the United States. This is an excellent example of the challenges associated with the marketing adaptation approach to international expansion. The key challenge in this case is how IKEA can maintain its cost-conscious strategy while simultaneously adapting to the highly individualistic nature of the U.S. consumer. Also, how can IKEA balance its limited service offerings with the higher service needs of U.S. consumers?
1. Given the SWOT analysis presented in the case, what are IKEA’s key competitive advantages? What strategic focus should the company take as it looks to further expand into the U.S. market?
2. What factor is the biggest reason for IKEA’s growth and popularity: value or image? Which is more important in the U.S. market? Why?
3. What strategic alternatives would you suggest IKEA employ to further penetrate the U.S. market?
4. Speculate on what will happen at IKEA stores as they are tailored to fit local tastes. Is the company’s trade-off of service for low cost sustainable in the long term?