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Question: 1)

Person in charge

(3206004424)

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. 6 Successful use of the word of mouth and the use of catalogues in order to reduce the advertising costs. 7 IKEA has simple and plain staff levels, lowering the fixed and giving more freedom to its employees. This management structure also helps making decisions in a faster way. 5

Q2: 1 What are the cultural factors which make expansion abroad in retailing difficult? 2 What has made it possible in IKEAs case?

cultural factors

The retailing difficulties are not only limited to merchandising and promotion but the cross-over of store brands and brand images. The social systems and social behavior also affects the corporation as different management styles and company cultures may be difficult for employees to adjust to and their maybe clashes which can make the whole process less effective and also less efficient.

If there are major differences in the existing culture and language difficulties it may establish greater cultural barriers . The culture of the country also dictates if the target markets will be living in urban, rural or suburban areas and research must be done to show if they would be willing to travel out of their area to come to a different place to obtain the product.

Having presented the factors that make the expansion in retailing abroad difficult, we are going to refer to specific cultural reasons, which make IKEA s expansion abroad not easy: - Cultural specific strategy: - The use of the Swedish flag - Swedish style of the furniture

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Nevertheless, IKEA, with its competitive advantage, its size and resources, has changed the global markets:

many small furniture retailers have disappeared, and there is now a trend for growth of larger-scale retailers, and for an increased number of international retailers.

One other strong advantage of IKEA that energised the market is also the innovation:

IKEA innovates all the time, with always new products, new styles, each year a catalogue where all the products are presented is launched, and the innovation is also for the marketing strategy, tools, with recently TV advertisement in Europe for instance.

Question(3): Describe how IKEA'S expansion has re-energized mature markets around the world and changed the competitive situation.
Person in charge: (3206004425)

Something about IKEA

IKEA is one of the few store chains to have locations both in Israel and in other Southwest Asian nations. The chain has 254 stores in 35 countries; most of them in Europe, and in the United States, Canada, Asia and Australia. 2008 The first Ukrainian IKEA store and MEGA mall will be opened . 2008 The first Bulgarian IKEA store is expected to open doors. 2009 First New Zealand IKEA store to open near Auckland.

Expansion by Franchising
IKEA approaches unknown, relatively small and high risk markets by franchising. Franchisees have to carry basic items, but have the freedom to design the rest of the product mix . The centralized head office is involved in the selection process and provides advice. In addition, all products have to be purchased from Ikea product lines. In order to maintain service, quality and logistics standards, individual franchisees are periodically audited and compared to overall corporate performance.

Expansion by Fully owned Subsidiaries

Establishes subsidiaries in stable markets which are identical to the Scandinavian market . Ensure standardization, operational control and provide a smooth entry into a new market.

With continued expansion efforts underway worldwide, IKEA strives to ensure its U.S. expansion supports the company's vision and business model to offer home furnishings at affordable prices. In the U.S., IKEA evaluates markets and builds stores where it can achieve economies of scale. Having clusters of IKEA stores within a market or region of the country enables the company to efficiently streamline and manage its distribution services, recruitment initiatives, training and development and marketing efforts. The priority to increase the IKEA presence in existing markets also includes relocating some older, smaller stores so that the complete selection of IKEA products can be featured. With stores on the east and west coasts, IKEA is balancing this emphasis on existing markets with a gradual entry into other major metropolitan areas.

Question(4): How does the TV advertising campaign initiated by IKEA overcome the entry barrier of high advertising expenditures?
Person in charge: (3206004423)

1.Make ad exactly towards his target groups

To reach a target audience of young adults and families, the retailer launched an integrated marketing communications campaign before the store opened.

2.Make full use of all the ad means to promote their production.

such as :print, television, billboard, transit, and direct-mail advertising before the store opened.

3.Unique ad in deferent area

There are no two grand-opening advertising campaigns are exactly alike in IKEA, because they know that no two audiences are exactly alike. the markets for each of these stores were as different as Coney Island hot dogs and avocado salad.

For example
When The first store opening in Elizabeth, Ikea kicked off a television campaign to support the chain's overall image. The commercials poked fun at the irritations of shop-ping at traditional furniture stores, such as high prices and de-livery hassles. However, the campaign didn't take itself too seri-ously; its tag line was "It's a big country. Someone's got to furnish it." The two campaigns started people talking about Ikea, and they helped bring people-by the thousandsto the store on opening day.

 Question(5):

Should IKEA expand further in the United States or focus on other countries?

I think IKEA had better focus on its market share in other countries, such as in rapidly developing countries like China, India, Brazil, etc. The emerging economies are all undergoing large-scale constructions and many people become house owners. So they have a great hunger for furniture. Further more, their purchasing power is growing and they can afford relatively expensive and highquality furniture, which is exactly the proper sphere of IKEA.

So I believe IKEAs products will be generally popular in these countries, as is the case in China now. On the other hand, the real estate industry in the U.S. has gone through a bust and it hasn't navigated through the subprime crisis and is struck further by the severe financial crisis. This undoubtedly leads to the slump of the demand for furniture. So its more reasonable for IKEA to place greater emphasis on other countries.