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The Strategy Development Process of IKEA

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IKEA’ s strategy in the USA has been founded on two arguments linked to IKEA’ s identity and it's business model (product offer based on function and design under reasonable prices). Apart from targeting lower income groups, the basic idea of IKEA at the USA market has been designed to bring some additional economic advantages. First, lower income groups expect less in terms of service. Second, the lower income groups would like to have IDEA into their homes, compared to the middle and higher income groups which treat IKEA as transitional furniture in their home.

Third and last the low-income market in the USA is larger than the high-income group. Although, it had a favorable start supported by the exchange rate, the further development of IKEA at the US market was dubious. As part of its global/local strategy, IKEA targeted the lower income segments of the population and did not adapt its products to the apparent differences in the tastes. According to the survey as explained by Solomon (2009), the American low-income consumer has a more traditional and conventional taste compared to the modern style of the Swedish low-income consumer, while IKEA’ s offering is made 20% in traditional style and 80% in modern.

Although the IKEA US marketing team used specific targeting communication techniques to create an impression of 40% traditional vs. 60% modern, the actual low range of desired traditional products had its toll on the USA market. The sales improved over the years; however, the increase happened due to the educational efforts of IKEA’ s stylists. With almost a two-digit annual growth (10%), China is the second most important economy in the world and the first market by the size of its potential (IMF 2010:2).

Its economic growth is a result of the influence of FDIs for which the combination of large investments in infrastructure, stable exchange rate, favorable policies, labor force quality under low cost, proved to be the winning combination (PRS 2010:3).  

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