1) Which of the following statements are true of the furniture retailing market
ID: 326601 • Letter: 1
Question
1) Which of the following statements are true of the furniture retailing market in the U.S. at the time of the case? (select all that apply) A) Only high-end retailers offered delivery services B) High-end furniture retailers had luxurious stores which tapped into customers' desires for prosperity C) Specialty retailers competed on having a wide selection, driving up their inventories D) Low-cost furniture retailers tended to have stores which had a dreary atmosphere
2) Which of the following are part of IKEA's approach to design, manufacturing, and assembly? (select all that apply) A) IKEA saves money on shipping because all its products fit in flat-packaged boxes B) IKEA sometimes redesigns a product just to make it take up less space when being shipped C) IKEA expects its customers to pick up their purchases in the store, transport them home, and assemble them D) IKEA often designs products with high-quality materials on the visible surfaces and lower-quality materials on the less visible parts
3) Which of the following are components of IKEA's strategy? (select all that apply) A) IKEA products are designed to last for a lifetime B) Within the price range categories (high/medium/low), IKEA seeks to be 30-50% cheaper than the competition C) IKEA owns all of its own suppliers so it can control costs D) IKEA aims to make tasteful, well-designed products that do not make customers feel cheap For the exclusive use ot Y. Sherhan, 2018. HARVARD BU SINESS SCHOOL 9-504-094 IKEA Invades America In 2002, the IKEA Group was the world's top fumiture retailer. With sales approaching $12 billion, IKEA operated 154 stores in 22 countries and serviced 286 million customers a year. (See Exhibits 1 through 4) In the United States, IKEA had 14 stores, with plans to open as many as nine more in 2003. There were a number of tactors that distinguished IKEA from other furniture retailers-its stores were strictly self-service and featured such amenities as playrooms for children and Swedish cafés, and all of its fumiture came unassembled (customers were expected to put together the furniture on their own)-yet there was no question about the company's success; when a new store opened, it was not unusual for thousands of shoppers to line up on the first day Company Background IKEA was founded in 1943 when 17-year-old Ingvar Kamprad decided to start a local company using some money his father had given him Initially, the company sold basic household at discount prices; in 1947, however, Kamprad began selling home furnishings. Six years later, Kamprad opened his first furniture showroom and two years after that, IKEA began designing its own low-priced furniture. In 1958, IKEA opened its inaugural store, in Almhult, Sweden; at 6,700 square meters, it was the largest fumiture display in Scandinavia at the time By the time IKEA opened its flagship store in Stockholm in 1965, IKEA had become the favored destination for price-conscious Swedes. The 45,800-square-meter flagship- which ultimately became the prototype for all of IKEA's retail outlets-was inspired by New York's Guggenheim Museum and featured a childcare center, a restaurant, a bank, and enough parking for 1,000 cars. The store's magnetic appeal was apparent from the start; literally thousands of Swedes showed up on the first day. Before long, IKEA was opening similar low-priced fumiture stores in countries beyond Scandinavia, first in Europe, and then in both Asia and North America. (For a more detailed history, see Figure A below) The name IKEA came from Kamprad's initials combined with the first letters of the names of the family farm (Elmtaryd) and village (Agunnaryd) where Kamprad was raised Professor Youngme Moon prepared this cae. This case was developed from published souroes. HitS cases are developed solely as the hasls for dase dscuslion Cases are not Intended to serve as endorsements, sources of peimary data, or @ustratiore of effective or inetfective Copyright 0 2004 President and Fellows of Harvard College. To order oopies or request permission to repeoduce materiala, call 1-800-545-7685, wrhe Harvard Business School Publishing Boston, MA 02163, or go to http://www.hbep harvard.edu. No part of this publication may be mpmdwnd, stred in a hral systen, und in a speeabheet, or traneitted in any tem or by any mean-_lectrole, mechanical, photocopying recoeding or othwrwise-without the permission of Harvard Business School. a document is authorized for use only by Youset Sherhan in Service Operations Management (MGT 3121) taught by Cory Labanow, CUNY-Baruch College from January 2018 l 2018.
Explanation / Answer
1. The applicable options are B,C and D.
B – It has been mentioned in the case that high-end specialty furniture retailers in USA offered an environment that focused on luxury with an aim of conjuring up aspirational images based on affluence and prosperity. Example of Ethan Allen has been provided.
C – Specialty retailers carried special styles of products like American furniture, Asian furniture, Contemporary furniture etc. This tended to increase their inventories.
D – Low cost furniture retailers had dreary atmosphere due to their low price focus and this was reflected in their environment.
2. The answer is A,B,C, and D.
A – Flat packaged boxes served the dual purpose making it easier for the consumer to transport the goods while reducing the shipping costs for the company.
B – It is not unusual for IKEA to design and redesign a product multiple times. This is done to maximize the number of products in a single shipping pallet.
C – Customers use IKEA’s catalog to pick furniture of their choice, pick it up from the company’s self service warehouse, get them to their home and assemble it themselves.
D – This fact is mentioned in the case in page 4, 2nd paragraph.
3. The answer is B and D.
B – Ikea made products in different price ranges – high, medium and low. It set price point that was 30% to 50% lower than its rivals in each of the price ranges.
D – While the early products of Ikea had functional design, it changed later. The company now has a distinct design aesthetic. It now wants to have low priced products with meaning.
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