Question

IKEA’s decision to redesign its European-style sofas to better meet the needs of its American consumers

Multiple Choice

• created value for U.S. buyers.

• allowed for premium pricing.

• increased value creation but decreased production costs.

• generated the average consumer price between U.S. buyers and European buyers.

• resulted in a standardized design for U.S. and European buyers.

IKEA’s ability to design functional, attractive furniture at a reasonable price that can be sold in a similar way across multiple countries is an example of

Multiple Choice

• a core competence.

• a low cost strategy.

• perceived value.

• value.

• a differentiation strategy.

IKEA maintains a global network of suppliers across 50 countries. This benefit of this strategy is that it allows IKEA to

Multiple Choice

• eliminate head-to-head competition in local markets.

• improve the functional design of its product line.

• avoid maintaining physical locations near competitors.

• achieve the location economies associated with producing its product in the optimal location.

• quickly design its products.

In China, IKEA has opened stores near public transportation, while in most Western countries, IKEA’s stores are located in suburban shopping areas. This strategy is consistent with

Multiple Choice

• a differentiation strategy.

• a low cost strategy.

• global standardization.

• pressures for local responsiveness.

• pressures for cost reduction.

Answer 1

1. Created value for US buyers

This is because American style sofas would be more valuable for American customers than European style sofas. The American customers would feel more associated with them and it would create more value for them.

2. A core competency

This is a core competency for IKEA since the company is able to manufacture quality furniture at a low cost which no other company is able to manufacture. A core competency is also defined as that which is specific for a company and which no other company is able to achieve.

3. Achieve location economics associated with producing it's product in the optimal location.

This is because having a global network of suppliers enables the company to achieve low cost production and distribution strategy of the company and also maintain its stock at an optimal cost.

4. A low cost strategy

Opening stores near public transportation allows IKEA to reduce its transportation cost associated with logistics of furniture. This strategy works well in high volume location where the logistics requirements is more and in order to achieve cost reduction, this strategy is effective.