IKEA in China: Competing through Low-Cost Strategies



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Code : COM0112

Year :
2006

Industry : Retailing

Region : Sweden China

Teaching Note: Available

Structured Assignment : Not Available

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Introduction:With the concept of 'simplicity is beauty', IKEA has emerged as a 'sign of success' in the global furniture retailing industry. Spanning across 33 countrieswith 226 stores in Europe, Asia, Australia and the US, and annual sales of $17.7 billion in 2005, IKEA has become a global leader of home furnishing. Realizing the potential ofChina as a fast growing consumer market, IKEA entered China in 1998.

Since then, it has established its furniture outlets in major cities like Shanghai and Beijing. To attract Chinese customers, IKEA adopted a low-cost strategy of providing fine quality products at discounted prices,which proved to be a successful one. However, analysts are skeptical whether the cut-price strategywould benefit IKEA in the long run amidst competition from companies like B&Q and the changing customer preferences in China, or would the company succeed in maintaining its reputation as a provider of quality products to customers of all segments across all its markets.

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