Ikea Pricing Strategy

International marketing is when a business sells its goods and services to other countries and develops different strategies to adapt to the cultures. Ikea is a Swedish company created in 1943, that aims to produce high quality furnishings at a lower price, making them affordable and available to everyone. Being a global company, and having 373 stores in more than 40 countries, Ikea faces various challenges and opportunities, as they are obliged to address the people and cultures worldwide, while making profits and remaining competitive. Therefore, they develop different strategies to fulfil their objectives.

Figure 1 represents the SWOT analysis for IKEA. One of their major reason for their success is that IKEA has a wide range of products.

The quality of the furnishings in IKEA is judged by their ability of being functional, well-designed and affordable. While the concept value for money is popular amongst many people, it was a challenge for IKEA to set up the right prices in some asian countries. For instance, when first entering the furnishing market in China, their pricing strategy had failed. The company had not considered the fact that it is a low income country with cheap labour, and retained average european prices in the store. This led to a very low turnover, and damage to their reputation. However, after they considered the risks of lowering their prices by more than 30%, and targeting a younger market, their sales rose tremendously. This demonstrates that one of the IKEA’s major weaknesses is pricing the products in countries outside Europe that differ greatly in their culture and economy, without it leading to operating at a

A lot of manufacturers and suppliers in these countries did not have the developed technologies to produce sustainable “green” raw materials, and therefore, products that are standardized in IKEA. To invest in the development of an environmental-friendly sphere in those countries would result in an increase of price for the goods, which would not be tolerated by indian and chinese people. Furthermore, the concept of DIY, for which they are mostly famous, is not at all common (even hated) in asian culture, due to low labour costs. IKEA made a mistake, by failing to ascertain the differences in cultures promptly. As a result, they have increased the number of assembly services for customers to visit.

Another problem with cultural differences IKEA has encountered was in the US. They did not study their target market in detail, and therefore did not know that the average sizes of furnishings in the US were bigger than the ones in Europe. Beds, cupboards, even curtains did not fit the houses. The former head of IKEA, Carstedt claimed: “American customers were buying vases to drink because the glasses were too