IKEAs International Strategy and the Establishment of New Stores Research Paper

IKEAs International Strategy and the Establishment of New Stores - Research Paper Example One of the key policies of the IKEA group is that it does not target the rich and instead sells to the smart (Crampton 2008, n.p). The interpretation of this is that it struggles to minimise the prices of its goods as much as possible. This means that the production has also to minimise costs. According to (Bowman 1988, p. 67) this strategy may have two implications; an increase in market share due to the competitive prices or a reduction in market share due to the reduced quality caused by a reduction in production costs. This is illustrated by the quality of the IKEA goods that cannot be described as the best (Thomson 2009, p. 184). The disadvantage is that the customers are not satisfied with the goods. In one case, a customer claimed that he was happy with none of the products from the store (Scholes 2010, p. 5). In the end, the reduction in price may turn out to be a disadvantage as the group loses customers due to poor quality. A large number of firms offering the same services in the market makes it a competitive market. This means that the group has to have competitive prices in accordance with product value if it is to compete successfully (Doyle 2011, p. 258). If IKEA was the only player in the market it could increase prices without value addition. However, due to the market conditions, the company is able to offer cheap and quality goods which is an advantage. A key part of the IKEA’s strategy is to act as the market’s low-cost leader (Jacobsen 2009, p. 144). The idea is to balance low margins with high volumes by driving the prices down.