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IKEA is one of the world’s largest produces and retailer of high quality, but inexpensive furniture. The company’s top-level managers attribute its global success to effective pricing strategies, product differentiation, and its excellent experience in furniture retailing. …
The company has put into consideration various marketing elements in its efforts to meet its customer needs including the product, distribution strategy, price, and communication strategy. IKEA’S pricing strategy is based on its desire to be the global price leaders in furniture items. Its products retail at prices 30 percent below the market rates. The company’s pricing is standardized and applies to all its stores across the world; and the only difference is due to exchange rate fluctuations. The company has been able to achieve competitive prices because of economies of scale attained while purchasing raw materials, locating its retail shops in suburban areas, and its effective distribution strategy. Low pricing has contributed significantly to the company’s market share growth. Another key contributor to the low pricing is its long-term healthy relationship with its suppliers.
The company products are not only less expensive, but also stylish and of high quality. High quality and durable products have strengthened the company’s relationship with its customers. The company has a strong relationship with its suppliers and the benefit is mutual. In other words, the supplier benefits from the company being their customer and the company benefit from the suppliers being its customers. Additionally, the company has a wide range of products which depicts is focus to diversity. Through diversification, the company minimizes the business risk. In other words, if demand for some of its products goes down, decrease in profitability is offset by increase in demand for other products. The company also focuses a lot on product differentiation.
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