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The Economics of IKEA: Why Does Labor Lead to Love?

Why building your own furniture makes customers love IKEA more.

Business Law & Economics Retail, Marketing and Advertising Operations Management Manufacturing & Packaging Product Distribution Chapter 1 Taking Risks & Making Profits Chapter 2 Economics Chapter 3 Globalization Chapter 9 Production & Operations Management Chapter 14 Product & Price Chapter 15 Distribution Video Blog Understanding Business Higher Education

The Swedish company IKEA is famous across the globe for its meatballs and its wide array of furniture that customers must assemble at home. This video looks at how the retailer encourages sales by creating the “IKEA effect” with its winding floor plan that causes customers to snake through a series of product showrooms. 

Questions:

  1. What sort of strategies does IKEA use to keep costs low?
  2. How does the “IKEA effect” encourage customers to purchase furniture and home goods?
Author: NickelsMcHughMcHugh

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