Worksheet- Flat Packed and Priced (PED) Refer to the article and answer the following questions: How can knowledge of the PED of different consumer groups help firms to plan their pricing strategies? Why do you thìnk advertising may reduce the price sensitivity of consumers? FLAT PACKED AND PRICED IKEA, the Swedish home products company that designs and sells ready-to-assemble furniture, appliances and home accessories, is the world's largest furniture retailer with more than 300 stores in over 35 countries. It opened its first store in China in 1998 and now has a number of outlets across the country including in Shenyang, IKEA's second largest store in the world with 47,000m² of floorspace. Whereas in most areas of the world IKEA products are considered 'good value' by most consumers, in China its products were thought to be aimed at consumers with high incomes. However, this also meant that many Chinese consumers were very sensitive to price and a small reduction could persuade many more to buy IKEA products because they also wanted to be associated with a high income 'lifestyle' created by the IKEA brand. After cutting all its prices by 10% IKEA's China sales rose by 35% that year and 50% the following year. 1.Why was the demand for IKEA products by Chinese consumers reportedly more price sensitive than consumers in many other countries? 2. Why is information on price elasticities helpful to IKEA?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Answer question from text

Transcribed Image Text:Worksheet- Flat Packed and Priced (PED) Refer to the article and answer the following questions: How can knowledge of the PED of different consumer groups help firms to plan their pricing strategies? Why do you thìnk advertising may reduce the price sensitivity of consumers? FLAT PACKED AND PRICED IKEA, the Swedish home products company that designs and sells ready-to-assemble furniture, appliances and home accessories, is the world's largest furniture retailer with more than 300 stores in over 35 countries. It opened its first store in China in 1998 and now has a number of outlets across the country including in Shenyang, IKEA's second largest store in the world with 47,000m² of floorspace. Whereas in most areas of the world IKEA products are considered 'good value' by most consumers, in China its products were thought to be aimed at consumers with high incomes. However, this also meant that many Chinese consumers were very sensitive to price and a small reduction could persuade many more to buy IKEA products because they also wanted to be associated with a high income 'lifestyle' created by the IKEA brand. After cutting all its prices by 10% IKEA's China sales rose by 35% that year and 50% the following year. 1.Why was the demand for IKEA products by Chinese consumers reportedly more price sensitive than consumers in many other countries? 2. Why is information on price elasticities helpful to IKEA?

3. What evidence is there from the article to support the view that Chinese consumers
of IKEA products are more price sensitive?
4. How can advertising make consumers less price sensitive?
5. How could knowledge of this research help IKEA?

Expert Solution

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions