Case of Ikea

Topics: IKEA, IKEA Catalogue, Costs Pages: 5 (1752 words) Published: January 15, 2013
As we all know, IKEA is a famous furniture store. Until December 2008 IKEA has 292 stores in 36 countries and regions around the world. Most of the stores are located in Europe, others are in the United States, Canada, Asia and Australia. IKEA, which named "the world's 100 most valuable brands" in 2003, ranked World Furniture supplies sales business in the first sales of 12.8 billion Euros in 2004. Since its establishment in 1943, after 60 years of development, IKEA has now become the world's most influential household goods retailer. As of October 2011, IKEA has 332 stores in 38 countries. In fiscal year 2010, it sold $23.1 billion worth of goods, a 7.7 percent increase over 2009 (wikipedia). It makes people easy to remember IKEA first rather than other furniture companies when they plan to buy some furniture, not only in US or Europe, but also in most of Asia. I clearly remember the scene of the first store of IKEA opened in my hometown of China. A host of customers went to the store to experience the culture of IKEA without buy anything, although it will take couples of hours on the road for customers. But the company did not have a lot of advertising investment. However, some people claim that the poor quality of the company's products should make company improve their skills. But it does not affect the company's success all over the world.

There are some reasons for the success of the company from several parts.

Lower Price
The goal of the managers of IKEA is to keep the price of the product not too high, but let the customer feel that it is a real bargain. In order to get this goal, reducing costs will play an important role. In fact, reduce the cost of IKEA products throughout the entire process, for example product conception, design, production, transportation and marketing. To spare no effort to maintain low price, is absolutely necessary to maintain a significant price difference with other companies in all areas.

Design must obey the low-cost principle, and then consider the design aesthetics. The different way is that IKEA will set product in lower prices and costs in first step, then design the products as beautifully as possible. IKEA always want product in the same price, but lower design costs than anyone else. IKEA furniture assembled goods are split into different modules, some modules in different furniture can also be used, so that not only the design of the cost can be reduced, and the total cost of the product can be reduced. What’s more, there is a team work together, which includes designers and procurement staff, to make a better solution to keep a lower cost. It make IKEA may find a cheaper alternative materials, easier to reduce the cost. For material, furniture of IKEA is designed to meet the daily needs for several years enough, so that some part which you cannot see them will used cheaper material. Packaging is designed as flat as possible to reduce transportation costs. For packing, the pack of products may reduce the damages of the furniture in the storage or transportation, and reduce space occupied in warehouse. As a result, it makes it possible to reduce the transportation costs. Designers of IKEA work with supplier closely to help suppliers to improve skills and increase the production. The price of single product has declined, but sales grow up, so that IKEA may get higher profit with the low price. We can get that the design of products play a important role in the whole business.

IKEA gets more benefits from globalization, because the company gets raw material all over the world and procurement model is the purchasing patterns of globalization. The products are delivered to 26 distribution centers around the world from the trade area, and delivery to IKEA stores in the world. With the Chinese market continues to expand, A growing number of products will produced in the Asian region, which will greatly reduce the costs. Some Chinese companies will select...
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