Ikea Case Study

Topics: Product management, Price, Ingvar Kamprad Pages: 3 (1030 words) Published: March 17, 2013
I. Factors Contributing to Ikeas Success
Swedish company, Ikea, has experienced many triumphs throughout the business history. Founder Ingvar Kamprad created a successful business from a financial gift his father gave him. There are several factors that contribute to Ikea’s success. These factors include their low cost price strategy, the design of their store, and the shopping experience for customers. Ikea’s low cost low pricing structure.

Ikea’s low cost pricing strategy was a key to their rise to success. It started in 1951 when Ikea abandoned all its other catalog products to focus solely on low priced furniture. In the beginning, Ikea’s furniture was produced by local manufactures. The pivotal point in Ikea’s history came in 1955 when competitors forced manufactures to boycott Ikea. It was at this time the company started to produce their furniture in house. At this point, an Ikea employee proposed to remove legs from a table for easier transport (case citation). This was the birth of the flat packaging system. The flat packaging system reduced cost drastically. Ikea learned through this process that they could ship more products for less. The company estimated that its shipping cost was six times less shipping furniture disassembled (case citation). Not only did the cost for the company decrease the customers received lower pricing and easy transportation home. Ikea found more ways to cut cost with new product development. As the company expanded to other countries, it identified manufactures that would keep a balance of cost-efficient labor, while maintaining the product quality standards (case citation). Ikea’s engineers were developing new ways to construct the furniture. Their focus was to identify which material would be the best for constructing the furniture. Ikea engineers use a combination of inexpensive wood and fine woods to construct furniture pieces. Ikea’s low cost low price structure was genius. The flat packaging system was brilliant...
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