IKEA
STRATEGY
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CASE£JKEA: D
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RI C I N G
T h e Swedish retailer dominates markets in 32 countries, and now it’s poised to conquer North America. Its battle plan: Keep making its offerings less expensive, without making them cheap.
Above all else, one factor accounts for IKEA’s success: good quality at a low price. IKEA sells household items that are cheap but not cheapo, at prices that typically run 30 to 50 percent below the competition’s. While the price of other companies’ products tends to rise over time, IKEA says it has reduced its retail prices by a total of about 20 percent during the past four years. At IKEA the process of driving down costs starts the moment a new item is conceived and continues relentlessly throughout its production run. The price of a basic
Poang chair, for example, has fallen from $149 in 2000 to $99 in 2001 to $79 today. IKEA expects the most recent price cut to increase Poang sales by 30 to 50 percent.
IKEA’s corporate mantra is “Low price with meaning.” The goal is to make things less expensive without ever making customers feel cheap. Striking that balance demands a special kind of design, manufacturing, and distribution expertise. But IKEA pulls it off in its own distinctive way: tastefully, methodically, even cheerfully, and yet somehow differently than any other company anywhere. Here’s a stepby-step guide to how IKEA designs, builds, and distributes the items that the entire world wants to buy.
The TrofS mug is one of the most popular IKEA products. The story of the mug is an example of how IKEA works, from a co- worker’s bright idea through to production and sales. It is also a story about all the demands that we and our customers place on IKEA. A low price tag is the obvious one, but other requirements include function, modem design, environmental considerations, and making sure products have been manufactured under acceptable working conditions. Both
section 1
116
CASE£JKEA: D
E S I G N
AN D
P
RI C I N G
T h e Swedish retailer dominates markets in 32 countries, and now it’s poised to conquer North America. Its battle plan: Keep making its offerings less expensive, without making them cheap.
Above all else, one factor accounts for IKEA’s success: good quality at a low price. IKEA sells household items that are cheap but not cheapo, at prices that typically run 30 to 50 percent below the competition’s. While the price of other companies’ products tends to rise over time, IKEA says it has reduced its retail prices by a total of about 20 percent during the past four years. At IKEA the process of driving down costs starts the moment a new item is conceived and continues relentlessly throughout its production run. The price of a basic
Poang chair, for example, has fallen from $149 in 2000 to $99 in 2001 to $79 today. IKEA expects the most recent price cut to increase Poang sales by 30 to 50 percent.
IKEA’s corporate mantra is “Low price with meaning.” The goal is to make things less expensive without ever making customers feel cheap. Striking that balance demands a special kind of design, manufacturing, and distribution expertise. But IKEA pulls it off in its own distinctive way: tastefully, methodically, even cheerfully, and yet somehow differently than any other company anywhere. Here’s a stepby-step guide to how IKEA designs, builds, and distributes the items that the entire world wants to buy.
The TrofS mug is one of the most popular IKEA products. The story of the mug is an example of how IKEA works, from a co- worker’s bright idea through to production and sales. It is also a story about all the demands that we and our customers place on IKEA. A low price tag is the obvious one, but other requirements include function, modem design, environmental considerations, and making sure products have been manufactured under acceptable working conditions. Both