IKEA manage to keep costs low by their superior relationship with their suppliers were they buy low-cost components in huge quantities. Together with efficient warehousing and customer selling service it passes on to customers resulting in lower prices, anywhere from 25 - 50 % lower than its competitors... displayed 300 characters
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However, at the same time they manage to operate with 8 - 10 % profit margins, much higher than the industry average (Norman and Ramirez.1993).
We have made a short and simple SWOT analysis to get an overview their capabilities.
Strengths Weaknesses
High variety offering ' right range of products
Higher margins than competitors
Economies of Scale
Logistics - inventory management
Long term relations with suppliers
The business culture
Organisational capabilities ' adapting change
Market leader - Category killer
High service level - few stock outs
Low lead time
Good product information Too big ' may increase bureaucracy
Franchising ' higher control cost
Mass marketing 'expensive
Charismatic leader ' hard to replace
Search cost ' for cheaper components
Market surveillance ' keep up with trends
Opportunities Threats
Expanding Asian market
New technology ' may lower marketing cost
More focus on environmental issues New trends 'individualism
Time is money ' people do not have the time to put products together
Too dominate ' defence position man hamper innovation
The key elements to IKEA's winning formula are well known: simple, affordable, functional, high quality, Scandinavian design, an extensive product line, knock-down... displayed 300 characters
