Ikea

Essay text:

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. 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...