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Low prices are a result of large-quantity purchasing, low-cost logistics, store location in suburban areas and a DIY approach to marketing.
IKEA also benefits from economies of scale and healthy supplier-firm relationships. IKEA enters into long-term contracts, provides leased equipment and technical support in exchange for exclusive, low-cost manufacturing from suppliers. For new markets, IKEA should retain its price-image to maintain the brand’s positioning.
2. Product
IKEA’s value chain is unique in that customers are also suppliers and suppliers are also customers. The transactions between the supplier and IKEA and on to the customer have a value adding step in each stage...
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