Ikea

5.2.1. Overall cost leadership

The strategy of overall cost leadership is always the IKEA’s biggest aim. We can find the history of IKEA is also the history of looking for low price. We can find IKEA try to find the low price at every part of the process. For example, before they design a product, they already confirm the price. They use “flat-package” to reduce the cost of transport. They reduce the staff in store to reduce the cost of store. They also use the scale effect to purchase goods from all over the world.

Constantly using innovations to drive costs down. 

Low prices are the cornerstone of IKEA business idea and the the company always try to do things as efficient and cost-effective as possible. To drive costs down all the time, the company must find new and innovative ways to do that and to incorporate them in its businesses model. The business’ innovations include new materials that contribute more to sustainable environment and are less costly or using newest ways of packaging, handling and transporting materials.

Ikea

The Swedish furniture retailer Ikea revolutionized the furniture industry by offering cheap but stylish furniture. Ikea is able to keep its prices low by sourcing its products in low-wage countries and by offering a very basic level of service. Ikea does not assemble or deliver furniture; customers must collect the furniture in the warehouse and assemble at home themselves. While this is less convenient than traditional retailers, it allows Ikea to offer lower prices that attract customers.

For pricing, they constantly lower their cost by reducing packaging, delivery and installations to lower their price so that more consumers are able to afford them.

For communications, IKEA spend a lot on advertising so that consumers are able keep track of their promotions. For example, IKEA will send catalogs to their existing customers via mailbox so that consumers are aware of their latest design and promotional pricing. Also, in...