Fruity Fro-Yo Executive Summary

The well-known ‘build-it-yourself’ product design makes them progressive and makes them running ahead of the competition. IKEA is the only big brand in a category further not present in global markets, there are no real competitors operating in the same category. In 2013 775 million customers visited IKEA in 2013, and its website hosted 1.2 billion visits (4). Due to the ‘build-it-yourself’ product design IKEA is able to provide their customers with high quality and low cost products, even the customers with limited income and limited living space

The cost leadership strategy seeks to improve profit margins by bringing down the costs of producing while enabling the organization to still charge market prices. They also focus on increasing the market shares through lower pricing, enabling the organization to continue to reach profits because of reduced costs. As with any organization the goal is to minimize cost directly to the organization providing the delivery of products or services. According to Barney (2007) low cost leadership strategy takes pride in initiating its costs advantage abilities to charge lower prices while reaping the rewards of higher profits.

In cost leadership a firm will set out to become a low cost producer in its industry. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership then it will become an above average performer within its industry. The sources of cost advantage are varied and depend upon the

There are several ways businesses can achieve cost leadership through the implementation of a low-cost strategy. Essentially, passing on savings to customers requires the reduction of overhead costs incurred by the business. Such costs reductions would need to take place in the form of performing value chain activities in a more cost-efficient manner than competitors or by eliminating certain activities from the value chain altogether (Gamble et al. 90-91). Little Caesars, Aldi and Zenni Optical have all implemented low-cost strategies that have allowed them to establish themselves as leading competitors within their industries.

IKEA, which is a famous furniture company in Swedish has dominated in furnishing market for many years. Its success delis on its strategies in large part. This report is trying to analyze IKEA’s strategies on the basis of related literature.

Cost leadership refers to the strategies to create goods or services at the lowest possible cost whilst they are still acceptable to customers. By reducing the costs of manufacture and distribution, a business will be able to increase the advantage over competitors. Qantas main costs include staff (26%), aircraft operating e.g. maintenance (20%), fuel (25%), depreciation (9%), marketing (4%), property (3%), IT (3%) and other (11%). To gain cost leadership, operations management at Qantas must find ways to minimise costs. Qantas has targeted cost reduction of $1.5 billion over the next three years. The aim is to use the least quantity of inputs to deliver one unit of output. A number of methods are available:

Also, they have very efficient logistics and a low cost base such as labor, materials and facilities (Ibid, 1985). Essentially, if a firm can achieve and maintain cost leadership, it can obtain above average performance whilst the prices are still affordable in that industry. Hence, the cost leader does not try to be the industry innovator, it seeks to position its products to appeal to the average customer taste. The aimed goal is to increase efficiency and lower its costs in relation to competitors. Some of the

IKEA’s low-cost structure is the very essence of their success. It keeps the company profitable while other competitors struggle to survive in the market and the weakened economy. IKEA has continued to see positive revenue growth. Their other competitive advantage is treating the environment with care and concern. They are rated in the top 100 companies to work for by Fortune magazine and by offering a fun work environment for employees to maintain

Operations: A cost leadership firm will employ economies of scale in order to sell larger quantities at a lower price. This firm might also outsource activities in order to keep capital costs low and control labor costs.

Cost leadership strategy: Producing products/services at the lowest cost in the industry. There are examples of companies that became cost leaders by incorporating IT into their management information systems. Dell Computer Online build to order system resulted in Dell becoming the lowest cost producer of computers and thus dealing a heavy blow to rivalry competitors.

It is the main methodology that can be separated. In the situation when the system uses to look for the cost benefit that is constrained for one or diverse areas, the second concentrates on the ID of client sight that is delicate towards quality. The problem is associated with the strategy which is when the specialty is not very wide which enables the business to work productively and adequately for organizations with wide movement ranges, with the minor changes regarding the product and service (Lee,

The IKEA vision is to create a better life for many people who purchase their products. Their main objectives are: - IKEA produces cheap and affordable products for the customers - The company wants better life for those who cannot afford expensive products - IKEA always helps to produce right product for the right consumer - IKEA always tries to sell their products at low prices - The company’s global developments and its continual commitment is to have a positive impact on people and

The Cost Leadership strategy appears to be broad/industry wide and their advantage is having low cost, which is important for a given level of quality. What makes this stategy so effective is the fact that they sell their products for average inventory prices to gain higher profits than their competitors or they will sell below average prices to gain a market share. The lessons that can be learned from the use of the Cost Leadership Strategy include: required access to the capital necessary to make a significant production asset investment, the required skills needed to design products for efficient manufacturing purposes, high levels of experience in the manufacturing process, and the most efficient distribution channels available.

4. What is IKEA’s strategy toward suppliers? How important is this strategy to IKEA’s success?

New Service-Product Development Process- Continuously pursuing a better product and services to better meets customer’s needs should be a priority of a firm. The core process keeps the company afloat and provides a competitive advantage for the firm. Managers should be able to develop customer satisfaction procedures on how the firms plans to achieve goals or meet project designed to customer specifications. A firm supply chain value should incorporate the needs to always produce new services by scanning the environment and pursuing best innovative practices.