Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. IKEA, the Swedish retailer of home products, dominates markets in 43 countries, and is poised to conquer North America. Above all else, one factor accounts for IKEA's success: good quality at a low price. IKEA sells household items that are cheap but not cheapo, with prices that typically run 30 to 50 percent below those of the competition. While the price of other companies' products tends to rise over time, IKEA says it has reduced its retail prices by a total of about 20 percent during the last four years. At IKEA the process of driving down costs starts the moment a new item is conceived and continues relentlessly throughout the life of the product. |  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070700893/New_global_icon.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (K)</a>]]>
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IKEA has always had a 50-cent coffee mug. Prior to the new TROFé mug, the company offered the “Bang” mug, which had been redesigned three times, in ways to maximize the number of mugs that could be stored on a pallet. Originally, only 864 mugs would fit. A redesign added a rim such as you would find on a flowerpot so that each pallet could hold 1,280 mugs. Another redesign created a shorter mug with a new handle, allowing 2,024 to squeeze onto a pallet. These changes reduced shipping costs by 60 percent.  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070700893/jac03296_p0101.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (K)</a>]]>
The latest version of the 50-cent coffee mug has been made even more useful with a simple notch on the bottom that prevents water from pooling up around the base during a dishwasher run. Further refinements have optimized the speed at which the cup can pass through the machines forming the cups and enable IKEA to fit the maximum number into kilns, saving on the expensive firing process. Simple changes in the shape of the mug have reduced the cost to produce the mug significantly while creating more value for customers purchasing this simple 50-cent coffee mug. This is the essence of operations management: creating great value to the customer while reducing the cost of delivering the good or service. |
