IKEA STRATEGY(LOW PRICE)

How did IKEA get so cheap? Do you have to sacrifice everything for low prices? Does design take a back seat to price?

“That’s partially true,” Per Krokst?de, new business manager at IKEA Sweden, tells Business Insider Netherlands. “We don’t say that a product has to cost exactly $8.50. But we do say we want to design a folding chair in our so-called ‘lower price category.’ Next, we draft a target price, like $7.99. And then we work toward that goal.”

IKEA uses this design principle on a daily basis.

The strategy is best seen as a pentagon, in which form, function, quality, sustainability and low price constantly compete with each other. 

Courtesy of IKEA

Do low prices mean the furniture's quality suffers? 

“Let’s say we want to design a chair that costs no more than $19. This determines the choice of materials we might use,” Krokst?de explains. “Can we make the chair out of solid oak? Probably not for that price. But on the other hand, do we even want to, since in this case oak might not be the best choice as far as sustainability is concerned?”

The design team at IKEA takes various factors into account to keep prices as low as possible: how do we use the smallest amount of material? What about the transportation costs of different parts of a product? And what is the optimal design to fit as many chairs, tables or sofas on one shipping pallet?

Once the design team finally has a product for the lowest price, management takes a look at the product.

“Just when you think you're there, management comes over to tell you they think the price is still too high,” Krokst?de says.

Aiming for a low price is one of the hardest parts of his job, but also the most important one, he says.

In the end, everything IKEA does must create a better everyday life for “many people” — a phrase you will hear over and over at IKEA's headquarters to describe the company's enormous target audience. “We want to design for many people," Krokst?de says, "and usually, they don’t have an awful lot of money.”