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During the Great Recession, this iconic Swedish furniture company developed a new way to expand: cutting costs while increasing customer loyalty.
Starting in 2008, facing rising prices and a global recession that hit its core markets (new homeowners and middle-class consumers) especially hard, Ikea set out on a new strategic path: to offer even lower prices to consumers, while positioning itself for long-term growth. It accomplished this through the simplest of methods: focusing relentlessly on separating “good costs” (productive investments) from “bad costs” (unnecessary expenses). The company then invested 100 percent of its net savings on building up the essential qualities of its business or lowering the price of its products.
One of our most important decisions was a change we chose not to make. They did not cut back on our investment in retail stores. They own all of our buildings and land, and all stores are custom built and designed for efficiency and sales potential. This makes Ikea one of the bigger Real Estate Investors in the World.
To make up the difference, we had to become very good at four things. First was lowering operational costs. Second, we had to become even better at increasing volume, because that allows us to lower our cost of goods and operating costs. Third, we had to develop an even better-functioning supply chain. The fourth area involved empowering our co-workers.
Via Peter Hoeve
