IKEA is the world’s largest furniture company that provides ready-to-assemble furniture, housewares and kitchen appliances. IKEA was founded in 1943 by a 17-year-old boy, Ingvar Kampard. IKEA is the world’s largest furniture store since 2008 and its best competitor (Groupe SEB- $12 billion approx.) don’t even stand close to its (IKEA- $47 billion approx.) annual sales. It’s the market leader in the furniture business and what make this possible is its unique business model. Let me tell you a story of a brand-named General Mills.
In early 1900s, it was a common sight to see mothers working for a whole day to prepare a cake from the very scratch, to show their love and devotion to their families. But this was very hectic and they sometimes get frustrated in doing so. So, General Mills, in 1933, foresee this opportunity and introduced the first cake mix after blending dehydrated molasses with dehydrated flour, sugar, eggs and other ingredients. The mix only required water to complete the batter, which makes it more than easy for the mothers to do the job. In early periods the product sales plunged, but soon it started fading away. The company was shocked and they hire a team of analysts to search the reason behind failure. The results were surprising. They found that the mothers didn’t feel the love and devotion while serving the cake which they feel earlier, so they shifted back to the home-made cake.
Then in 1947, General Mills (Betty Croker) introduced a new mixture in which mothers have to add eggs along with the water to make the batter for cake. This simple move is the game changer for General Mills as the mothers were feeling more connected while baking the cake, even when this is inconvenient. Later the icing and other cake decorations were introduced that give them the obsession that they are making their own cakes and boosted their sales further.
This similar business model is applied by IKEA. The beauty of IKEA furniture products is that they are so easy to assemble that almost everyone can do it with a 100% success rate. This makes their customer a feeling of accomplishment every single time they use the furniture, even though it makes them put an extra effort. Also, this assembling business model saves them huge cost of transportation and ware housing (because furniture could be packed in little boxes and stacked on one another, while normal furniture can’t) and thus allow them to give superior products at reasonable prices.
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