Tuesday, February 5, 2013
IKEA and TATA : Two Companies With Similar Business Strategy
The articles about IKEA and TATA highlight some very interesting facts about these two companies.Both companies are from the different parts of the world.These companies are selling different products. IKEA is selling furniture and TATA is selling cars.These companies are making profits in a similar way.
These companies are using a very attractive price tag for their products.They are , however, not selling low quality products.They are just using innovative ways to build and supply their products.These innovations have resulted in the decrease of their product price without compromising on the quality of the product. TATA, for example, is using Aluminum in its Nano car engine.IKEA is using expensive wood on the outer side and low price wood on the inner side of the products.This strategy has helped them to come up with an attractive price tag fro their product.
Another thing that I have noticed about these two companies is how they transport their products to their stores and dealers. They are using innovation in transportation.For example,IKEA employees say that they are not going to pay for the transportation of air.They are using the concept of flat package to transport their goods.Similarly, TATA is transporting it's Nano car in parts. It not only helps TATA to reduce the price but also helps it to transport the car deeper into the rural areas of the country.
These companies give their customers option to tailor their products according to their requirements.Almost all the big companies in the western world prefer to innovate themselves and let the customer buy the products with some compromises on their needs. TATA and IKEA are exploiting this thing for attracting more customers.In this way, they can also learn more about the requirements of the customer to redesign their future products.So in a way they are receiving the feedback from their customers to remodel their product.
Both of them first selected a price and then designed the products for that price. TATA's target was to design a one lakh (Rs.100000) car. IKEA follows the same pattern for its products. If look at G.M. or other big car manufacturing companies, they look for a design and then build the products and give them a price tag which can help them draw profits from their products. That's the problem with them that they don't consider the price first and in turn are losing the market share especially in emerging markets.
Their supply network is very simple when it comes to the end user. IKEA doesn't provide the user with the option of transportation. So it doesn't need to care for the delivery of the product to the user.It may be little problematic for the end user but it helps IKEA to reduce its burden.Similarly, TATA gives its car in the form of parts to the dealers. So it reduces their burden to transport the car without any problem from one manufacturing plan to the far and distant places of the country.
From the above comparison, it is visible that two companies who are into two entirely different business fields are working on a similar strategy to increase their business and profit.But there are some issues that i think that they are overlooking in their business models.For example, TATA may learn from its customers but it can't accommodate all the customers in one car.I mean to say that its hard for them to keep changing the design of the car while maintaining the price of the car to a minimum level. Moreover, IKEA is making it hard for the customers to buy online for their products. From a customers' prospective if you are given your product at you home or office you feel comfortable.These are the things that these companies need to consider in their business models.
Lisa Margonelli, "How Ikea Designs Its Sexy Price Tags," Business 2.0,
John Haoel and John Sealy Brown, "Learning from Tata's Nano,"
Bloomberg Businesswek, April 2010.