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This change in construction that was developed and made commercially viable by IKEA changed life for an entire industry. It entailed a great deal of added value:

  1. The factory can get around an entire manufacturing element thus reducing manufacturing costs. Today the work and responsibility involved in fitting the table legs rest with the customer. The customer does not perceive this as a cost.
  2. The tables can be packaged in flat boxes, and 90% of the air can be dispensed with. Costs involved in packaging, storing, and transporting the table are considerably reduced.
  3. The fact that IKEA builds its outlets on the periphery of towns and cities, they can reduce rent to a level that makes it financially feasible to carry large stocks of the finished table.
  4. Customers can take their newly purchased table with them on the same day and will not have to wait for it for several months. Availability increases notably which, in turn, leads to more decisions to buy and to larger volumes.
  5. The table is packaged so as to allow customers to transport it themselves. The costs for the store's furniture van have disappeared.
  6. IKEA places orders for 10,000 tables at a time. This allows rationalization of production, the deployment of modern machines, and a more efficient purchasing of raw materials.
  7. IKEA begins to collaborate with the suppliers to develop better machines and materials. IKEA transfers know how between factories.
  8. IKEA develops her activities in Sweden, and initiated exportation that was soon to conquer the whole world.
  9. People can furnish their homes with good-quality furniture at reasonable prices.

What can we learn from developments in the furniture industry?

As long as we stay in a rut, business will be conducted as a zero-sum game. If we wish to make more money through a deal, we have to squeeze some of the other parties in the chain to take upon themselves higher costs, risks, or liabilities.

Would the key to increased efficiency be shifting liability onto customers? Would it be flat boxes, low prices, long series, low quality, production in developing countries, or would design modifications be what is required? The answer will be found somewhere in your own organization. You are in possession of the requisite specialist insight.



Iwar Unt is one of Europe's top negotiating experts. Over the past thirty years, he has taught negotiation skills to over 20,000 business people. Iwar has written a number of books on partnership, negotiation technique and the creation of added value, published on the Scandinavian markets, Great Britain, Russia, India, China and the United States. Iwar is a member of Financial Times expert group Business Minds. You may the visit his web site at www.forhandling.com



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September 2004