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Firstly, IKEA aims for a suitable and economical way to develop and manufacture its own products, and to reduce material waste. IKEA's principles are various: "Whoever designs the product the cheapest", "Simplicity" to reduce expenditure, "Esthetics" to raise customer value, and "Enhancement of delivery". It uses modules to develop design-oriented systems, where low cost and high efficiency works hand in hand. Not only their design costs but also their production costs are lowered.
Secondly, IKEA uses large scale global manufacturing outsourcing and bulk purchase to minimize manufacturing expenditure. It encourages a wide range of free competition among its suppliers. Competitive pressure that forces the suppliers to participate in the pursuit of this "minimum price maximum quality" ethos. In addition, IKEA annually proposes to its own suppliers a target production cost index, aiming to lower manufacturing expenditure towards a downward trend. In turn, IKEA is able to offer consumers lower prices making its products even more competitive in the market place.
Furthermore, IKEA and its IT technology, well-designed logistics, and the use of flat packs, will not only save storage space and transport tariff, but also dramatically reduce the overall cost, without compromising product quality.
Finally, IKEA lets its customers self-assemble their furniture and choose their own delivery options, thus significantly saving its operating costs, and giving the customers freedom of choice.
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