Case: IKEA: Design and PricingPlease see the attached document to help with the questionsQuestions1. What are IKEA’s competitive priorities?2. Describe IKEA’s process for developing a new product.3. What are additional features of the IKEA concept (beyond its design process) that contribute to creating exceptional value for the customer?4. What would be important criteria for selecting a site for an IKEA store? Source: Information about the Trofé coffee mug was obtained from www.ikea.com. Case: IKEA: Design and PricingThe Swedish retailer dominates markets in 32 countries, and now it's poised to conquer NorthAmerica. Its battle plan: Keep making its offerings less expensive, without making them cheap.Above all else, one factor accounts for IKEA's success: good quality at a low price. IKEA sellshousehold items that are cheap but not cheapo, at prices that typically run 30 to 50 percentbelow the competition's. At IKEA, the process of driving down costs starts the moment a newitem is conceived and continues relentlessly throughout its production run. The price of a basicPöang chair, for example, has fallen from $149 in 2000 to $99 in 2001 to $79 today. IKEA expectsthe most recent price cut to increase Pöang sales by 30 to 50 percent.IKEA's corporate mantra is "Low price with meaning." The goal is to make things less expensivewithout ever making customers feel cheap. Striking that balance demands a special kind ofdesign, manufacturing, and distribution expertise. But IKEA pulls it off in its own distinctive way:tastefully, methodically, even cheerfully, and yet somehow differently than any other companyanywhere. Here's a step-by-step guide to how IKEA designs, builds, and distributes the itemsthat the entire world wants to buy.The coffee mugs are some of the most popular IKEA products. The story of the mugs is anexample of how IKEA works, from a co-worker's bright idea through to production and sales. It isalso a story about all the demands that customers place on IKEA. A low price tag is the obviousone, but other requirements include function, modern design, environmental considerations,and making sure products have been manufactured under page 67 acceptable workingconditions. Both customers and co-workers must be able to rely on IKEA.Step 1. Pick a PriceProduct Development-A sketch for a new product? Yes, but it's also a calculation of what thatproduct will cost. The low price begins at the drawing board.The team behind each product consists of designers, product developers, and purchasers whoget together to discuss design, materials, and suitable suppliers. Everyone contributes with theirspecialist knowledge. Purchasers, for example, use their contacts with suppliers all over theworld via IKEA Trading Service Offices. Who can make this at the best quality for the right priceat the right time?When product developers were given the task of creating a new mug, they were told how muchit should cost in the stores. In the case of the original Trofé, the price had to be incredibly low-five Swedish kronor! This mug had to have a real knockout price.To produce the right mug at the right price, the developers had to take into account materials,colors, and design. For example, the mug was originally made in green, blue, yellow, or whitebecause these pigments cost less than other shades, such as red.Step 2. Choose a ManufacturerSuppliers and Purchasing-The task of developing products never ends. Working with suppliers,the mug was shortened and the handle changed so it stacks more efficiently, saving space fortransport, warehousing, and store display-and, not least, in the customers' cupboards athome. IKEA is always keen to banish as much air as possible from its packaging. Packages shouldpreferably be flat for efficient transport and storage.

IKEA is a multinational furniture retailer that was founded in 1943 by Ingvar Kamprad in Älmhult,…

Answered: Case: IKEA: Design and Pricing Please…

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE