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Case: IKEA: Design and Pricing Please see the attached document to help with the questions Questions 1. 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?

Case: IKEA: Design and Pricing Please see the attached document to help with the questions Questions 1. 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?

Understanding Business
Understanding Business
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
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Case: IKEA: Design and Pricing
Please see the attached document to help with the questions


Questions
1. 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 Pricing The Swedish retailer dominates markets in 32 countries, and now it's poised to conquer North America. 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 sells household items that are cheap but not cheapo, at prices that typically run 30 to 50 percent below the competition's. At IKEA, the process of driving down costs starts the moment a new item is conceived and continues relentlessly throughout its production run. The price of a basic Pöang chair, for example, has fallen from $149 in 2000 to $99 in 2001 to $79 today. IKEA expects the 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 expensive without ever making customers feel cheap. Striking that balance demands a special kind of design, 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 company anywhere. Here's a step-by-step guide to how IKEA designs, builds, and distributes the items that the entire world wants to buy. The coffee mugs are some of the most popular IKEA products. The story of the mugs is an example of how IKEA works, from a co-worker's bright idea through to production and sales. It is also a story about all the demands that customers place on IKEA. A low price tag is the obvious one, but other requirements include function, modern design, environmental considerations, and making sure products have been manufactured under page 67 acceptable working conditions. Both customers and co-workers must be able to rely on IKEA. Step 1. Pick a Price Product Development-A sketch for a new product? Yes, but it's also a calculation of what that product will cost. The low price begins at the drawing board. The team behind each product consists of designers, product developers, and purchasers who get together to discuss design, materials, and suitable suppliers. Everyone contributes with their specialist knowledge. Purchasers, for example, use their contacts with suppliers all over the world via IKEA Trading Service Offices. Who can make this at the best quality for the right price at the right time? When product developers were given the task of creating a new mug, they were told how much it 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 white because these pigments cost less than other shades, such as red. Step 2. Choose a Manufacturer Suppliers 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 for transport, warehousing, and store display-and, not least, in the customers' cupboards at home. IKEA is always keen to banish as much air as possible from its packaging. Packages should preferably be flat for efficient transport and storage.
Transcribed Image Text:Case: IKEA: Design and Pricing The Swedish retailer dominates markets in 32 countries, and now it's poised to conquer North America. 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 sells household items that are cheap but not cheapo, at prices that typically run 30 to 50 percent below the competition's. At IKEA, the process of driving down costs starts the moment a new item is conceived and continues relentlessly throughout its production run. The price of a basic Pöang chair, for example, has fallen from $149 in 2000 to $99 in 2001 to $79 today. IKEA expects the 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 expensive without ever making customers feel cheap. Striking that balance demands a special kind of design, 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 company anywhere. Here's a step-by-step guide to how IKEA designs, builds, and distributes the items that the entire world wants to buy. The coffee mugs are some of the most popular IKEA products. The story of the mugs is an example of how IKEA works, from a co-worker's bright idea through to production and sales. It is also a story about all the demands that customers place on IKEA. A low price tag is the obvious one, but other requirements include function, modern design, environmental considerations, and making sure products have been manufactured under page 67 acceptable working conditions. Both customers and co-workers must be able to rely on IKEA. Step 1. Pick a Price Product Development-A sketch for a new product? Yes, but it's also a calculation of what that product will cost. The low price begins at the drawing board. The team behind each product consists of designers, product developers, and purchasers who get together to discuss design, materials, and suitable suppliers. Everyone contributes with their specialist knowledge. Purchasers, for example, use their contacts with suppliers all over the world via IKEA Trading Service Offices. Who can make this at the best quality for the right price at the right time? When product developers were given the task of creating a new mug, they were told how much it 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 white because these pigments cost less than other shades, such as red. Step 2. Choose a Manufacturer Suppliers 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 for transport, warehousing, and store display-and, not least, in the customers' cupboards at home. IKEA is always keen to banish as much air as possible from its packaging. Packages should preferably be flat for efficient transport and storage.
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