Ikea: Design and Pricing

Week 2 Homework

Chapter 3: Case: IKEA: Design and Pricing

1. What are IKEA's competitive priorities?

IKEA's competitive priority is based on producing quality products at a low price. This concept is exemplified in its' corporate mantra " price with meaning". This is achieved by creating inexpensive products without making its customers feel cheap. This manta is followed from design to the customer's home.

2. Describe IKEA's process for developing a new product?

IKEA starts the process by picking what the new product will cost. This will help to determine color, materials used, and design. Next they choose a manufacturer using their network of manufactures. They do this by determining which manufacturer can most efficiently produce the new product. Next they design the product, keeping in mind efficiency, ie. Packaging, shipping ect. Every inch of the product is reviewed in order to maximize their ability to manufacture, ship and store the new product. Finally they ship it. While shipping, the key word is flat, in fact the flatter the better. From vacuum packing pillows to exclusively producing disassembled furniture, IKEA is committed to not shipping air. Lastly they must sell their new product.

3. What are additional features of the IKEA concept (beyond their design process) that contribute to creating exceptional value for the customer?

The way they ship their products is clearly one of its greatest contributors to its low prices. By remaining flat, shipping only 65% full containers and by building its distribution centers near ports, railways, and highways IKEA is able to ship with great efficiency. They are able to ship the maximum amount of products, at the right time to the right stores keeping their prices 20 the 30 percent lower than their competition.

4. What