Ikea Case Study

1. What are IKEA's competitive priorities?

IKEA is a leader in inexpensive home articles, but not cheap, which means to have good quality furniture and home décor articles at a low price. Products run 30 % to 50% lower in price than competitors. Another perk of IKEA is that typically prices tend to rise over time for a product; at IKEA it is the other way around, prices for a product fall over time. For example, the Pöang chair was priced at $149 in 2000, $99 in 2001, and now costs $79. With decreasing the price of the chair, the sales went up 30% to 50% over time.

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

IKEA has three steps in the process of designing and developing its products.

The first step is to set a price the product is going to sell for. The product development begins with designers, product developers, and purchasers getting together and brainstorming the materials, design, and suppliers. When the price is given many factors come into play, design, material, color and other factors. The product is than designed around those factors and numbers.

The second step is to choose a manufacturer. IKEA's goals are to produce its products with the least amount of packaging, air in between products during transportation, which has a very important part in being cost effective. It is very important for the company that working conditions and environmental awareness are being conducted. Therefore, it developed a code of conduct for those factors. The IKEA Trading Service of conduct controls and oversees manufacturer working conditions for employees and makes sure no child labor and other thing occur. Manufacturers are screened on a regular basis.

The third step is to design the product. IKEA uses internal competition to design its products; designers get the chance to show their talent when a new product is being developed. The goal is to design a product that is very functional at a minimum cost.

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

IKEA's design is very modern and clean. In order to be able to produce those products at the price they want to offer the customers, the company has other features besides the design and production process that help reduce the costs of a product. The shipping plays a big part of this process. IKEA wants to waste the least amount of space in a container, therefore bulky items, such as tables, shelves, and chairs are not being transported assembled, they come in pieces and the customers have to assembled the products at home. This is not only for IKEA a huge perk in decreasing shipping costs, but also for customers, who can take flat