Ikea: Design and Pricing

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. They are able to achieve this by creating inexpensive products without making the customers feel like they have been cheated.

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

*IKEA starts the process by picking how much the new product will cost. This will help to determine materials used, design and even the colors that are going to be used.

*The next step is to choose a manufacturer from their network of manufactures. This is done by determining which manufacturer can most efficiently produce the new product.

*Next they design the product, keeping in everything in mind from the production, packaging, and even the shipping. Every inch of the product is looked over so that they are able to get the most out of the manufacturing, shipping, and the storage of the new product.

*Finally they ship it. Ikea has a vast amount of nice products that do need to be assembled once purchased because they are committed not shipping by air. They even vacuum seal certain items to get them as flat as possible for shipping.

*The final step is to sell the 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 that the company ships their products is a major contributor. By shipping flat, they ship only 65% full containers and by strategically placing their distribution centers near ports, railways, and highways IKEA is able to ship with great efficiency. Getting the maximum amount of products shipped out, at the right time to the right stores keeping their prices 20 the 30 percent lower than their competition is another contributing factor to the IKEA concept.

4. What would be important criteria for selecting a site for an IKEA store?

Some of the important criteria are to make sure the space is large enough to accommodate for the large showrooms and large pieces, to have loading and unloading dock. The site would also need to be located in a shopping area if possible. Being close to a main highway or street would not hurt so that customers would not have to worry about taking surface streets or waiting a long time for their delivery to get to them.

Expando, Inc. is considering the possibility of building an additional factory that would produce a new addition to their product line. The company is currently considering two options. The first is a small facility that it could build at a cost of $6 million. If demand for new products is low, the company expects to