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Ikea Case Study

1192 words - 5 pages

From product design to the customer’s home, IKEA’s products follow a unique and calculated product development process. By creating this process IKEA is one of the fiercest low-cost furniture competitors in the market today. IKEA’s process for developing a new product contains the following steps: pick a price, choose a manufacturer, design the product, ship it, and sell it. By understanding each of these steps, IKEA’s competitive priorities and exceptional value to its customers, as well as, store placement comes to light.
Step One: Pick a Price
IKEA’s relentless focus on quality and low prices begins from the very start of developing a product. IKEA assigns a price to a product from the ...view middle of the document...

These changes also increased production efficiency by making more space in kiln leading to a decrease in the overall production cost. The increased efficiencies associated during this phase help create more value for the customer overall as well. While the increased shipping and production efficiency helped maintain the low cost of the product, the design change also helped increase the storage capacity of the mug in a person’s kitchen.
IKEA also enforces a strong code of conduct with its manufacturers in order to create a healthy and safe workplace. By enforcing a strong code of conduct, IKEA is able to appeal to the emotional values of many of its customers. Many people decide to shop and spend money with IKEA based on their own personal moral code.
IKEA’s concern for the environment is another one of its IKEA’s competitive priorities seen in the manufacturing phase. By striving to keep the price of the mug lower, IKEA limited the colors available to colors with less pigment such as green, blue, yellow, and white. Colors with less pigment are overall better for the environment allowing IKEA to pass on, not just the lower price, but the environmental concern to its customers.
Step 3: Design the Product
After the manufacturer and price point of the product are finalized, IKEA begins the design of the product. An internal designer begins this process by writing a brief that explains the product’s price, function, materials, and fabricator’s capabilities. After the brief is completed, both staff designers and freelancers begin to refine the design of the product until settling on a final product design to produce. During this phase designers focus on maximizing functionality of a product at a minimum cost.
Step 4: Ship It
Once the product design is finalized, IKEA begins to ship the new product to its stores. This is where IKEA really focuses on creating and maintaining its extremely low prices. Shipping is IKEAs most important competitive priority. By insisting on flat packing, IKEA uses a 65 percent average fill-rate target for all its shipping containers, and hopes to increase this to 75 percent eventually. With more shipping coming from the Far East, IKEA created a global network of distribution centers.
The Trofe mug design and redesign and redesign is a perfect example of IKEAs focus and drive to improve shipping efficiency. The original mug design allowed 864 mugs to be shipped per pallet. The third and final design of the mug allowed for 2,024 mugs to be shipped per pallet. By prioritizing and demanding efficient shipping, IKEA increased the...

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