Esteban Bedoya, PROC 5820, Spring 1 Week 3 Case Study, IKEA 1. What are IKEA’s competitive priorities? IKEA’s competitive priorities focus around providing good quality products at low prices. Their theme of “low price with meaning” embodies a continuous improvement and reduction of costs to pass them on to their customers. IKEA is one of the few companies that manages to reduce instead of increase the prices of their products over the years. They are able to accomplish this priority of low prices through their original process of design, production, packaging, and distribution. The processes employed by IKEA to offer products that are usually 30 to 50 percent lower in price than that of their competition. Another part of IKEA’s competitive advantage is to be involved in the entire process with their suppliers. This ensures that their suppliers utilize acceptable work practices as well as environmentally friendly procedures. 2. Describe IKEA’s process for developing a new product. IKEA’s process of developing a new product, as put in the case study, begins with a rough sketch along with a determination of the approximate price for the item. A team comprised of designers, product developers, and purchaser later establishes the best approaches to develop the item, each providing input from their respective area of expertise. A manufacturer is than chosen using many factors relative to product and the way in which they conduct business. IKEA, as previously mentioned, is thoroughly involved in the entire process. With the price and the manufacturer at hand, an internal competitive process is used to obtain the best design, which should possess the best possible uses, the most cost effective materials, and good quality in mind. Lastly, IKEA focuses on packaging the product in a manner that takes the least amount of space and distributes it through the many strategic stores and distribution centers to be sold. 3. What are additional features of the IKEA concept (beyond its design process) that contribute to creating exceptional value for the customer? IKEA prides itself in providing and making the consumer live the whole product experience within their stores. They don’t just want to sell one product and that is it. They design their stores to be interactive and in a way where you can actually spend long periods of time in them. They show ‘chic’ or modern places within the store, showcasing to customers how they can use IKEA’s furniture and its great functionality or use of space. IKEA focuses on providing their clients many options as well as practical and multiuse products. Also, since IKEA’s products are cheap, their consumers are not put off by having to purchase them in a box and assemble them at home. It helps in not having to deal with finding a large truck to transport furniture to the client’s home. IKEA also provides easy to build instruction and most of the tools that are needed for it to be accomplished. Since these products have a reasonable price, the option of reselling them and acquiring new ones for remodeling is a more accessible option. Lastly, IKEA doesn’t have “pesky” sales people accosting the buyers, but relies on knowledgeable staff that is always willing to help. Furthermore, they care about ALL of the clientele, as they have their catalogs printed in 34 different languages, reducing the miscommunication barriers. 4. What would be important criteria for selecting a site for an IKEA store? IKEA should focus on areas that showing a rapid rate of growth and already highly or densely populated areas. The demographic that is more prone to buy at IKEA are young to middle age families. Furthermore, IKEA should focus on staying in areas close to a busy intersections and main highways where the store can be easily seen. Lastly, a focus on an area that isn’t exactly near to their competition, but as close as possible to a distribution center to keep costs low.
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