Ikea Case Study

IKEA Case Study

Questions

1. What are IKEA’s competitive priorities?

The IKEA concept is based on their market positioning statement “Your partner in better living. We do our part, you do yours. Together we save money” and focuses on a commitment to product design, consumer value and clever solutions. By using inexpensive materials in a novel way and minimizing production, distribution and retail costs, their customers benefit from low prices. In addition, the company’s relationship with its suppliers and external partners (external audit control & audit companies) has also given IKEA competitive advantage. Through this IKEA is able to monitor the quality of the materials to be used in its products, thus reducing cost, while achieving manufacturing efficiency.

1. Describe IKEA’s process in developing a new product.

The design of IKEA’s products begins with an understanding of its customers’ needs. Then, a target price would be set for a product, where materials, product specifications and design will be taken into account. The company then choose a manufacturer that can efficiently produce the product taking into consideration, quality, working conditions and environmental awareness. IKEA has been building relationships with their suppliers. These suppliers does not only meet the company’s demands but also work with them together to carry on necessary improvements of the product. With the price point and manufacturer, IKEA proceeds with the designing process with the goal of maximizing functionality of each product. The finished products are then shipped and distributed. IKEA strives to deliver the right number of goods to the right stores at the right time.

1. What are the additional features of the IKEA concept (beyond its design process) that contribute to creating exceptional value for the customers?

The way the company ships its products is a major contributor to creating exceptional value to customers. By shipping flat and maximizing the number of products shipped and the use of space in their shipping containers, shipping cost is reduced which means lower price to customers. IKEA works in many ways not only to rationalize and simplify distribution, but as well as to minimize the impact this part of the business has on the environment. The formula is to calculate as exactly as possible how many products will be needed to satisfy demand. This eliminates any unnecessary costs for production and warehousing.

1. What would be the important criteria for selecting a site for IKEA store?

A criterion to consider in choosing a site for an Ikea store is to make sure the space is large enough to accommodate large showrooms and products. IKEA makes sure it’s close proximity to its suppliers, which is one way of creating good business relations between companies involved. The trading service office’s employees can make frequent visits to suppliers and follow the production process closely, enabling new ideas to be tested and regular quality controls to be made.

II. Essay / Conclusion

How to relate IKEA strategy to the Philippine Business Environment?

There is a growing demand for living room furniture items in the Philippines. Tourism-based enterprises face growing needs to update their amenities. At the same time, families’ easier access to on-line shopping and the continued development of condominiums in highly urbanised areas indicates a strong market.

The Philippines furniture industry is one of the most labor-intensive and artistic industries in the country. Ninety five percent of furniture companies are classified as SMEs and the three major production areas are in Cebu, Pampanga and Metro Manila.