Case Ikea Design and Pricing

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| DESIGN AND PRICING | BUSN 6110/ME – OPERATIONS & PROJECT MANAGEMENT | | [Type the author name] | 6/14/2011 | CASE IKEA: DESIGN AND PRICING 1. What are IKEA’s competitive priorities? IKEA’s competitive priorities are price, design and function. Each one of these competitive priorities is explained in detail below: - Design- While most retailers use design to justify a higher price, IKEA designers work in exactly the opposite way. Instead they use design to secure the lowest possible price. IKEA designers design every IKEA product starting with a functional need and a price. Then they use their vast knowledge of innovative, low-cost manufacturing processes to create functional products, often co-ordinated in style. Then large volumes are purchased to push prices down even further. Most IKEA products are also designed to be transported in flat packs and assembled at the customer's home. This lowers the price by minimizing transportation and storage costs. In this way, the IKEA Concept uses design to ensure that IKEA products can be purchased and enjoyed by as many people as possible. - Function- Many people have many different needs. IKEA tries to make the most out of a small space. IKEA designers are always seeking new ways to improve their customer’s lives while at the same time saving them money. - Low Price- Low price is a prerequisite for the IKEA brand and its aim is to serve many people and to do this the IKEA product range needs extremely low price levels. IKEA designers do their part to keep prices low by using production capabilities from other areas in unique and previously unimagined ways. For example, having a shirt factory produce furniture upholstery or using leftover materials from the production of one product to create an entirely new one. IKEA customers also contribute to keeping prices low by selecting

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