Ikea corporate mantra is “Low Price with meaning”. Cost or Price is one of competitive advantage to form a competitive position in market. IKEA mantra incudes bringing meaning to its product, confirms the quality of the product. IKEA Product development process is:
1) Pick a Price
“The Price of the Product in store” is the very first thing decided before starting any other process. Price derives all other following strategies such as Color of the mug could be Red, Yellow and blue only as they cost less.
2) Choose manufacturer:
IKEA works towards reducing the cost and long term relationship help both parties understand each other demands and expectations easily. When you have certain mission in hand like low cost with meaning, it’s better to develop a product under close cooperation with suppliers. Here suppliers suggested IKEA to shortened the mug and changed the handle to stock it easily which save space while packaging and shipping.
Moreover IKEA has code of conduct and make their suppliers to follow that. I think it’s a good practice maintaining the code of conduct across all your suppliers.
3) Design the Product
The designer begins the design process by writing
a) Product Price
b) Its function
c) The material to be used
d) Fabricator’s capabilities
Then design get discussed till they settle on one with lowest price. It all seems to be much disciplined. Attention to details are appreciable here and must be helping them to work smoothly.
4) Ship It :
Distribution and logistics are mentioned as lifeblood of IKEA and their way to low price. They deliver right number of goods to the right store and at the right time. I think it’s eminent to maintain the deliveries in order to win the trust of market. After seeing one of customer struggling to fit table in his car, IKEA started manufacturing assembled item for better packaging and handling which reduced the cost and made customer happy. This implies: First IKEA really care about customers and second it work towards making the things better for both: customer and manufacturer which seems to be fantastic and working concept.
IKEA work towards making the shipping efficient as it redesigned product 3 times to make it flatten so that shipping could be efficient. Shipping more item in one go saves money for IKEA and in turn this saving comes to Customers also.
Such dedication to work towards shareholders and stakeholders keep the fame up.
5) Sell It
IKEA put expensive items in lush setting to attract customers and give various credit options for easy payments. On the other hand cheaper stuffs are without salesperson and any conspicuous price reduction. It also asks customers to assemble their furniture. It has started membership program which enhances the strength of their loyal customers. With some unusual restrictions like always paid shipping to home, non – assembled items, IKEA has different setting in the industry, however with its other strategies like free meals for kids on Tuesday, and low price with value, IKEA has been able to capture its market.
I think IKEA is doing best at Value Engineering and reducing cost wherever possible.
Kristin and `Davis (2004) stated in their paper “Finding Value in the Value Engineering Process” that value engineering is just one of the tools available to owners seeking to keep project budgets under control and cut cost, however most owners believe that designers perform value engineering as a normal part of their design or that it should only be done when a project is over budget. They described number one advantage of using this tool is