Midterm

International Operational Management

(MID-TERM EXAMINATION)

GLEMBA-2 class

M. Panji Sukarno - 29113452

Jakarta, 7 June 2014

Case-1: IKEA, Design and Pricing

1. What are IKEA’s competitive priorities ?

Offering low price products with meaning is the top competitive priority of IKEA. This signifies that their products are cost-efficient but remain to have quality, style, relevance and value both to the company and their customers. They are affordable but NOT cheap. This mantra rooted from an integrated design process, which continually seeks to reduce costs from selection of raw materials, production, distribution and logistics, up to its retail set-up.

Moreover, Cost leadership and an exceptional supply chain management are IKEA’s major competitive advantage. With the principle of “low price with meaning” IKEA is able to incorporate cost minimization in every process of developing a product that are modern, functional and a true value for money.

Overall, there are some points for IKEA’s competitive priorities :

* Good value at low cost

* Product designs/range

* Designs, builds and distributes what world wants to buy.

* Convenient shopping.

* Cheap but not Cheapo.

* 30% to 50% low than competitor’s price

* Price reduction of 20% in last 4 years

* Corporate mantra: ”Low price with meaning”.

2. What are IKEA’s process for developing new product ?

Like any other company, whether initiated by top management, market-research, or R&D, product development starts with conceptualization. What sets IKEA apart is that it begins with the end in mind. Their product development process starts with their mantra: low-price with meaning. They do not only determine the needs and wants of their market, its feature, benefit, and attributes like a typical entrepreneur but they also integrate their designs with the cost of each product development cycle’s stage which enables them to calculate immediately its impact to...