IKEA Essay Example for Free

IKEA Essay IKEA, the Swedish retailer, is known for its good-quality, inexpensive products, which are typically sold at prices 30–50% below those of its competitors. While the price of products from other companies continues to rise over time, IKEA’s retail prices have been reduced by a total of 20% over the last four years. At IKEA, the process of cost reduction starts at product conception and continues throughout the process of design, sourcing of materials and components, production, and distribution. For example, the â€Å"Bang† mug has been redesigned many times to realize shipping cost savings. Originally, 864 mugs would fit into a pallet. After redesign a pallet held 1,280 mugs, and with a further redesign 2,024 mugs could be squeezed into a pallet, reducing shipping costs by 60%. IKEA strives to deliver the right number of goods to the right stores at the right time to make sure that the deliveries are efficient. IKEA’s mantra in shipping has always been the same stating â€Å"We don’t want to pay to ship air†. IKEA’s products are shipped in flat boxes by not only reducing shipping for IKEA, but making it easier for customers to be able to slip it in the cargo hatch of a station wagon. New Product Process: Product Price The process of developing a new product at IKEA starts with a team of designers, product developer and purchasers who get together to discuss design, materials, suppliers and pricing. Everyone contributes and purchasers use their contacts with suppliers all over the world to find who can make this product at best quality for the right price at the right time. Manufacturer IKEA’s products are often developed in close cooperation with suppliers. IKEA has introduced a code of conduct governing working conditions and environmental awareness among suppliers. This deals with matters of health and safety at workplace that forbids use of child labor. IKEA implements quality control with external audits who check IKEA and external suppliers. The manufacturer is chosen based on several factors and kinds of materials used for the product. Design The team works with existing pool of manufacturers and suppliers with a price point to identify the best designer and select a design for production. This is a continuous process that involves designer submitting a brief about the product’s price, it’s function, materials used and fabricator’s capabilities. This design is reviewed by IKEA’S staff designers and freelances until the design is refined to be the best. Shipping IKEA has pioneered the concept of flat. This flat package enables IKEA to lower shipping costs by maximizing the use of space inside shipping containers. There is no storage waste. The company has estimated that if the products are assembled and shipped, then the transport volume would be six times it’s original. IKEA has created a global network of distribution centers, most of which are near container ports and major truck and rail routes for efficient distribution. Sales IKEA designs its stores – a kind of theme park traversing as a furniture outlet. The layout of an IKEA store guides shoppers through a predetermined path of several model homes. Customers can sit in, try it out. The emphasis is always on low priced products with yellow price tag. The IKEA centers have day care as well as dine in options. The biggest selling point is on price tag. Additional Features – Value for Customer IKEA contributes to adding value to the customer includes its relationship with suppliers, distribution and logistics, and customer service in their stores. IKEA keeps costs low and offers good quality products. IKEA tries to reduce their prices every year. Going green is the mantra adopted by the company along with ethics which believe in no child labor. The logistics and the way their products are packed to the way they are stored is remarkable. Providing an on-site day care and a cafà © makes the shopping experience good for children and their parents, to the way they display their products. The products are packed in such a way that customers can load them in the cars or u-hauls and transport them to their homes or offices. A customer is satisfied after viewing the product they have assembled.