WELCOME WELCOME EVERYONEEVERYONE

AA CASE STUDY CASE STUDY

PRESENTED BY-PRESENTED BY- SOMALI DASSOMALI DAS MADHURIMA DASMADHURIMA DAS PRAJNA PATTNAYAK PRAJNA PATTNAYAK

LIPIKA PADHYLIPIKA PADHY

SUBMITTED TO-SUBMITTED TO-MISS POOJA PATTNAIKMISS POOJA PATTNAIK

CASE STUDY ONCASE STUDY ONHOW IKEA DESIGNS ITS SEXY HOW IKEA DESIGNS ITS SEXY PRICE TAGSPRICE TAGS

ORIGIN-ORIGIN-The origin of this IKEA is The origin of this IKEA is Sweden.Sweden.DEVELOPER-DEVELOPER-Pia Eldin LindstPia Eldin Lindsténén• Dominates markets in about 32 Dominates markets in about 32

countries.countries.• Also conquered North America.Also conquered North America.

BATTLE PLAN-BATTLE PLAN-Keep making its offerings less expensive, Keep making its offerings less expensive,

without making them cheap.without making them cheap.

ONE FACTOR ACCOUNTS FOR ONE FACTOR ACCOUNTS FOR IKEA’S SUCCESS-IKEA’S SUCCESS-

• Good quality at a low price.Good quality at a low price.• Sells household items at cheap rate Sells household items at cheap rate

but not cheapo.but not cheapo.• Prices runs 30% to 50% below the Prices runs 30% to 50% below the

competitions.competitions.• Price of PPrice of Pöang chair has fallen from öang chair has fallen from

$149 in 2000 to $99 in 2001 to $79 $149 in 2000 to $99 in 2001 to $79 today.today.

IKEA’S CORPORATE IKEA’S CORPORATE MANTRA-MANTRA-

““LOW PRICE WITH LOW PRICE WITH MEANING”MEANING”

IKEA’S ONE OF THE PRODUCT-IKEA’S ONE OF THE PRODUCT-TROFTROFÉ MUGÉ MUG

STORY OF THE MUG-STORY OF THE MUG-

• IKEA works from a co-worker’s bright IKEA works from a co-worker’s bright idea through to production and sales.idea through to production and sales.

• Also tells about our demand and Also tells about our demand and customers place on IKEA.customers place on IKEA.

• Our requirements-function, modern Our requirements-function, modern design, environmental considerations design, environmental considerations and making sure products.and making sure products.

PICK A PRICE-PICK A PRICE-

Product development-Product development-

Team behind each product-Team behind each product-

• DesignersDesigners

• Product developersProduct developers

• Purchasers get together to discuss Purchasers get together to discuss design, materials and suitable design, materials and suitable suppliers.suppliers.

E.g. Purchasers use their contacts E.g. Purchasers use their contacts with suppliers all over the world via with suppliers all over the world via IKEA Trading Services Offices.IKEA Trading Services Offices.

Development of TrofDevelopment of Trofé Mug-é Mug-

• Pia given the task of creating a new Pia given the task of creating a new mug over 5 years.mug over 5 years.

• Also told about its cost in the stores.Also told about its cost in the stores.

• The TrofThe Trofé mugs are incredibly low é mugs are incredibly low cost.cost.

• Mug had a read knock-out price.Mug had a read knock-out price.

How to produce the right mug How to produce the right mug at right place?at right place?

Pia and her colleagues had take into Pia and her colleagues had take into account the following things-account the following things-

• MaterialsMaterials• ColourColour• DesignDesignE.g. If the mug is made on green, blue, E.g. If the mug is made on green, blue,

or yellow or white as these pigments or yellow or white as these pigments cost less than other shades, such as cost less than other shades, such as red.red.

CHOOSE A CHOOSE A MANUFACTURER-MANUFACTURER-

Suppliers and Purchasing-Suppliers and Purchasing-• Task of developing products never Task of developing products never

ends.ends.• Working with suppliers, the mug was Working with suppliers, the mug was

shortened and the handle change so it shortened and the handle change so it stacks more efficiently, saving space stacks more efficiently, saving space for transport, warehousing and store for transport, warehousing and store display and not least, in the display and not least, in the customers cupboards at home.customers cupboards at home.

• IKEA is always keen to banish as much IKEA is always keen to banish as much air as possible from its packaging.air as possible from its packaging.

Story about a Romanian Story about a Romanian Supplier-Supplier-

• Worked with IKEA for 15 years.Worked with IKEA for 15 years.

• Long-term relationships help both Long-term relationships help both parties to build up a huge fund of parties to build up a huge fund of knowledge about demands and knowledge about demands and expectations.expectations.

• Products are developed in close Products are developed in close cooperation with suppliers.cooperation with suppliers.

Introduction of code of Introduction of code of conduct by IKEA-conduct by IKEA-• Governing working condition.Governing working condition.

• Environmental awareness among Environmental awareness among suppliers.suppliers.

• Healthy and safety conditions on the Healthy and safety conditions on the workplace.workplace.

• Forbids the use of child labour.Forbids the use of child labour.

• This code is carried out by co-worker This code is carried out by co-worker in IKEA Trading Services Offices.in IKEA Trading Services Offices.

Price Tags by IKEA-Price Tags by IKEA-

• Low price tags makes it crucial to the Low price tags makes it crucial to the vision IKEA of creating a better vision IKEA of creating a better everyday life for many people.everyday life for many people.

• IKEA works non-stop to reduce cost.IKEA works non-stop to reduce cost.

• Low-cost mugs is an example of low Low-cost mugs is an example of low environmental considerations can environmental considerations can influence the development of influence the development of products.products.

Characteristics of New Mug-Characteristics of New Mug-

• Lighter in colour.Lighter in colour.

• Cuts costs.Cuts costs.

• More environment friendly.More environment friendly.

• Lead and cadmium free.Lead and cadmium free.

• Use of less pigment.Use of less pigment.

DESIGN THE PRODUCT-DESIGN THE PRODUCT-• Designer begins design process by Designer begins design process by

writing a brief.writing a brief.• Explains the product’s price.Explains the product’s price.• Function.Function.• Materials to be used.Materials to be used.• Fabricator’s capabilities.Fabricator’s capabilities.• Send its to IKEA’s designers and Send its to IKEA’s designers and

freelancers.freelancers.• Refines promising designs.Refines promising designs.Designer wants products to be like Designer wants products to be like

Swiss Army knives-to get maximum Swiss Army knives-to get maximum functionality of minimum cost.functionality of minimum cost.

SHIP IT-SHIP IT-• Distribution and logistics-lifeblood of IKEADistribution and logistics-lifeblood of IKEA

• Important pieces of the puzzle on their Important pieces of the puzzle on their road to a low price.road to a low price.

• Sends goods at right number to right Sends goods at right number to right stores at right time.stores at right time.

• Calculate the goods requirements and Calculate the goods requirements and make sure about deliveries.make sure about deliveries.

• About 2024 mugs are distributed all over About 2024 mugs are distributed all over the world from Romania by rail, road and the world from Romania by rail, road and sea.sea.

• Transportation by IKEA also reduces Transportation by IKEA also reduces environmental impact.environmental impact.

Concept of Flat-Concept of Flat-• Establishment of company’s eureka Establishment of company’s eureka

moment in 1956.moment in 1956.• In case of chair taking more space: remove In case of chair taking more space: remove

the legs.the legs.• IKEA products have been designed to ship IKEA products have been designed to ship

disassembled.disassembled.• Flat enough to be sipped into the cargo Flat enough to be sipped into the cargo

hatch of a station wagon.hatch of a station wagon.• Safety tied down an auto’s roof rack.Safety tied down an auto’s roof rack.• It lowers the shipping cost by maximizing It lowers the shipping cost by maximizing

the use of space inside shipping containers.the use of space inside shipping containers.• Items assembled means transport volume Items assembled means transport volume

will be 6 times of its original volume.will be 6 times of its original volume.

From design studio to From design studio to warehousing, IKEA’s warehousing, IKEA’s employees mantra-employees mantra-

““We don’t want to pay to We don’t want to pay to ship air”.ship air”.

3 Times redesigning of IKEA 3 Times redesigning of IKEA Mugs-Mugs-• To maximize the number of mugs To maximize the number of mugs

that can be stored on a pallet.that can be stored on a pallet.

• A redesign-Added a rim such as in a A redesign-Added a rim such as in a flowerpot, where each pallet could flowerpot, where each pallet could hold 280 mugs.hold 280 mugs.

• Another redesign-a shorter mug with Another redesign-a shorter mug with a new handle, allowing 2024 mugs to a new handle, allowing 2024 mugs to squeeze onto pallet.squeeze onto pallet.

Mug’s sales price-50%Mug’s sales price-50% Shipping cost-reduced by 60% Shipping cost-reduced by 60%

• When 25 million cubic metre of When 25 million cubic metre of goods all over the globe is taken, goods all over the globe is taken, flat-pack frugality adds up.flat-pack frugality adds up.

It shifted more of its buying from It shifted more of its buying from Europe to the far East.Europe to the far East.

• Shipping time.Shipping time.• Costs have become an even more Costs have become an even more

critical concern.critical concern.• Last year China tied Sweden atop Last year China tied Sweden atop

IKEA’s list of supplier countries.IKEA’s list of supplier countries.

Company’s response by-Company’s response by-• Global network of distribution centers.Global network of distribution centers.• Near container ports.Near container ports.• Major truck.Major truck.• Rail routes.Rail routes.

18 distribution centers in the world-18 distribution centers in the world-• Handle 70% of IKEA’s total product Handle 70% of IKEA’s total product

line.line.• 30% of IKEA’s products travel directly 30% of IKEA’s products travel directly

from supplier to store.from supplier to store.

SELL IT-SELL IT-

Sells lot of expensive furniture by Sells lot of expensive furniture by these processes-these processes-

• Put a piece in a lush setting.Put a piece in a lush setting.

• Let the customer fall prey to visions Let the customer fall prey to visions of wealth and comfort.of wealth and comfort.

• Offer plenty of easy credit.Offer plenty of easy credit.

Selling of TrofSelling of Trofé Mugs-é Mugs-• Mugs are packed on pallet.Mugs are packed on pallet.

• Transportation packaging is collected Transportation packaging is collected from recycling.from recycling.

• Price tags has been placed by the Price tags has been placed by the suppliers.suppliers.

• Display is to be done in-store.Display is to be done in-store.

• Providing inspiration for smart Providing inspiration for smart interior solutions.interior solutions.

• Contribution of customers to low Contribution of customers to low prices by selecting and collecting the prices by selecting and collecting the products from the self-serve area.products from the self-serve area.

• Taking them home.Taking them home.

• Enclosing instructions to assemble Enclosing instructions to assemble them.them.

IKEA produced catalogues about the IKEA produced catalogues about the products printed in 34 different products printed in 34 different language versions.language versions.

Scene of IKEA stores-Scene of IKEA stores-• Scene of meticulously constructed virtual Scene of meticulously constructed virtual

Sweden.Sweden.

• Company sponsoring child care facility.Company sponsoring child care facility.

• Swedish meatballs and lingonberries.Swedish meatballs and lingonberries.

• Information kiosks provide advice on home Information kiosks provide advice on home décor.décor.

• Color-coordinated cards offer plenty of Color-coordinated cards offer plenty of suggestions.suggestions.

• Low-priced products that IKEA calls BTIsLow-priced products that IKEA calls BTIs

(“breathtaking items”) are often perched on (“breathtaking items”) are often perched on risers, framed by huge yellow price tags.risers, framed by huge yellow price tags.

IKEA’s Point of View-IKEA’s Point of View-

• Biggest selling point-price tag.Biggest selling point-price tag.

• Blatantly manipulation layout.Blatantly manipulation layout.

• Having plenty of time to consider Having plenty of time to consider purchases.purchases.

• Broadcast ethos for living in the Broadcast ethos for living in the modern world.modern world.

IKEA’s Main Mantra for the IKEA’s Main Mantra for the Customers-Customers-

““In New year it will be an even In New year it will be an even cheaper”.cheaper”.

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