Chapter 4 : Product Design

1
How IKEA Designs Its Price Tags

• Chapter 4 Product Design
• Case Study by
• Agatha Bober

2
BEGINNING OF THE CONCEPT

• Ingvar Kamprad, an entrepreneur from Sweden
  began the concept. Although the soil is thin
  poor, the people have reputation for working
  hard, living frugally making the most out of
  limited resources. When Ingvar started his
  furniture business in late 1940s. He applied the
  lessons he learned wanted to offer home
  furnishing products of good function design at
  prices lower than others. Using cost-cutting
  solutions, that wouldnt affect the quality
  ideas of products.

3
CORPORATE GOAL

• Corporate mantra is Low price with meaning.
• Making things less expensive without ever making
  customers feel cheap
• To be successful theres a need for special kind
  of design, manufacturing, distribution
• Sell of household products 30 - 50 below
  competitions

4
THE PROCESS
BANG Is How IKEA Works

• 5 step process used with example of a mug Bang
• Pricing Manufacturing Design Distribution
  Sales
• Bang mug is the most popular IKEA product
• Next year about 25 millions will be sold
  worldwide
• From co-workers idea through production sales
• Analysis of materials, colors design of the mug

5
PICK A PRICE
Product Development

• Sketch for a new product
• Calculation of what the product will cost
• Low price at the drawing board
• Team behind each product
• Designers, product developers, purchasers
• Purchasers use their contracts w/ suppliers
  worldwide via IKEA Trading Service Offices.

6
Generic Product Development Process
OVERVIEW

• Process Type (market-pull product)
• Description the team begins with a market
  opportunity selects appropriate technologies to
  meet customer needs
• Distinct Features Process generally includes
• distinct planning concept development
• system-level design
• detail design
• testing refinement
• production ramp-up phases

7
CHOOSE A MANUFACTURER
Suppliers Purchasing

• Finding the right supplier worldwide
• Investing in specially adapted equipment for
  fast efficient production
• The mugs size was changed to help in production
  process (better use of space)
• Close relationship w/ supplier
• Knowledge about demands expectations.

8
DESIGN THE PRODUCT
Maximum Functionality at Minimum Cost

• Price point Manufacturer already established
• Find the designer design for production
• Written brief of the product in detail
• products price, its function, materials to be
  used fabricators capabilities
• IKEAs staff designers freelancers evaluate
  settle on the promising design.

9
SHIP IT
Distribution Logistics

• Right number of goods, right stores, right time
• The products are disassembled flat packaged
• Lowering shipping costs
• Maximizing shipping space
• Lowering cost of production
• Mug was redesigned 3 times to fit the greater
  number on the on a pallet
• 864 same .50

10
SHIP IT
Distribution Logistics

• Creation of a global network of distribution
  centers
• 18 IKEA distributors centers worldwide handle
  70 of product line
• 30 of products travel directly from supplier
  store
• Some product components come together for the
  first time in the store
• Important criteria for selecting a site for an
  IKEA store is near container ports major truck
  rail routes

11
SELL IT

• In- store display is important
• The layout of the store guides in manipulated
  path
• Catalogues are available to choose products from
• Realistic home settings for customers to sit in
• Info. kiosks provide advice on home decor
• Color - coordination cards to suggest ideas
• Customers contribute to low price by
• Selecting collecting from self-serve area
• Assemble the furniture themselves
• Child care facility mini restaurant café

12
FACTS FIGURES

• 200 stores in more than 30 countries 90,000
  co-workers
• More than 100 million households worldwide
  receive the catalogue, free of charge. This year
  it was in 47 editions 24 languages for 32
  countries.
• Turnover of all IKEA stores
• is 14,564 (million EURO) 17,581
  (million USD)

13
DETAILED PROCESS

• Product Design Process
• The Product Development Process ( 5 phases)
• Marketing / Design / Manufacturing / Other
  Functions
• Economic Analysis of Product Development Projects
• Build a Base-Case Financial Model
• Analysis of Project Trade-Offs what if
• Designing for the Customer
• Quality Function Deployment
• Value Analysis/ Value Engineering
• Designing Products for Manufacture Assembly
• How Does Design for Manufacturing Assembly
  Work?
• Measuring Product Development Performance