CASE

STUDY

How IKEA
Design Its
Sexy Price
Tag

MO - MMT/MI-ITS

Anang J/Imanuel L/Sandy

Milestone of IKEA name was born
IKEA is named after the initials of
founder Ingvar Kamprad, Elmtaryd, the farm
on which he grew up, and Agunnaryd, the
nearby village.

1926 1943 1953 1965

Ingvar Kampard 1st Showroom Flagship IKEA store opens

IKEA Founder born - Open in Älmhult Stockholm-
Pjätteryd, Swedia Largest
Furniture
Store
20XX

2018
Ingvar Kampard
IKEA founder passed away
on 27 Januari 2018
2014
Indonesia 1st IKEA
October 15th, AS, Tanggerang,
no. 50th Country with total 5
store available

Latest Achievement
Nov 2021; 454 Stores, 60 Countries 2021 20XX
Case Study – Preliminary

ORIGIN
The origin of this IKEA is Sweden.
Up to Nov 2021; 454 Stores in 60 Countries
Conquered North America, Brazil and to
includeVietnam on 2025 Development Plan

BATTLE PLAN
Keep making its offerings less expensive,
without making them cheap.
Case Study – Preliminary

“ONE FACTOR ACCOUNTS FOR IKEA’S SUCCESS”

• Good quality at a low price.
• Sells household items at cheap rate but not cheapo.
• Prices runs 30% to 50% below the competitions.
• Price of Pöang chair has fallen from $149 in 2000 to $99 in
2001 to $79 today.
Case Study – Preliminary

CORPORATE MANTRA “LOW PRICE WITH MEANING”

• To make things less expensive without ever making
customers feel cheap.
• Stricking that balance demands with special of design,
manufacturing and distribution expertise.
• IKEA’s use their own distinctive way which differently than
other company anywhere (tastefully, methodically etc.)
Case Study – Preliminary

STORY OF THE “ BANG-Trofe” MUG

“one of the most product success story”
• IKEA works from a co-worker’s bright idea
through to production and sales.
• Also tells about our demand and customers
place on IKEA.
• Our requirements-function, modern design,
environmental considerations and making sure
products.
Case Study – IKEA’s Flow Process

1. PICK A PRICE
2. CHOOSE A MANUFACTURER
3. DESIGN THE PRODUCT
4. SHIP IT
5. SELL IT
Case Study – IKEA’s Flow Process

1. PICK A PRICE
Product development
Team behind each product
• Designers – low price begin from at the drawing board.
• Product developers – PIC : PIA Eldin Lindsten
#Given the task of creating a new mug & told about its cost in the stores, also final
incredibly low cost.
#Mug had a read knock-out price.
#PIA and His Colleagues also chosen the correct Materials, Color and Design
(E.g. If the mug is made on green, blue, or yellow or white as these pigments cost less than
other shades, such as red.)
• Purchasers get together to discuss design, materials and suitable suppliers.
E.g. Purchasers use their contacts with suppliers all over the world via IKEA Trading Services
Offices – who able to supply with the right price in the right time.
Case Study – IKEA’s Flow Process

2. CHOOSE A MANUFACTURER
Suppliers and Purchasing
• Task of developing products never ends.
• Working with suppliers, the mug was shortened and the handle change so it
stacks more efficiently, saving space for transport, warehousing and store
display and not least, in the customers cupboards at home.
E.g. Supplier from Rumania which co work 15 years with IKEA :
Long-term relationships help both parties to build up a huge fund of knowledge about
demands and expectations.
Products are developed in close cooperation with suppliers : The new size has rationalized
production – space in the kiln during firing process increase, cost effective and save time
• IKEA is always keen to banish as much air as possible from its packaging. Should
be flat efficient and during transport.
Case Study – IKEA’s Flow Process

2. CHOOSE A MANUFACTURER
IKEA’S Code of conduct :
• Governing working condition.
• Environmental awareness among suppliers (lead and cadmium free)
• Healthy and safety conditions on the workplace.
• Forbids the use of child labour.
• This code is carried out by co-worker in IKEA Trading Services Offices.
Price Tags by IKEA :
• Low price tags makes it crucial to the vision IKEA of creating a better everyday
life for many people.
• IKEA works non-stop to reduce cost.
• Low-cost mugs is an example of low environmental considerations can influence
the development of products.
Case Study – IKEA’s Flow Process

3. DESIGN THE PRODUCT

•Designer begins design process by writing a brief.
•Explains the product’s price.
•Function.
•Materials to be used.
•Fabricator’s capabilities.
•Send its to IKEA’s designers and freelancers.
•Refines promising designs.
Designer wants products to be like Swiss Army knives-to get
maximum functionality of minimum cost.
Case Study – IKEA’s Flow Process

4. SHIP IT
• Distribution and logistics-lifeblood of IKEA
• Important pieces of the puzzle on their road to a low price.
• Sends goods at right number to right stores at right time.
• Calculate the goods requirements and make sure about deliveries.
• About 2024 mugs are distributed all over the world from Romania
by rail, road and sea.
• Transportation by IKEA also reduces environmental impact.
Case Study – IKEA’s Flow Process

4. SHIP IT
CONSEPT OF “FLAT”
• Establishment of company’s eureka moment in 1956.
• In case of chair taking more space: remove the legs.
• IKEA products have been designed to ship disassembled.
• Flat enough to be sipped into the cargo hatch of a station wagon.
• Safety tied down an auto’s roof rack.
• It lowers the shipping cost by maximizing the use of space inside
shipping containers.
• Items assembled means transport volume will be 6 times of its
original volume.
Case Study – IKEA’s Flow Process

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

3 Times redesigning of IKEA Mugs

• To maximize the number of mugs that can be stored on a pallet.
• A redesign-Added a rim such as in a flowerpot, where each pallet could hold
280 mugs.
• Another redesign-a shorter mug with a new handle, allowing 2024 mugs to
squeeze onto pallet.

RESULTING : Mug’s sales price-50%

Shipping cost-reduced by 60%
Case Study – IKEA’s Flow Process

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

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

18 distribution centers in the world-

• Handle 70% of IKEA’s total product line.
• 30% of IKEA’s products travel directly from supplier to store.
Case Study – IKEA’s Flow Process

5. CELL IT

Sells lot of expensive furniture by these processes-

• Put a piece in a lush setting.
• Let the customer fall prey to visions of wealth and
comfort.
• Offer plenty of easy credit.
Case Study – IKEA’s Flow Process

5. CELL IT
Selling of Trofé Mugs
• Mugs are packed on pallet.
• Transportation packaging is collected from recycling.
• Price tags has been placed by the suppliers.
• Display is to be done in-store.
• Providing inspiration for smart interior solutions.
• Contribution of customers to low prices by selecting and collecting the products
from the self-serve area.
• Taking them home.
• Enclosing instructions to assemble them.

IKEA produced catalogues about the products printed in 34 different language

versions.
Case Study – IKEA’s Flow Process

5. CELL IT
Scene of IKEA stores
• Scene of meticulously constructed virtual Sweden.
• Company sponsoring child care facility.
• Swedish meatballs and lingonberries.
• Information kiosks provide advice on home décor.
• Color-coordinated cards offer plenty of suggestions.
• Low-priced products that IKEA calls BTIs
(“breathtaking items”) are often perched on risers, framed by
huge yellow price tags.
Case Study – IKEA’s Flow Process

5. CELL IT

IKEA’s Main Mantra for the Customers-

“In New year it will be an even

cheaper”.
 Thanks
Salam Sehat Selalu