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Ikea - Case Study Example


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The value is foremost focused on the customers. Ikea has an idealistic notion of its business, where it emphasizes customer needs and budget as its way of life. Its organizational culture and production approach concentrate on delivering value that has meaning for customers because it is value that they can afford and it results to products that have practical essence to their lives. Aside from customer-centered pricing, Ikea produces value for its shareholders through its pricing strategy. Rydberg-Dumont explains that Ikea starts with the price tag and designs products from there. She says: “We design the price tag first.” The target price is aligned with market needs, so that the products will have sure buyers.2 The pricing strategy allows Ikea to focus on manufacturing products that have high quality and that are constantly evolving according to changing customer needs and lifestyles. Ikea serves value to its shareholders by ensuring that it makes products that not only customers can afford, but can provide profit for the company. Ikea carefully balances the target price through aligning market needs and lifestyles and production costs, so that the company makes profit that can enable it to continue and to expand its business. Ikea’s promise of value permeates all products, including the Klippan sofa. Rydberg-Dumont describes the strengths of the Klippan sofa where it balances price and quality. She says that the slip sofa is her favorite Ikea product because it has a slipcover that

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people can take off and wash.3 People can buy slip covers with different designs and colors. This makes the product convenient to maintain. Furthermore, the Klippan sofa can retain its “modern” appeal throughout time. Different designs make the sofa look new and exciting. In addition, Rydberg-Dumont stresses that Ikea even improved the quality of the sofa over time. She explains that the company built it from the inside. Innovation in Ikea’s manufacturing process continues, which enhances the excitement factor for the sofa. Finally, the sofa represents the value-and-price offering of the company. Ikea has lowered the cost of the Klippan sofa bymaking it smarter and smarter throughout time. By “smarter,” she means that it is now a self-assembly sofa. It is the ultimate IKEA product because it can be transported easily and assembled effortlessly at home and it has good quality for a low price. Hence, the Klippan sofa manifests the promise of value of Ikea through being an innovative, good quality, low-cost product. Aside from discussing the example of the Klippan sofa, Ikea is described as pursuing value-based pricing approach, specifically good-value pricing, instead of a cost pricing approach that some manufacturing companies follow. Ikea follows good-value pricing because it combines quality and fair price that customers determine.4 Like the example of the Klippan sofa, Ikea starts with a product’s target price that is based on customers’ needs and lifestyle. Rydberg-Dumont describes that Ikea sells products that have “good function” at low prices, with the fundamental aim of serving people who care about value. She says: “It’s for all the people.”5 The value comes from starting with people’s perceptions and lifestyle. An Ikea employee talks about developing “exciting and special home furnishing offer.”


Name Instructor Class 12 July 2013 Ikea: Good-Value Pricing Strategy Ikea is a multinational corporation that produces and sells low-cost, good-quality furniture. Its promise of value is driven by its mission: “To create a better everyday life for the many people.” To do so, it pursues good-value pricing strategy, where it can offer a better life to its customers by providing quality furniture that they can afford…
Author : yundtjimmie
Ikea case study essay example
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