Developing a New Product for IKEA: Production of Digital Television

This report discusses the development of a new product, digital television, for IKEA. It covers the product life cycle, value proposition, competitive advantage, customer decision making, and acquisition. The report also analyzes the environmental, economic, and social dimensions of the product. The report concludes that the new product is likely to succeed, given IKEA's concern for individuals with limited home spaces and income.

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Entrepreneurship and Venture Planning
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Table of Contents
Introduction.................................................................................................................................................3
Projection and the Product Life Cycle.........................................................................................................3
Environmental Dimension...........................................................................................................................3
Economic Dimension..................................................................................................................................3
Social Dimension........................................................................................................................................4
Value Proposition........................................................................................................................................4
Competitive Advantage...............................................................................................................................5
Porter’s 5 Forces..........................................................................................................................................5
Customer Decision making and Acquisition................................................................................................6
Circular Journey of Decision Making..........................................................................................................7
Conclusion...................................................................................................................................................7
Bibliography................................................................................................................................................8

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Introduction
IKEA is the largest furniture retailer globally. The organization was founded in 1943 and
its success in the industry is attributed to its experience in product differentiation, retail market as
well as cost leadership. In the design and development process of a new product, the firm begins
by understanding the daily needs of its customers, particularly the needs of the individuals with
limited living spaces and income. By so doing, IKEA has been successful in offering its clientele
well-designed and functional products at low prices that most individuals can afford. This report
aims at developing a new product, - production of digital television- for IKEA. The parts of the
report include a projection of the product life cycle, value proposition, competitive advantage,
customer decision making and conclusion, including a summary and conclusion.
Projection and the Product Life Cycle
Environmental Dimension
The life cycle perspective of the new product should be such that it adheres to the
environmental dimensions of sustainability. IKEA can manufacture digital television for its
customers by taking into account environmental dimensions such as reducing the use of
hazardous materials in its new product (Hiatt and Sine, 2014, pp.775). Such measures include
developing OLED TVs that are mercury-free, making use of PVC-free internal cables, as well as
BFR-free parts.
Economic Dimension
The product life cycle under this dimension is concerned with the cost and performance
of the digital TV. IKEA is famous across the globe for producing home products that are cost-
friendly and of good quality. With specialized designers and manufacturers at its factory floor,
best raw materials are scrutinized, aimed at lowering production costs (El Ebrashi, 2013,

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pp.192). As a result, with low production costs, the product can be offered at low prices thus
increasing the company’s sales and distributing competition in the industry.
Social Dimension
IKEA is an organization that is committed to social responsibility, including being
directly involved in matters that impact on children. By adopting the production of this new
product that is of high quality and offered at an affordable price, IKEA can become more
socially responsible (Honig and Samuelsson, 2014, pp.22). This is achievable by engaging its
new clientele with issues affecting children by use of advocacy campaigns, along with
conducting cause-related marketing campaigns to support UNICEF.
Value Proposition
IKEA can manufacture TV sets using the standard HDTV set that comprises of 32-inch,
46-inch, 55-inch, 60-inch, including the WE5 Eco TV that include the 40-inch and 46-inch sizes.
Depending on the size of the television set, the average energy consumption of this new product
is about 90 and 170 watts per hour while in operational. However, when it is in the energy-
saving mode, the product consumes approximately 0.2 watts energy every one hour (Arend,
Sarooghi and Burkemper, 2015, pp.634). Depending on the calibration of every single user,
power consumption will vary. For instance, in the case of a 46-inch TV, with proper calibrations,
the power consumption should be about 80 watts every hour.
IKEA can make this product very competitive in the market by ensuring that it becomes
Energy Star compliant. Considering this fact, customers can greatly save energy and money.
With the product being Energy Star compliant, it is at least 25% more efficient than other
products in the same market and greatly saves the customers’ money over the life of the

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television set. The audio, convenience, as well as picture that comes with IKEA’s commitment
into the production of television, is undoubtedly worthwhile. The product is designed in a slim
profile, presenting a fantastic compliment to every home’s décor (Honig and Samuelsson, 2015,
pp.36). In addition, the product only takes a small place in the house, thus giving the buyer the
convenience as well as the ease to seat and place their Television set in any direction they want.
Competitive Advantage
Investing in the new product will face high competition particularly from organizations
that have already established their brand in the market such as Sony, LG, and Samsung
(Donnellon, Ollila and Middleton, 2014, pp.493). Sony Corporation is an electronics company
that holds leadership in the electronic market. Currently, the company leads in the manufacture
of audio, communications, video, including information technology products (Vanevenhoven
and Liguori, 2013, pp.325). With varieties in electronics and entertainment products, the
corporation has been able to maintain an overwhelming global presence. In addition, LG
Electronics produces a wide range of products that serve every category, including having a
strong focus on quality. Nonetheless, the company has got a strong strategic partnership with
many organizations. As a result, this gives the company the advantage to undertake technological
advancements.
Porter’s 5 Forces
The threat of direct substitutes is low. The reason behind this justification is that there no
too many products available that can satisfy the current demand for quality Television sets at
pocket-friendly prices.

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Rivalry among existing companies is intense. Corporations such as Sony, LG, and
Samsung pose a threat to the success of this new venture. However, studying the market, it is
evident that the products from these organizations are not as cheap as they want us to believe
(Gielnik, et al., 2014, pp.757). Hence, the product standards a better chance to face the
competition.
The threat of new entrant is low because investing in such a venture requires a lot of
capital and a lot of market presence. However, IKEA is known globally for the supply of
furniture, kitchen appliances, among other products (Wainwright and Kibler, 2013, pp.850).
Thus, introducing the new product would perfect since the firm has already established its
presence in the market.
Bargaining power of buyers is estimated to below. The production of this product takes
into account the needs of every customer, especially those that do not have a high income
(Kummitha and Majumdar, 2015, pp.265). Compared to rival companies, the product is to be of
high value and being offered at lower prices.
Bargaining power of suppliers is low. IKEA already has established connections with
many suppliers due to the wide production of home products such as home appliances.
Nonetheless, the company has got its engineers who have the capability to develop some parts
needed for the new product.
Customer Decision making and Acquisition
According to the traditional funnel metaphor, the customer decision-making process for
the new product involves weighing down the products available in the market and making a
decision to purchase. The main consideration here would be the quality and price of the product.

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The post-sale phase determines the client’s loyalty to the new product and the likelihood to
purchase the product again.
Circular Journey of Decision Making
The decision-making process is a circular journey with four phases. The first phase is the
initial-consideration whereby the customer considers a set of brands depending on brand
perceptions and current exposure to touchpoints. Brand awareness is crucial in this case. The
second phase is the active evaluation where the client adds or subtracts a product depending on
what they want by evaluating factors such as quality and price (Kickul and Lyons, 2016, n.d.).
The third phase is the moment of purchase, in which case, the client selects the product to buy.
The final phase is the post-purchase experience (Rae and Ruth Woodier-Harris, 2013, pp.928).
After buying a product, a customer builds expectations depending on their experience such that
they inform their next journey of decision making.
Conclusion
Manufacture of TV sets by IKEA can be a good venture that is likely to succeed
considering the company’s concern for individuals with limited home spaces and income.
Developing cheaper and high-quality TV sets compared to those already available in the market
can be a big win for the organization, especially that it already has established its presence in the
market through products such as kitchen appliances. Customers are always concerned with
obtaining a good quality product at a low cost. As a result, the new product is likely to attract
new customers for the organization.

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Bibliography
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