IKEA: Providing High Quality Affordable Lighting Solutions

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Table of Contents

IKEA Proposal
Feasibility Study
Competitive Advantage Assessment
Steps for Patenting
Operational Excellence
Supply chain management solution
E-commerce strategy
References

IKEA Proposal

On observing the history of IKEA one notes that the company is mainly concerned with provision of quality products to customers at a reasonable price. Based on this position the company has continued to strive to offer well designed and functional home furnishing products (IKEA, 2011). The main objective of the company in selling affordable furnishings is to improve the lives of more people.

It has been reported that IKEA borrows the above philosophy from its founder who strongly felt a need to develop a business that focuses on lowering costs but maintaining quality. In efforts to lower costs IKEA uses a wide variety of strategies that have proven effective and allow the company to enjoy success internationally (IKEA,2011). It is based on these strengths that his report produces a proposal to use cutting edge technology and the company’s business knowledge to provide high quality affordable lighting solutions to the customers.

To gain a better understanding of the potential for this proposal it is necessary to imagine a future where the transfer of power from source to appliance is possible without the use of wires. It has been established that research into wireless electricity transmission began way back in 1905 (Maruf, 2010).

During this period one Serbian inventor names Nikola Tesla began construction on what was to be the first power station that would transmit electricity wirelessly around the globe. This project failed after his financiers pulled out citing that the project was too farfetched and thus appeared to be a waste of funds.

However, efforts of some physicists from MIT appear to be making significant headway with this research and a solution appears t be in the offing. The physicists created the firm, WiTricity which is among a number of global entities that develops a wide range of appliances used to power up gadgets (Maryum, 2010).

The manner in which this firm intends to do away with wires is through the use of coils. The transmission of power between the source and device takes place through these coils fitted on the device and the power source (Maryum, 2010).

The goal of this is to allow electricity to be transmitted over mid range distances that will allow transmission from a wall to the middle of the room (Maryum, 2010). This allows for significant simplification of several tasks such as lighting. In normal conditions setting up the lighting for a room will require significant cabling to be performed within the room. However, with the use of technology such as that suggested by WiTricity, IKEA will be able to make significant reductions on the cost of interior décor products.

It is believed that this proposal is favorable given the mission of IKEA and its approach to business. It has already been observed that IKEA is focused on provision of high quality affordable products and improving the life of its customers (IKEA 2011). Through exploiting this opportunity the company can go a step further in making a name as an innovator in the furniture industry. This is not to mention the fact that the patent to this product can allow its exploitation in many future household products.

For example, it has been noted that due to the simplicity associated with WiTricity it is possible to build the coil for power under a table. This table will thus automatically eliminate the need for power to devices such as computers, cellphones, iron boxes, etc. that may be used on its surface (Maryum, 2010). This product if patented would allow IKEA to produce a wide range of products not to mention generate a significant amount of revenue in the sale of rights (See Figure 1).

Figure 1: Possible Applications in Furnishings (Wireless Electricity 2011).

Feasibility Study

Given the potential of this proposal it is important to with some feasibility findings to help ascertain the potential profitability of the proposed venture. According to Zaharuddin such findings can be sought in three areas namely, financial, environmental and technical (2008). Given that this is a proposal whose success relies greatly on the functioning of an external product, eh technical feasibility would have to be based on technical data in support of this product.

Having provided a theoretical prediction in relation to wireless electricity, the MIT group embarked on practical tests. In the process of carrying out testing the MIT group managed to light a 60W light bulb using a power source located During these tests they were able to light a 60W bulb from a power source seven feet away in the absence of a physical connection between the source and bulb (Hadley, 2007).

The wireless transmission of power is possible through a number of different approaches. One of the first approaches to be attempted was the use of radiation methods. This entails the use of electromagnetic radiation to transmit the power. The main short coming of this approach is that radiation spreads in all directions and is thus unsuitable for power distribution as it would cause significant wastage (Hadley, 2007).

Instead of using radiation methods, WiTricity used magnetic coupled resonance to perform the power transmission between source and appliance. This is due to the fact that two resonant objects that bear similar resonant frequency tend to exchange energy efficiently (Hadley, 2007).

This approach was then utilized with magnetically coupled resonators to allow for energy transfer even when significant distance existed between the objects. In addition to minimal interference, it has been observed that use of this approach ensures there is much less wastage of power (Hadley, 2007).

The next aspect worth considering in relation to this proposal is the environmental feasibility of the proposal. It has been noted that wireless electricity may not be as efficient as using a cable but its environmental benefits make it a worthwhile consideration (Maruf, 2010). This is due to the significant improvement in the environment that is likely to be seen by its adoption.

For example, simple devices such as wireless keyboards use 4 batteries to operate. During 2010 the demand for such batteries led to the production of approximately 40 billion units. The environmental impact to manufacture a single battery is similar to that caused by driving a car for three miles (Maruf, 2010).

Based on this it is possible to see how adoption of WiTricity could make major improvements in our environment. It is clear that just this simple shift in technology will lead to major reductions in green house gas emissions. It should be noted that given improvement of life is one of IKEA’s goals WiTricity could serve as a very useful product.

The last assessment that will be made in this section will be in relation to the financial feasibility associated with the proposal. It should be noted that due to the fact that the product has already been researched the prospects of its use are much brighter due to the reduced research investment and significant industry attention it is receiving (Kim, 2011).

Among the major international companies that have shown interest in the product include Apple, who may want to use the technology in improving charging technology used in their devices. Intel is also reported to be experimenting the use of this technology within some of their facilities.

This interest in the product will in turn translate to economies of scale that suggest the product cost will not be too high. This is due to the fact that significant interest from diverse parties will increase production capacity and allow for greater distribution of profits.

Competitive Advantage Assessment

Once a product has been identified it is essential for its success that the company develops a strategy that will position its products strategically within the market (Wimmer, Lee, Quella & Polak, 2010). This is due to the fact that strategic positioning of the firm in the marketplace plays a major role in determining the future of the company.

This position suggests a review of the environmental mission and vision of the company (Wimmer et al., 2010). Given that IKEA has already identified a need to encourage the use of affordable materials and innovation to improve standard of living, this report will focus on how to use this to position the company in the marketplace.

The above position serves as a very crucial point for IKEA and the proposal to use WiTricity in future products. Current appliances use electric power that is delivered to the device through a cord (Mchale, 2009). The power that is utilized from a cord leads to wastage due to electrical vampirism. This occurs due to the fact that corded appliances tend t draw up to 20% more electricity than required (Mchale, 2009).

This position is further complicated by the fact that this 20% adds up daily and contributes a significant amount to our eventual expenditure on power. The use of wireless electricity is thus capable of bringing about as much as 20% savings to the electricity bill of a regular house hold (Mchale, 2009).

The product ha sbeen found to be highly efficient when the power available to an appliance and power drawn for the source is compared. Based on data it has been found that the use of WiTricity can increase efficiency to as much as 90% (WiTricity, 2011). This potential to bring about reasonable savings makes this product very suitable for the market and provides a strategic approach to gain a competitive advantage.

The technology used to generate wireless power avoids electrical vampirism due to the use of electromagnetism between the source and the appliance (Mchale, 2009). The only disadvantage with the approach is due to the fact that the source and appliance cannot be placed too far away. This is a small price to pay when one compares the financial savings that such a system will produce.

In addition to savings another factor that can be useful in relation to WiTricity and competitive advantage is its potential impact on renewable energy. Given that the world is currently already aware of the need to reduce the use of non renewable energy there has been an increase in efforts to resort to renewable sources such as solar and wind energy (Mchale, 2009).

It should be noted that a major cost in the existing systems is the cost of cabling and storage of this power. The introduction of WiTricity suggests that construction of projects that were earlier in the range of thousands range may now fall into the range of hundreds (Mchale, 2009). This potential reduction in cost is likely to see a greater number undertake these projects with significant improvements in the environment as a result.

The above data is very crucial for IKEA in relation to its strategic positioning and competitive advantage. It is important to note that in industrialized countries, of the energy resources expended annually 40% of this goes into the generation of electricity (Lacy, 2006). This position has brought about significant controversy n the choice of fuel to use for power generation given the impact of emissions on the atmosphere.

This is often further complicated by the fact that the sources of coal and other fuels used are often remote from the area of demand (Lacy, 2006). The continued use of coal for production of electrical energy has had an adverse impact on the environment.

However, through the use of novel ideas such as WiTricity there is some hope of reducing environmental degradation due to the significant energy savings possible. In addition to that it has been mentioned that the use of WiTricity alongside technologies such as solar and wind energy could serve as a major factor in encouraging its adoption (Mchale, 2009).

Steps for Patenting

To make plans for a product is a crucial part of development given that history indicates that the only difference between monumental success and failure is often just a piece of paper (Rivette & Kline 2000). This case is best illustrated by observing the Kodak case that ended in the costliest R&D disaster in the history of American business.

It is reported that the seven patents involved in the case were owned by Kodak’s archrival in business, Polaroid (Rivette & Kline, 2000). The end result of this litigation was that Kodak was charged almost $3 million for infringement damages, legal fees, R&D wastage and manufacturing costs.

The role of patents in modern business is crucial given that it has been observed that in businesses where the innovation treatment of patents could either result in significant success or loss for the business involved (Rivette & Kline, 2000). This is because the stages involved in between innovation and eventual sales could be costly and lead to a situation where one is forced to sell the company.

In such cases ownership of a patent for the technology in question allow the company to negotiate from a much stronger position than before. This is the position behind the staggering $395 million or 30 times sales that Texas instruments paid for Amati communications, a pioneer in digital subscriber line (DSL) technology (Rivette & Kline, 2000).

These plans are important due to the fact that intellectual property once considered an afterthought is currently a hot topic for debate. The main reason behind this change can be traced to the replacement of the industrial economy with a knowledge based economy (Rivette & Kline, 2000).

This new position has led to a scenario where as opposed to land and property having value, ideas and innovation are extremely valuable. This position suggests any good idea needs to be patented from the onset to avoid the loss of both revenue and ownership to other parties who may seek to have the concept patented (Rivette & Kline, 2000).

Operational Excellence

According to Glazer, operational excellence can be defined as the pursuit of high performance operation within an organization (2012). It has been observed that organizations that strive to attain high performance operations also achieve operational excellence. By nature operational excellence is a continuous pursuit within an organization that considers changes in the environment and reacts to them accordingly. The main purpose of these efforts being to improve quality of service offered to the customer (Glazer, 2012).

An example of this consideration is seen in the initial global expansion that came with globalization. In this first wave several companies relocated to countries that would allow them lower production costs while maintaining quality of products (Glazer, 2012). This approach to business allowed certain companies a competitive edge in that they were able to offer similar or better products at relatively low cost.

This approach of expansion to areas with cheaper labor may be used by IKEA to provide operational excellence and maintain quality. It has already been used by IKEA in the past to manufacture products at a lower cost and should therefore be sustained in the life of the new proposed product (IKEA, 2011).

Another approach that may be used by IKEA in maintaining operational excellence is the concept of franchising. Franchising is a concept that involves establishment of various outlets in many different parts of the world built on a common principle. It is common for franchises to have a patent on designs and logos used in products.

Franchising is especially useful in that it allows the business to open several outlets without financial pressure (York, 2009). Franchises often benefit from the expertise and excellence associate with the brand created by the parent company.

It should be noted that operating a franchise is a complicated task and as such there should be adequate resources allocated to ensure the success of the venture. Among the common tradeoffs that come with franchising is that fact that may franchisees may not have operated a business before (York, 2009).

For this reason it is necessary that the parent company allocate resources to train such individuals so that they are competent to produce quality products and maintain the brand reputation. Given that operational excellence involves improvement and optimization of operations to maximize quality of service it is very important that the parent company have a strategic plan to guide the growth of the outlets.

In relation to achieving operational excellence it has already been mentioned that a clear view of operations is essential. In the case of the proposed product it is suggested that one approach that may be useful is merging of companies. Given that the potential of the product is huge and the patent on the product needs to be protected IKEA and WiTricity could merge to make maximum use of each other (Picot, 2002).

It is important to note that it has already been mentioned that many mergers in recent times have been largely influenced by patenting of products (Rivette & Kline, 2000). At the same time it is also necessary to keep in mind that may mergers fail and as such the pre merger activities involved should be undertaken with great care and attention to detail. However, where companies realign themselves properly post merger successes have also been reported and suggest the strategy may be effective to improve operational excellence.

Supply chain management solution

In relation to supply chain management it is believed that adherence to the value addition principle currently used by IKEA to manage its supply chain should be maintained. This is because of the fact that IKEA has managed to successfully manage its supply chain and keep the company profitable.

The IKEA strategy in terms of supply chain management requires that the supply chain is value driven and distribution points are kept closest to the customer (Sople, 2012). Traditional supply chain links had several additional players such as the agent, distributor and retailer which in turn translate to higher cost of the final product.

In addition to that the approach by IKEA to further lower the cost of the products by leaving assembly to the owner should be maintained as this has led to significant reductions in the transportation expenses and eventual product cost (Sople, 2012). The IKEA image is also heavily reliant on the leverage produced through the use of technology and its Scandinavian image.

The introduction of WiTricity into the design appears certain to ensure these products attain even greater leverage in the marketplace (Sople, 2012). This approach of evaluating the supply chain from the customer to the producer is very effective in identifying opportunities for value addition. This position implies that the organization should work in collaboration with all suppliers, customers and other participants in the supply chain.

E-commerce strategy

Due to data that suggests individuals are spending more time online it appears that there would be significant benefit in using e-commerce strategies in marketing the product (OECD, 2007). Upon observation of statistics from several countries it is clear to see that the number of people using the internet for information about goods has increased (See Figure 2). Based on this therefore it is clear that there is a need to provide an avenue to tap into the online market.

Figure 2: International Internet Activity (OECD 2007).

The exploitation of the increasing number of people who resort to the internet to shop appears to be worth considering (See Figure 3). This position led to the introduction of an online shopping outlet by IKEA in 2007 and it is believed that the maintenance of such an approach to sales will be very useful for the proposed product (Daft & Kendrick, 2010).

Figure 3: Internet Shopping Activity (OECD 2007).

It should be noted that IKEA places a very high value on interaction with the customer and e-commerce is very effective in achieving this. IKEA has almost 32,000 fans on its Facebook page which is used by fans to upload pictures of their rooms. In addition to that the company added a notes application which has proven useful collection of feedback from customers on various issues (Daft & Kendrick, 2010). For this reason it is suggested that an online sales point be maintained and social media be used to gather customer inputs.

References

Daft, R., & Kendrick, M. (2010). Management. Hampshire, UK: Cengage Learning EMEA.

Glazer, H. (2012). High Performance Operations: Leverage Compliance to lower costs, increase profits and gain competitive advantage. New Jersey: Pearson Education Inc.

Hadley, F. (2007). Goodbye Wires!. Web.

IKEA. (2011). The IKEA Concept. Web.

Kim, A. (2011). Apple’s Interest in WiTricity wireless charging. Web.

Lacy, I. (2006). Nuclear energy in the 21^st Century: The world nuclear university primer. Printed in the USA: Academic Press.

Maruf, M. (2010). Wireless Electricity could be just months away. Web.

Mchale, B. (2009). How WiTricity works & How WiTricity saves you money. Web.

Organization for Economic Cooperation and Development – (OECD). (2007). Netherlands. Paris: OECD Publishing.

Picot, G. (2002). Handbook of international mergers and acquisitions. New York: Palgrave Macmillan.

Rivette, K., & Kline, D. (2000). Rembrandts in the Attic: Unlocking the hidden value of patents. Printed in the USA: Cartia Inc.

Sople, V. (2012). Supply Chain Management: Text and Cases. New Delhi: Dorling Kindersley (India) Pvt. Ltd.

Wimmer, W., Lee, K., Quella, F., & Polak, J. (2010). ECODESIGN – The Competitive Advantage. Printed in Germany: Springer.

Wireless Electricity. (2011). WiTricity Technology to Power. Web.

WitTricity. (2011). Wireless Electricity delivered over distance. Web.

York, M. (2009). Franchise: Freedom or Fantasy? Bloomington, IN: iUniverse Books.

Zaharuddin, H. (2008). A to Z Entrepreneur in Practice. Printed in the USA: Dickson.

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