Case Study for IKEA
Ingvar Kamprad, believes that: “Most things still remain to be done, a glorious future! Time is your most important asset. Split your life into 10 minutes’ units and sacrifice as few as possible to futurities. The corporate culture of IKEA is built based on this philosophy all the way from design teams to suppliers and to the customer. A continuous strife for improvement in all areas of the value chain is an effective way to shape the industry to better-fit IKEA’s future strategies. Due to the uniqueness of Ikea’s strategic positioning, being the largest competitor in its field, the firm has the advantage of setting the phase of the industry”(Introduction to IKEA, p.19). Kamprad established IKEA when he was 17 years old. Up to 2010, “the IKEA Group had a total of 280 stores in 26 countries”(Year Summary FY09, p.25). “There were 127,000 co-workers in 2010 in the worldwide. The IKEA Group had operations in 41 countries-29 trading service offices in 25 countries and 27 distribution Centers and 11 customer distribution centers in 16 countries. At the same time, IKEA had 1,074 suppliers in 55 countries. The IKEA range consisted of approximately 9,500 products. About 626 million visitors come to the IKEA Group stores, and IKEA websites had 712 million visits” (Year Summary FY09, p.26) “At IKEA our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”(Business Idea, 2012). “IKEA’s goal as it emerged over time was to provide stylish functional designs with minimalist lines that could be manufactured cost efficiently under contract by suppliers and priced low enough to allow most people to afford them”(Hill, p512). Firstly, the IKEA’s target market is young people who like well-design products, and also the price can be adopted. The items in IKEA are special and amazing. As the IKEA’s website saying, “We design the price tag first, then the product.” They will compare the price with competitors, and then set the price 30-50 percent lower than the competitors. In the IKEA store, it take advantage of self-service, which means allowing costumers enter the warehouse, load furniture onto trolleys, and then take them through the checkout. It looks successfully. Secondly, the key feature of IKEA furniture is self-assembly. Self-assembly not only can reduce the shipping cost but also reduce the risk of destroy through the shipment. After 1956, self-assembly became one of the important concepts for IKEA. Thirdly, through sharing network with the suppliers, the IKEA can drive down the cost of items per unit. “The goal is to identify the appropriate suppliers and least costly materials, a trial and error process that can take as long as three years” (Hill, p.516). In order to avoid the risk from the suppliers, the IKEA bought the Swedwood as the vehicle to buy and run furniture manufacturers across Eastern Europe together with the largest investment in Poland. At the same time, the Swedwood also can get the knowledge about the manufacturing processes, which are useful in design and relationships with other suppliers. The IKEA also give some suppliers suggestions in order to make IKEA’s item high quality. “There were three advantages of doing business with IKEA: “One concision, and you could rely upon what had been decided. We were given long-term contracts, and were able to plan in peace and quite… A third advantage was that IKEA introduced new technology””(Hill, p. 513). “Up to 2010, IKEA had 1,074 suppliers in 55 countries” (Year Summary FY09, p. 26). As a successful furniture retailer, the IKEA needs not only low labor cost but also high quality. They corporates with some suppliers, which locate in the low labor cost countries. “By 2008, IKEA had 1,380 suppliers in 54 countries. The top five sourcing countries were...
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