Ikea Global Sourcing Challenge

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  • Topic: IKEA, Ingvar Kamprad, Timeline of labor issues and events
  • Pages : 10 (2551 words )
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  • Published : March 27, 2012
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IKEA's GLOBAL SOURCING CHALLENGE

EXECUTIVE SUMMARY
The IKEA Group, one of the world’s top furniture retailers, has emerged as the fastest-growing furniture retailer in the US. Its unique business strategy has given it its strengths for its success today. However, like all strategies, IKEA’s strategy has its own flaws that can pose as weaknesses. IKEA also has a lot of opportunities in the marketplace such as expansions of their company and threats such as competitors in the same industry. Based on the case “IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (A)” we will build a modified SWOT analysis that will assess the company’s internal performance and determine the current position it’s facing, followed by recommendations on the steps IKEA can take in order to solve the issues addressed. Background:

* Founded 1943 - Ingvar Kamprad
* An international retailer of home products (flat pack furniture, bathroom and kitchen accessories) * 313 stores in 38 countries
* A privately held retailer chain, Dutch-registered foundation, owned by the Kamprad family * Not present on the stock market – control over the company * IKEA acronym → Ingvar Kamprad (its founder) Elmtaryd (the farm where Ingvar grew up) Agunnaryd (the home town of Ingvar)

BUSINESS DESCRIPTION
Nature of the Organization:
* Scandinavian modern style furniture and accessories
* International company that designs and sells ‘ready-to-assemble’ furniture * World’s largest furniture retailer
* IKEA was founded in 1943 by 17-year-old Ingvar Kamprad in Sweden * As of October 2010, the chain has 313 stores in 38 countries, most of them in Europe, North America, Asia and Australia * Many stores include restaurants serving traditional Swedish food * The IKEA corporate structure is divided into two main parts: operations and franchising * The net sales of IKEA group amounted to €21.846 billion (none of the profit is taxed)

STRENGTHS
* Strong brand recognition worldwide
* IKEA cares about it a lot, based on the Case “IKEA’s Global Sourcing Challenge :Indian Rugs and Child Labor”, we can see that IKEA has tried to address all issues to protect its brand image

* Wide range of products at an affordable price: textiles, kitchen utensils, flooring, rugs, carpets, lamps, plants, and of course its furniture

* Stable sales over number of years

* Strong values and beliefs in IKEA’s culture
* Came from its first CEO and founder –Ingvar Kamprad, and has been held ever since * Company’s vision: “Creating a better life for the many people”, through low prices, combined with good quality and function of a home furnishing items

* Strategies, to implement its vision:
* 1953- Self assembled furniture, also known as knockdown or flat pack furniture. * Result of it and its competitive advantage: savings on home delivery, and assembly for the end user- the main part in the supply chain, combined with a good design and function of a product. * IKEA catalog, old concept is modern

* pre-determined design of the stores
* low-priced restaurant
* play room for children
* sourcing at the lowest prices possible

* Unique organizational culture and management style
* operates in a very informal environment, yet very high expectations and standards for its employees * no obvious division by status: managers are required to work in the store once in a while to maintain contact with the front line and consumer * cost consciousness: no waste of resources; ex: no flights first class

* Long-term relationships with suppliers, despite of the difficulties IKEA has been having * In the mid 1990s, 2,300 suppliers in more than 70 countries, sourcing 11,200 products * Willingness to educate suppliers and provide them with know-hows, as well as provide them with machinery * “We commit to doing all we can to keep them competitive- as long...
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