Case Problems in Business
October 24th, 2014
At a very young age Ingvar Kamprad showed signs of having an excellent sense of thrift. Even at age five, it is documented that through the resale of matches throughout the city of Stockholm, Ingvar was profitable displaying a knack for appeasing customer needs. Combining the initials of his first name IK and the first letters of the farm and village where he was born (Elmtaryd and Agunnaryd) EA, IKEA was created slowly rising to become the world’s largest seller of retail furniture. SWOT
The Size and Scale of its Business
Growing Demand for Green Products
Online Retail Giants
Focus on Sustainability & Limiting Waste Production
Economic Trends Reducing Disposable Income
Democratic Design Concept
Looking at such a design forward and industry revolutionary organization such as IKEA, it is hard to find many faults. With all of the inherent strengths that come with their unique design, and brand recognition it is hard to think that a company such as this would ever falter. But further consideration would show that with expansion, grows many concerns. For Example, when first entering the US markets, IKEA had trouble distinguishing its furniture’s value to the US consumers who weren’t used to its different appeal (Jones.) However, utilizing its concept of democratic design, IKEA was able to introduce and highlight products that American consumers would find appealing. This helped to drive and sustain sales, in a marketplace that reaps great rewards to those willing to innovate. This willingness to innovate, which I believe is mostly driven by tenacity for independence highlighted by Ingvar Kamprad, allows the company to orient, adapt, and execute in situations where other companies may regress.
The IKEA Idea, as explained by its website is explained as, “…providing a range of home furnishing products that are affordable to the many people, not just the few. It is achieved by combining function, quality, design and value - always with sustainability in mind.” (IKEA, Idea) What is interesting to me, is that this idea is easily overlooked. Surprisingly enough, if one looks through IKEA’s furniture catalog you will see a wide range of products, rivaling in price even the world renowned Wal-Mart. Even so, the IKEA brand is recognized for smart, chic, and manageable furniture that gives a seemingly more intelligent look to the interior of one’s home.
Moreover than looking smart in one’s home, IKEA has placed an emphasis on operating smart on all fronts. By aiming for operations through a mainly vertical structure, IKEA has drastically reduced expenses due to the use of a middle man. For example, by developing a large network of suppliers and production facilities, IKEA has been able to effectively utilize economies of scales to enhance their profit margin. This is done by purchasing mainly in bulk. To further this efficiency they opt to source their materials close to their production facilities, so that transport costs are dropped. And lastly, to affect their handling costs & carbon footprint they ensure that products are delivered directly from the suppliers to their own stores (Business Case Studies.) While this may seem like much to coordinate, this goes to show that by developing strong relationships and developing suppliers. Higher rate of effectiveness can be generated, without negatively impacting the ecosystem in which we all reside.
While it seems that bigger is always better, the fact of the matter is that the larger the size of a company, the more variables and coordination is needed to achieve effective and functional operation. The last paragraph highlights just how many variables that IKEA puts into play to remain their reputation...
Cited: "SWOT Analysis and Sustainable Business Planning an IKEA Case Study." Introduction. Business Case Studies, n.d. Web. 24 Oct. 2014.
Dudovskiy, John. "IKEA Porter 's Five Forces Analysis." Research Methodology. Research Methodology.Net, 8 Mar. 2014. Web. 24 Oct. 2014.
"Newsroom." History. IKEA, n.d. Web. 24 Oct. 2014.
"The IKEA Concept - IKEA." IKEA /US/EN. IKEA, n.d. Web. 24 Oct. 2014. .
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