...Global Sourcing Development at IKEA – a Case Study Paper prepared for the 25th IMP conference Jens Hultman1, Susanne Hertz1, Rhona Johnsen2, Thomas Johnsen2 1: Jönköping International Business School, P.O Box 1026, SE-551 11 SWEDEN E-mail: jens.hultman@ihh.hj.se, susanne.hertz@ihh.hj.se Tel: +46 0(36) 10 10 00 2: Audencia Nantes School of Management, 8 Route de la Joneliere, BP 31222 – 44312 Nantes Cedex 3, France. E-mail: tjohnsen@audencia.com; rjohnsen@audencia.com Tel: + 33 (0)240 37 46 25 Abstract This study explores the dynamic process of global sourcing development through a case study of the Swedish home furnishing giant IKEA and its supply network concerning the PAX wardrobe system. The paper provides a synthesis of the existing global sourcing literature by dividing this growing body of research into three major themes: globalization processes and stages, motives/drivers, and organizational design and management. Moreover, the paper integrates the global sourcing literature with the established literature on the internationalization process of firms. Comparing the existing research on global sourcing and internationalization, we propose two research questions focused on: (1) the ways in which the IKEA global sourcing and supply chain development process resembles a linear stages process, and (2) the principal drivers of the development of global sourcing within IKEA. Relating the findings of the global sourcing process in the case of IKEA, the paper suggests that the...
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...Case Study on IKEA Executive Summary The case study of IKEA has been read, analyzed; and the findings are presented in the report as required. The goal of the report was to analyze the case study of IKEA and then to present the findings as well as performing some tasks that are required in this report. Firstly, some terms that are closely associated with marketing has been described and analyzed. In addition to that, those terms are also discussed in relation with the case study. Brand, Business strategy, retail sector, price sensitive and franchisee are the terms that have been discussed in this report in the first section. In the second section, the required calculation for average number of customers of each sector and average spending of customers has been worked out. A new mission statement for IKEA has also been proposed there along with the justification for the mission statement. In the third section, the importance and nature of SWOT analysis has been discussed and elaborated. It is seen in the case study that IKEA performs a SWOT analysis that supports their process of building strategy. Moreover, the SWOT analysis of IKEA has also been performed and justified. In the fourth section, SMART objectives and some new marketing mix ideas for IKEA has been demonstrated. In the fifth Section, the concept of marketing model and minimizing the threats for IKEA has been included and demonstrated. Ultimately, the report contains what were required...
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...Executive Summary Background IKEA, the world’s largest home furnishings retail chain, was founded in 1943 by a Swedish entrepreneur Ingvar Kamprad. IKEA offers standardized products worldwide that are Scandinavian in design worldwide. The unique idea of this famous brand is to offer the option of assembling products to customers. The design of the furniture is very modern and light as it is made of particleboard. The products are of contemporary design and function with the concept that is based on low price. High quality, convenience, affordability, consistency, functionality and good design are the essence of this world class home furnishing retailer. Challenges IKEA faced many challenges in terms of culture and business practices as well as socio-economic and political conditions in China. The biggest challenges were pricing, copycat producers and cheap labor cost for assembled furniture. Alternatives To make the price more affordable for Chinese consumers IKEA has developed manufacturing units in China and collects raw materials locally. Due to country specific environment IKEA chose franchising in China. Because of cheap labor cost of Chinese assembled furniture IKEA offers reasonable fee-based assembling services. IKEA has built its stores near public transportation lines inside cities since only 20% of customers own cars in Shanghai. Recommendations IKEA needs to find more local suppliers to keep price lower. To understand local culture and purchasing habit,...
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...Management IKEA Case Study Sharleen Suwaris-SUSND11 Sharleen Suwaris Executive Summary The following is an analysis of the IKEA case study found in the Strategic Management Text book. This analyses the strategies used by IKEA to gain competitive advantage in markets outside its original area. The report begins by providing a background into IKEA. It studies International Business Level Strategy and the three international corporate level strategies. The case study goes into informing its target market and pricing strategy, which is already discussed. This case study further says how different people in different parts of the world thinks about IKEA, how elegant their designs are and how affordable for them to purchase IKEA products. Some of IKEA’s main markets are in three of the fastest growing markets such as Russia, US and China. IKEA store bring out products such as furniture to small product like a scented candle. IKEA has over 1300 suppliers in about 53 countries. They further have 12 full time in- house designers with 80 free lancers and other production workers to identify the correct raw materials and produce products efficiently and cost effectively. Primarily, IKEA produced standardized products however; this international strategy did not work for one of its vital markets that is, US. Therefore, they had to emphasize on taking corrective actions. The report also analyses the entry methods used by IKEA and its sustainability. IKEA Case Study 2 ...
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...Ikea Case Study Executive Summary This report gives the main findings and conclusions of a small research process for IKEA in the Czech Republic market. It identifies and explains why the Czech Republic represents a good opportunity and holds minimal risk based on a review of objective and subjective secondary research into the potential of the country as a source of product (specifically, it suggests establishing a joint venture with a local manufacturer by 2018); for furniture marketing (it recommends the opening of a store in Prague by 2020); and as a platform base (which could be achieved through the establishment of a warehouse and distribution centre near Brno by 2025). The aim is to establish the size and structure of the market while the objectives are to find out the number of customers and expected average spend per capita ... The key research questions are ... A specific challenge identified was XXX so one of the questions relates to XXX. The methodology adopted is objective and positivist and uses a deductive approach. The main methods used are a review of internal documents (the assignment case study); and analysis of secondary data including the CIA Factbook and the MarketLine Furniture Industry Report for the Czech Republic. ... The report concludes that the Czech Republic represents an appropriate target country for IKEA over the next decade and recommends further primary and desk research to establish the precise size and nature of the opportunity. The...
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...IKEA case study 1. Firm specific advantages IKEA has a variety of firm specific advantages since its business approach appeared to be very unique for the furniture industry. First, IKEA’s most important specific advantages were its good value for the money. IKEA used this advantage for its expansion plans all over the world. IKEA when they failed in the USA had to highlight this specific advantage to bail them out of the financial difficulty they had gotten into. Second, the most innovative decision of IKEA is to reduce merchandise costs through involving customers in the assembly cycle. This idea allows saving on warehouse costs and helps to reach another economy for customers on transportation costs. As a result of new store layout, IKEA has been able to allow sales clerk to focus more on in-store displays and fast moving lines. Another set of firm specific advantages of IKEA is related to the relationship with suppliers. IKEA has created global sourcing network of more than 2,300 suppliers in 67 countries. With these connections around the world, it has been able to cut price at many stores while maintaining sufficient quality standards. Because of these influences, IKEA experiences huge economies of scale, allowing it to match rivals’ quality while undercut prices worldwide. Lastly, IKEA has its legacy of quality in different countries. IKEA has always maintained the best quality in all the countries that it has opened outlets in. It’s creative business model and store...
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...IKEA CASE STUDY Jill E Keeney Capella University February 24, 2016 Fundamental of Human Resource Management 3040 Instructor: Professor Marni Swain Introduction With so many people working hard to make ends meet, the living-wage pay seems like an ideal solution to help. The living-wage allows employees to meet their basic needs. (Chapman & Thompson, 2006) IKEA is trying to create a better life for its employees by implementing the living-wage. The living-wage also creates a workforce that is higher skilled, provides better customer service, and less turnover. This is more cost efficient for a company. (Bell, 2014) Risk and Challenges Issues for a business implementing the living-wage is productivity, skill of workers, and employee financial issues. While IKEA is not raising prices with the living-wage, it might have to adjust the amount of employees it schedules and hires, so an employee might be doing the job of 2 to 3 instead of just one employee. IKEA might have make the workforce more productive, and this would lead to less jobs within the company. (Chan, 2015) Employees might also be working less hours than full-time due to the increase of pay and less jobs being created. The other factor is that employees may not be able to have yearly increases if the business profit/loss is not adequate. This might create a turnover in employees if the living-wage is not increased yearly. (Geiger, 2015) An issue that IKEA might be faced with is low-skilled employees slowly...
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...IKEA was founded in 1943 by Ingvar Kampard and focuses on stylish but inexpensive Scandinavian furniture targeted at low to mid income families. In 1956, IKEA adopted the concept of self-assembly by opening a self-service open warehouse. Internationalisation began in 1973 and now IKEA is operational in 22 countries with 178 stores, having over 70,000 staff under employment. IKEA is able to maintain low-cost without sacrificing quality and offers great design to keep customers coming back. Instead of having its own manufacturing facilities, IKEA subcontracts manufacturers. and also engages customers as pro-sumers, where they both consume and partake in the production process. Finally, IKEA has one of the most efficient internal production system. In addition, to maintain the cost leadership, IKEA’s suppliers are located in low cost nations with close proximity to raw materials and reliable access to distribution channels. Also, IKEA utilises economies of scale and competitive advantages as they look for suppliers that produce highly standardised products intended for the global market. IKEA is able to keep customers coming back with its effective marketing shown in its eye catching catalogues, good service and strong in stock position as the most popular styles and design trends are continuously anticipated. With these three aspects, IKEA is able to attract its customers, keep the customers coming back and keep the customers satisfied. While there have been successes, there...
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...IKEA CASE STUDY Ikea is a multinational company that grew from a small activity to the leader of the low price furniture market. Their success is not only determined by a lean supply chain and business know how but also by the loyalty of its customers. The company’s strategy to approach the consumers is to study their needs and likes to be able to offer the best possible product. As the case describes, IKEA, adapts its products depending on needs and preferences of different country customers. For example, noticing that U.S. customers were buying vases to use as glasses because the average Ikea glassware wasn’t big enough, the firm developed bigger glasses for the U.S. market. Through intense customer research (observation, focus groups and surveys) IKEA tries to satisfy the consumers, and through its strong brand and locations attracts more and more clients. IKEA’s value for its costumers is concentrated in founder Kamprad’s statement: “People have very thin wallets. We should take care of their interest” and this is what the company does, offering good quality and fashionable design at a low price. Consumers have some disadvantages in respect on what they would normally get from a normal furniture shop, having to transport and assemble the products themselves. IKEA builds and retains its customer’s loyalty by keeping a consistent image of style and quality, keeping low costs and offering a wide range of products adapted to the different customer’s needs, appealing to all...
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...Case Study – IKEA 1. History (Explain) IKEA was founded in 1943 by 17-years old Ingvar Kamprad in Sweden. First two letters IK of IKEA were taken out of the founders name and last two letters EA symbolise the name of Kamprads parents farm ‚Elmtaryd’ and the village ‚Agunnaryd’ where the farm has been located. First the company sold various consume good such as pens, watches and wallets. In 1947 Kamprad started also selling furniture via distribution, especially to the poorer farmers in Sweden. 1951 the first IKEA catalogue ever was published just offering furniture. In the catalogues the furniture produced by IKEA was pictured as part of a complete furnished room, a thing that was unusual for the time then. In the 1950s Kamprad started hiring designers who designed furniture especially for IKEA. These were sold and shipped first in 1955 as building kits in order to keep the costs of assembly and shipping as low as possible. Three years later in 1958 the first IKEA store was opened in Sweden, followed 1963 by the second store in Norway. In the following 40 years ‚Ikea’ started building stores all over the world, mainly in European and Asian Countries and developed itself to a company with about 150.000 workers and sales about €25 billion in 2014 and 315 stores in 27 countries. 2. IKEA is considered one of the success stories. How have they achieved this success? What barriers have they overcome? They decided to side with the many. That means responding to the home furnishing...
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...IKEA Case Study IKEA Case Study The founder of IKEA, Ingvar Kamprad, established the IKEA brand in Sweden when he was only 17 years old. It was 1943, and the IKEA brand started its enterprise journey by selling items such as seeds from Kamprad’s family’s farm and Christmas magazines. By 1948, the IKEA furniture line came to life. Kamprad’s concept was “good furniture could be priced so that the man with that flat wallet would make a place for it in his spending and could afford it” (Hill, 2013). Today, IKEA is one of the world’s largest furniture retailers. This essay will discuss the legal, cultural, and ethical challenges that confront IKEA; determine the various roles that the host governments played in IKEA’s business operation; and will summarize the strategic and operational challenges facing global managers illustrated in IKEA: “Furniture Retailer to the World.” Legal, Cultural, and Ethical Challenges IKEA faced obstacles with a culture of disjointed, established Swedish furniture retailers that sold an expensive line of furniture that was to be passed down in families as heirlooms. IKEA’s self-assembly, less expensive furniture concept led to ethical and legal implications for them. Kamprad was able to undercut prices of the established retail outlets by cutting retailers out of his process (Hill, 2013). Because Kamprad cut the retailers out, they countered by coercing furniture manufacturers to not make sales to IKEA...
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...Case study : How IKEA adapted its strategies to expand & become profitable in China Executive Summary: IKEA is known globally for its low prices and innovatively designed furniture. In China, however, it faced peculiar problems. Its low-price strategy created confusion among aspirational Chinese consumers while local competitors copied its designs. This case study analyses how IKEA adapted its strategies to expand and become profitable in China. It also assesses some lessons the company learnt in China that might be useful in India, where it plans to open its first store by 2014 and 25 stores in 10 to 15 years. Swedish furniture giant IKEA was founded by entrepreneur Ingvar Kamprad in 1943. He began by selling pens, wallets and watches by going door to door to his customers. When he started selling his low-priced furniture, his rivals did everything to stop him. Local suppliers were banned from providing raw material and furniture to IKEA, and the company was not allowed to showcase its furniture in industry exhibitions. What did IKEA do? It innovated to stay in business. It learnt how to design its own furniture, bought raw material from suppliers in Poland, and created its own exhibitions. Today, IKEA is the world's largest furniture retail chain and has more than 300 stores globally. In 1998, IKEA started its retail operations in China. To meet local laws, it formed a joint venture. The venture served as a good platform to test the market, understand local needs...
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...BACKGROUND INFORMATION IKEA is an internationally known home furnishing retailer. It has grown rapidly since it was founded in 1943. Today it is the world's largest furniture retailer, recognized for its Scandinavian style. The name IKEA comes from the first letters of IKEA’s founder Ingvar Kamprad and the names of the farm and village where he grew up Elmtaryd Agunnaryd. Although the soil was thin and poor in Ingvar’s village, people had the reputation for working hard making the most out of limited resources. Ingvar applied the lessons learned from his village to the home furnishing market. Nowadays, IKEA’s vision is “to create a better everyday life for the many people by offering a wide-range of well designed, functional home furnishing products at low prices so as many people as possible will be able to afford them”. IKEA had a turnover of 26 billion Euros in 2011 and is present in 35 countries with more than 300 stores. PROBLEM DEFINITION IKEA had faced only successes when expanded from Swedish market in other European countries. The first attempt was in 1973 in Switzerland, followed by Germany in 1974. Since then it expanded across much of Europe with very good results. The issue raised in this case is how a giant like IKEA with a success story all over Europe tries to enter vast markets like the one in USA. So, the problem is how to sustain the corporate culture and brand identity together with the existing cost structure when entering new big markets with the...
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...IKEA CASE STUDY by Kasimir.v.k 1) In the early 1970s, IKEA became the largest retailer in Sweden. For the first time, a company changed the concept of furniture. They revolutionized the idea of simple-using furniture. This has been a market niche they entered during the early 1970s, which had an effective impact since furniture retailing did not work well. In addition, IKEA was able to offer the same quality or even better than other Swedish furniture manufactures for a much lower price. This was the first competitive advantage they had at that point; decent quality and low price. Another aspect that led to IEKA’s advantage was that at that point in time, Europe had a much smaller market, meaning it was easy to enter. The key success factors for IKEA were that they have been able to control the customer traffic at the checkouts and the merchandise pickup areas. This was allowing customers to pick up flat-packed furniture to so easily transport it to their homes, while saving maintenance costs. In addition, damage occurred during the transport minimized after flat-packing. The other key success factor was that they were able to compete with their prices in the market that turned them to a leading company in this business. 2) IKEA’s success of entering the European market was due to the low competition. Furniture organizations weren’t that developed and efficient, compared to IKEA. In addition, being part of Europe, the company had a good understanding of what the taste...
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...Ikea Case Study By: Nikki Barker Marketing Management Professor Forbes The Current Situation of IKEA shows that industry trends are currently changing and leading more towards online purchasing. The level of competitors is increasing due to availability of the Internet. Consumer perceptions are evolving. Legal considerations are more linnet in China and India on copyright laws. Technology is leaning more towards media and Internet and less towards physical catalogs. Therefore, due to changing of the current situation, new plans need to be formed and implemented. First, we as a company must establish a full analysis of the situation and then look at the target markets. The main internal strength of the company has been making a profit with the current expansion from 2012 (IKEA, 2014). With every strength there is a weakness and it is critical to realize what our internal weakness is. Management throughout the company has not been on the same idea level of where the company is headed in terms of expansion. For company growth there must be unity. So we want for management to be able to have a round table discussion and work out the details of expansion. The first thing is for management to get all concerns on the floor at the beginning and work from there. IKEA has the chance to expand and evolve with the times in China and India. This is an opportunity that needs to be jumped on before it is no longer an option. With lax laws in China, competitor companies...
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