Ikea Supply Chain Analysis

Low prices are one of the cornerstones of the IKEA concept which attrack their customers to but their products. This low price strategy is coupled with

Evaluating SWOT of IKEA, the company has developed a strong strength in the industry through effective global marketing strategy that would assist, and continue to help them gain more grounds globally as indicated in the outlined strength. The company has great future opportunities for business expansions in the market as well as developing nations; having said that, their weak point is quality, which is a concern as customers can discouraged because of poor quality, poor relationship with employees can be detrimental to efficiency, their competitive market strategy is low cost product, but create standardized products as such will attract

IKEA is rumored to be a very standardized retailer, i.e., a certain set of marketing strategies is used that are the same around the world. This indeed sets IKEA, operating on markets in Europe, US as well as Asia and Australia, apart among international retailers. Often the theoretical conclusions in international

IKEA is one of the most successful furniture retailer who dedicated to sell flat pack of furniture, accessories, and bathroom and kitchen items around the world. It is well-known as a global phenomenon and its famous statement that “Our vision is to create a better everyday life for the many people”. IKEA has a clear and consistent concept in providing low price, value for money furnishings with a full range of choice. Its philosophy in the core value of cost efficiency along with IKEA's competitive strategy, which influences the performance objectives of operations in company. IKEA shows an excellent performance in achieving cost competitive advantages

IKEA is the largest furniture retailer around the world. The current leadership position of the company provides considerable advantages in terms of the economies of scale and at the same time creating an entry barrier for new competitors. It is ready to achieve the target of EUR 50 billion annual sales by 2020.

Moreover, IKEA wants its wide range of customers to choose products at an affordable price that are durable, as well as safe and environmental friendly (IKEA sustainable report, 2011).

The world is experiencing tremendous and influential change. Although the company opened 14 new stores in fiscal 2003, sales growth was only 2.7%, largely as a result of the depressed economic conditions across Europe, the company’s core business region (Global Market Information Database, 2004). Thus, it is clear that, in order to improve performance at a significant level, simply opening new stores is not enough. Instead, IKEA must assess its external and competitive environment, determine the key opportunities and threats which face it, and align its strengths and weaknesses to best counter the weak consumer market, and thus generate the strong growth it needs to remain a strong brand and presence in its chosen markets (Johnson, Scholes and Whittington, 2005)

Firm strategy, structure and rivalry – Home ownership in China is expected to boost with China economic growth. Home-furnishings market will expand to 186.9 billion yuan ($28 billion) this year, according to data from Euromonitor (Bloomberg, 2010). This is an opportunity for other furniture retails players to eat into Ikea market share. With this competition, Ikea is much eager to monopolise the industry.

As pointed out in Ikea's mission statement, the company is in business to produce high quality products at a low cost. This would support a

IKEA focuses on the low-cost leadership strategy due to the beliefs and vision of the creator of the company, Ingvar Kamprad. IKEA puts into action this low cost strategy by buying in bulk and selling it back to the consumer at a low profit, so that the savings is passed on to the customers who purchase their goods. Now, we must also remember that the low-cost leader strategy has two different areas in which it can emphasize; broad and narrow, the narrow scope has a limited product range whereas a broad scope has many different items. IKEA has a broad scope in which allows it to reach a larger target

1. IntroductionIKEA, the famous Swedish company, is the one of the largest furniture retailers in the world, which specializes in modern but inexpensive Scandinavian designed furniture. According to Echeat (2006), the IKEA had more than 175 stores spread over 31 countries at the end of 2002 and worldwide sales of about 12.8 billion euros in 2004. During the IKEA financial year 2001-2002, a total of 60,000 people are employed by IKEA worldwide and there are 323 million people visited IKEA stores around the world (Kronos, 2006).

Now, more and more people concern company’s corporate social responsibility on environment issues. IKEA needs to increasing energy efficiency and reducing their emissions of greenhouse gases to prove their concern on environment. Therefore, IKEA have to invest more on green issues and try to maintain low cost in the meanwhile, which is a big challenge. (IKEA, online, 2009)

Ikea have the product design, development, raw materials, processing, customer service five processes and sales flow. Ikea took control of the sales and product design of the two maximum links, at the same time ensuring service into the sales. Ikea has a comprehensive market survey that is conducted after every three years. The main purpose of the survey is to listen to the customer’s opinions regarding the products. Ikea strategy on reducing the cost is based on recycling raw materials to avoid deforestation. With the inception of the new technology, it has resorted to using composite plastics so as to reduce weight and save material with the purpose of increasing the rate of production. Ikea’s household products are split into assembly goods with products divided into separate designs and different modules. Ikea’s mode of marketing is to hold the psychology of the customer. Ikea does not introduce the

IKEA’s strategy before the mishaps in America could be characterized as going against the norm charting their own path to success using low priced manufactures to secure lower selling prices aimed to target those who were of older age and of middle class standing. Their new strategy was to target those of a younger demographic, young married couples, college students, and 20-30 something singles. By reemphasizing design, promoting through hip quirky advertisements, and encouraging consumers to do away with their old furniture, IKEA revenues doubled in a four-year period. IKEA today has adapted somewhat of a local customization strategy where their store layouts will resemble that of many local household layouts as proven by their success in China where they failed to expand beforehand. They also keep their prices extremely low in some areas as China by sourcing a large percentage of products in the area of operation.

IKEA is one of the most successful furniture retailer’s worldwide. The factors that contributed to this success and distinguished IKEA from its competitors will be monitored in the following analysis.