Seminar 2: Industrial Marketing

Marketing II (FÖ1017), 7.5hp

IKEA- Case Study

Supply Chain Management

Marketing II
Seminar 2 (10th February 2016)

Group paper from:

Lisa Buchholz
920225T360
Giulia Catena
921211T349
Nicoló Tassi
920210T318

. 7 6................................................ List of References .......................................................... Future prospects and possible measures for improvement ........................................................................................................ Relationships within the chain ........................... Introduction ................ 7.................................. Conclusion ... 3 2.......... 7 ................................................................. 3 3............... 5 4........................................................................................................... Supply chain management strategies & value. Seminar 2: Industrial Marketing Marketing II (FÖ1017)... 6 5....adding factors...............................................5hp Table of Content 1...........................

2010. In order to scrutinize how IKEA has implemented its supply chain management to reach its goals. internal quality and control measures as well as the regulations for production. especially Europe. 2009) with sales of over 20 billion Euros in 2009 (Kelly. al. well designed. the paper will refer to the model proposed by Lambert and Bennion (1982). as well as the assumable measures for improvement IKEA could develop in the future. .5hp 1. It seems striking that the superior levels of the supply chain are sustainability and long-term relationship with more or less every supply chain member. The other steps of the supply chain comprise the sophisticated distribution. 7.. IKEA’s mission is to offer functional.1).adding factors Analyze IKEA’s supply chain management strategies. 2. Seminar 2: Industrial Marketing Marketing II (FÖ1017). functional home furnishing products at prices so low as many people as possible will be able to afford them” (Kelly. In the following it is to discuss the main supply chain strategies IKEA chose in order to work effectively with their respective members and achieve their business goals. to get a holistic overview of IKEA’s success. p. IKEA had to and also did implement certain strategies with the aim to be as efficient as possible and provide their customers with the expected quality and mutually satisfy their needs for the reasonable price. 2010). Supply chain management strategies & value. Furthermore it is to enlighten the major advantages and value adding factors IKEA gains from their strategies and good relationships and networks with their supply chain members. which are aimed to be incorporated in all areas of the supply chain. low priced and sustainable furniture. Introduction IKEA can be stated as the world’s largest furnishing product vendor (Kotler et. In order to be able to fulfil this aim and promise. This part is committed to analyse every step of the supply chain and examine the numerous strategic factors which contribute to IKEA’s success. The company is known all over the world. increasingly in Asia and Australia and is popular for offering “ a wide range of well designed. North America. and explain how the value is created through these strategies.

220 suppliers are operating in over 55 countries. as well as time and labour. The success can only be enabled if every supply chain member. IKEA preferably choose their suppliers considering their production capacities and prices as low as possible to achieve high profitability. 2010). IKEA’s 1. including inventory and storage (Kelly. It is crucial to see the different steps in cohesion. The vast sum of suppliers makes it possible for the company to be very flexible in adapting to external changes (Håkansson & Johansson. 1992). The final step of the chain. the Trading Service Office ensures the control of each supplier and offers them help to reach higher levels which subsequently strengthens the relationship between the parties. IKEA achieves its economies of scale by relying on mass production that enables very low costs because of high quantities of the standardized products.5hp First it is to enlighten the area of Suppliers. considering a substitution of supply partners (IMP-Group. Another essential part of the supply chain is the Distribution which is optimized thanks to a global network able to provide products in the right place. opportunity costs can be saved. the market uncertainty is increased. at the right time by mutually enhancing the efficiency of transports in term of space and quantity. 7. According to the case study of Kelly (2010). because they are all interrelated and determine each other. Taking advantage of the large volumes which are transported in flat packages gives IKEA the competitive advantage to save costs for transportation. considering the underlying model of Lambert and Bennion (1982). Hence. So for example if some suppliers do not fulfil the code of conduct of IKEA (IWAY). 2010). The physical retail experience is a capturing and emotional engagement inside IKEA’s lifestyle and thus displays an essential part of the supply chain that appeals directly to the consumers. is about the Retailers. the firm can easily switch to another supplier without having any problems within the network. listing the different regulations that the suppliers have to meet in order to enter IKEA’s network (Kelly. At the same time. the just-in-time approach gives them the opportunity to reduce costs taking into account all the costs related to logistics. 1982). which is a code of conduct. Another determining factor for the decision- making process is the IWAY. In terms of Manufacturers. respectively . if a company is relying on many suppliers. Seminar 2: Industrial Marketing Marketing II (FÖ1017). Furthermore it is not as risky as to rely on one’s own subsidiaries or company. Moreover. Therefore. The catalogue and the web site are the main means of communication and also of the first contact able to meet needs and desires of the consumers.

requires a simplified model to capture the complexity of the main and affecting relationships. 1992). “relationships evolve over time. IKEA. & Johansson. plastic. However. 7. 2014) which also reduces the uncertainty in terms of transaction costs. are the fruit of complex synchronization between the different stakeholders. The actors of the relationships are IKEA itself.. Moreover IKEA is the owner of Swedwood. intended as the cycle of transformation and transfer of the resources operated by the different actors. 1995. 3. an average of 11 years per supplier (IKEA Group. strength and nature is changing as those involved interact” (Håkansson. By means of the sophistication of ties. Seminar 2: Industrial Marketing Marketing II (FÖ1017). the exchange and use of knowledge is a crucial part of the resources as it displays the basis for further commitment in the relationship. Resources of IKEA are mainly raw materials as wood. & Johansson. The characteristics of the networks established in the IKEA environment are characterized by long term relationships. both weak and strong. H. J. retailers and logistics centres (Kelly. H. the suppliers and the manufacturers. The activities actuated inside IKEA. Relationships within the chain How does IKEA managing the relationships with its chain members? The relationships within the supply chain of the global player IKEA can be seen as a real challenge. IKEA understands the dyadic relationship with the . supplier’s supplier and other associates work together in an effective and thoroughly committed way. Those stable long-lasting agreements make it possible to be more flexible considering adjustments and to be more competitive in the market (Håkansson. 2010). For this reason the paper applies the ARA model to understand the nature and the characteristics of the network between the different actors (Håkansson. Evidently.. H. being a global company with thousands of suppliers and distributors all over the world.22). J. 1992). a manufacturer company. The suppliers are in Europe (60%) and in China as the manufacturers. Their content.5hp supplier. and has to coordinate relationships between distribution centres. p.. It would be interesting to understand the level of control and power of IKEA on the resources to understand also the negotiation power of itself but the company does not reveal enough information about this. & Johansson. paper and hardware like nails and bolts. J.

thus is in urgent need of a well-functioning system. it might be beneficial to improve the communication of the company in terms of being more transparent for the consumer. in its Code of Conduct (IWAY) and the numerous alliances with for instance the Rainforest Alliance. However. 7. The company managed it to become the world’s largest furniture retailer. In case of IKEA it seems that the company is very successful in the implementation of their strategies concerning the relationship with suppliers. In this way. Since the last decade. it is still important to keep track of the company’s internal aims and requirements in order to be successful in the overall network with all its supply chain members in the future. In view of the fact that for IKEA it is of utmost importance to establish and keep long-term relationships with its partners. Future prospects and possible measures for improvement What do you think IKEA can do to improve its supply chain in the future? After having scrutinized the sophisticated supply chain management of IKEA one can state that there are always small and maybe also bigger issues that can be improved and need further maintenance and monitoring. According to the BGGB report (2014) there is a difference between the perception of the efforts of brands from the outside and their real performance. referring to the above. there is room for improvement to get even more “green” and monitor their ecologically friendly efforts in every part of the supply chain and thus really achieve the aimed goals. Additionally.5hp suppliers as it creates mutual advantages for both. the distribution channels and retailers. 2014). manufactures. the whole brand identity can even be enhanced. Seminar 2: Industrial Marketing Marketing II (FÖ1017). However. Obviously. IKEA achieved to be on the 14th rank (BGGB. which means that the company is balancing out its communicated efforts with the real performance in a reasonable manner. IKEA is increasingly focussing on sustainability which it wants to implement in every step of the supply chain. The improvement of the relationship to the consumer can be extraordinary ameliorated by revealing more information about its sustainable efforts and also assuring their effectiveness. IKEA manages it to produce more ecologically friendly. 4. this may not be that easy as the intended strategy can vary from the real performance. this is possible by sharing knowledge and the expertise in a way to create a trusted relationship and strong expertise. .

M. A model of Industrial Networks. Harvey. (1982). Lusch. (2014. In B. & Snehota. Lambert. Kotler. J.5hp 5.ikea. 10-27). (2006). K. Kelly. (1992).model from Håkansson and Johansson (1992). G.IKEA.. New Channels Strategies in the 1980s. Goodman. Upper Saddle River : Pearson Education Limited. In Developing relationships in business networks.com/wp- content/uploads/2015/08/Interbrand-Best-Global-Green-Brands-2014-Overview-8. & Svensson. . P.. (2009).. Marketing Management (13th ed. Written Examination Stimulus Material Case Study. Retrieved from http://www. S. University of Oklahoma: Center for Economic Management Research. Conclusion In order to conclude it is to state that an overview of the main steps of the supply chain management could be established. (2014). Relationships in business. London: Routledge. Håkansson. The Power of Participation. The paper has depicted the ties and the relationships in this complex environment focussing on the Supply Chain Metrics-model from Lambert and Bennion (1982) and the ARA. Lund: Studentlitteratur. T. IKEA Group. Brady. 127).pdf Håkansson..pdf IMP-Group.. Chichester: Wiley. H. Interaction approach. & Johansson. 7. Retrieved from http://interbrand. M.).. H. (1995). Marketing Channels: Domestics and International Perspectives (p. & R. I.com/ms/en_US/pdf/yearly_summary/ikea-group-yearly-summary-fy14. List of References BGGB. & Bennion. London: Routledge. In M. Keller. (2010). & Hansen. Lagrosen.. Axelsson.A new view of reality (pp. illustrating the dynamics of IKEA and of the other actors in the business scene. IKEA Group Yearly Summary. 6. 28-34). Marketing-Broadening the Horizons. M. (1982). Seminar 2: Industrial Marketing Marketing II (FÖ1017). In International Marketing and Purchasing of Industrial Goods (pp. D. Industrial Networks. Easton.. S. & G. 06).