IKEA Case Study

Q1. How is IKEA ensuring that its Vision "Create a better life for the everyday people" is achieved in its
business?

IKEA’s vision is to: “Create a better everyday life for the many people” Its business idea is "To offer a wide
range of well designed, functional home furnishing products at prices so low that as many people as possible
will be able to afford them" The IKEA concept is based on their market positioning statement “Your partner
in better living. We do our part, you do yours. Together we save money” and focuses on a commitment to
product design, consumer value and clever solutions. By using inexpensive materials in a novel way and
minimizing production, distribution and retail costs, their customers benefit from low prices not only that , A
lot of it has to do with the way it designs each item. IKEA picks what they want to sell a product for before
designing and manufacturing it, and the designers and suppliers work together to make sure the final product
can be that price. In 1956, IKEA founder Ingvar Kamprad introduced "flat packing," the method now
synonymous with IKEA that cuts costs by letting consumers purchase their furniture in pieces and assemble it
themselves. While it may be annoying to assemble furniture yourself, it allows IKEA to charge less for
everything and with such cost cutting methods and low prices IKEA managed to go global and reach every
household in western countries.

Q2. What is IKEA's Strategy in terms of managing its Suppliers worldwide?

IKEA sources suppliers to manufacture IKEA products, to those who can produce products of good function
and design at the lowest possible Some of these, in the Swedish forests around the birthplace of IKEA, they
have been with IKEA since its earliest days. They also have their production plants in China, Poland or
Germany. IKEA buys production capacity rather than product quantities. In other words, they order 10,000
hours of production from their suppliers rather than 10,000 bookcases. They negotiate prices with suppliers,
check the quality of materials, and keep an eye on social and working conditions. Although IKEA fosters
competition among suppliers to ensure it attains the best prices and materials, the company also makes
longstanding commitments to suppliers by signing long-term contracts, thus lowering prices of products
further. Healthy Competition, Long , term contracts , Eye for Quality are few things IKEA keeps in mind while
managing its suppliers.

Q3. Comment on the salient points of IKEA's distribution system that has made its Supply Chain one of the
best in the world.

IKEA has made a benchmark for Companies planning to go global,

From supplier to store For IKEA, distribution is most important part of the equation of creating home
furnishing articles at prices which are as low as possible, IKEA has around 9,500 products that are
manufactured by suppliers and transported to IKEA stores around the world At IKEA, distribution is all about
making the route from the manufacturer to the customer as short as possible.
Large volumes + flat packs = low costs

IKEA works in various ways not only to rationalize and simplify distribution, but also to minimize the impact
this part of the business has on the environment. The secret is to calculate as exactly as possible how many
products will be needed to satisfy demand. This eliminates any unnecessary costs for production and
warehousing. The hallmarks of IKEA distribution are, global distribution network ,large volumes ,flat
packages ,low costs

Better efficiency means lower prices

The fact that IKEA products are sold packed flat means that they can be transported with greater efficiency.
By minimizing “wasted space” it is possible to transport and store more packages at a time. And by increasing
what is known as “the filling rate” in containers etc (in other words, reducing the amount of wasted space),
the cost of transporting each item goes down.

Sustainability
It was in 1990 that IKEA decided to transform its conscious efforts into a sustainability action plan. Adopted in
1992, the Environmental Action Plan included 10 key initiatives also IKEA contributes to the recycling and
reuse of products; use wood from known areas and, if possible, certified as responsibly managed

Q4. What all steps has IKEA taken to ensure that it is an Environmentally responsible Company?

It was in 1990 that IKEA decided to transform its conscious efforts into a sustainability action plan.
Adopted in 1992, the Environmental Action Plan included 10 key initiatives:

1. Replace polyvinylchloride (PVC) in wallpapers, home textiles, shower curtains, lampshades, and
furniture
2. Minimize the use of formaldehyde in its products, including textiles
3. Eliminate acid-curing lacquers
4. Produce a model of chair (OGLA) made from 100% pre-consumer plastic waste
5. Introduce a series of air-inflatable furniture products into the product line to reduce the use of raw
materials and transportation weight and volume
6. Reduce the use of chromium for metal surface treatment
7. Limit the use of substances such as cadmium, lead, PCB, PCP, and AZO pigments
8. Use wood from responsibly managed forests that replant and maintain biological diversity
9. Use only recyclable materials for flat packaging and "pure" (non-mixed) materials for packaging to
assist in recycling
10. Introduce rental bicycles with trailers for customers in Denmark

IKEA created the IWAY code of conduct—minimum requirements suppliers must meet in order to do
business with the company. According to IWAY’s environmental and forestry standards, suppliers must
agree to: work to reduce waste and emissions to air, ground and water; handle chemicals in a safe way
dispose of hazardous materials in a safe manner; contribute to the recycling and reuse of products; use
wood from known areas and, if possible, certified as responsibly managed. To help spread the word and
aid suppliers in meeting IWAY standards, IKEA created a network of Trading Service Offices. The offices
train, support, and monitor suppliers to ensure compliance.