NATIONAL ECONOMICS UNIVERSITY

BUSINESS SCHOOL
BACHELOR OF BUSINESS ADMINISTRATION IN ENGLISH (E-BBA)

Module Quality Management

Lecturer Hoang Vu Hiep (PhD)
Date of issue 15/07/2021
Submission deadline 14:00 10/08/2021
Assignment brief
IKEA: Success with Quality and Strategic Management

History

IKEA is a furniture business group founded and owned by Ingvar Kamprad, a

Swedish billionaire. With over 50 years of operation in the global market, IKEA is
today a giant multinational corporation with furnishing centers located in 43 different
countries and has about 127,000 employees. IKEA’s annual sales exceed 12 billion
euros (2015). The way IKEA has become a leading brand in furniture retail is a
miracle story. With hundreds of stores across Europe, Asia, Australia, and the US
serving more than 470 million customers, IKEA is truly the most respected giant in
global retailing industry.

Ingvar Kamprad was born in 1926 in Southern Sweden and grew up in Elmtaryd
next to the small village Agunnaryd. In 1943, when Kamprad was 17 years old
rewarded him with a sum of money for his good academic performance at school.
Kamprad used the money to start up a small company and named it IKEA. The first
two letters stand for Ingvar Kamprad’s name, and the last two stands for the farm
and village that he was born and grown.

In 1947, Kamprad introduced wooden furniture to the production for the first time
and make it as the primary and the main product line of the IKEA’s retailing system.
The exploitation of various sources from local manufacturers allowed the company
to keep prices low compared to the existing competitors. IKEA has achieved great
success in the furniture category and the company also created a revolution for the
whole furnishing market in general.

In 1951, Kamprad decided to permanently stop the production line of all other
products and put all the effort to emphasize on wooden furniture.

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In 1953, IKEA opened its first furnishing showroom in Almhult under huge pressure
from competitors. At that time, the furniture market was currently in a price war with
competitors, hence, the establishment of this showroom plays a significant role in
helping consumers to have closer contact with the company’s wooden products
since they can have physical experience with each product (touch, feel, trust) before
making purchasing decision. This is also the first time ever that Swedish customers
can physically see and touch the products before buying. Hence, this brings huge
advantage for IKEA over current competitors. In 1963, IKEA successfully opened
the first showroom outside Sweden which was located in Asker, a municipality
outside of Oslo in Norway. By 1969, Kamprad expanded into Denmark market.

In the 1970s, IKEA continued to penetrate other European markets, with the first
stores outside Scandinavia opening in Switzerland (1973), followed by Germany
(1974), France, Russia, and Canada, Australia, and Hong Kong. Due to the
increasing number of people visiting the stores on the opening day, Kamprad
decided to change the way that products were displayed in the store to allow
customers to freely view the goods.

IKEA is the world's leading home furniture retailer with more than 127,000
employees working in more than 200 factories worldwide, achieving annual revenue
of over 10 billion USD, of which, in 2012, the company added 11 new stores in 9
countries. As of 2015, IKEA had 351 stores in 43 countries worldwide.

Standards in the quality management system of IKEA

The company has to a greater extent attempted to comply with ISO 9000 standards.
The products of the company are attested to and are expected to comply with the
national and international legislations of all the markets where the products are sold.
There are strict specifications in place, hence compelling the suppliers to stick to the
strict requirements. IKEA continues to define and develop strict product
requirements and make it possible for monitoring and verification of compliance. In
order to ensure durable, healthy, and safe quality products, IKEA company has a
test lab that is very useful when it comes to product development phase. This lab
has been guaranteed and accredited to international standards. There are
remarkable attempts by the company to use materials from the sustainable sources
and products are constantly submitted to tough durability tests.

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Customer focus

IKEA is an example of the few companies that have stayed true to the customer-
focused purposes. This aligns the company’s commitment to quality with the
expectations of the customers as far as quality is concerned. The purpose of the
brand has been to create a better everyday life for the consumers. In support of this
purpose, the organization offers a wide range of the well-designed and functional
domestic furniture products at very affordable prices for many people.

Leadership

Leadership is considered as one of the company’s core values. IKEA managers

instill excellence that is directly proportional to the superior quality of products
delivered. The managers try to set a good example and encourage others to emulate
the same. Kamprad, the founder of the company, admits that the best way to get the
best out of the employees is by setting an example and encouraging the employees
to work hard while adhering to the stringent business ethics, and above all,
excellence. The company has embraced a Democratic leadership approach, and
thus employees can participate directly in the decision-making process.

Engagement of people

People at all levels are of great essence to IKEA. As such, the business has tried to
involve a range of stakeholders as much as possible. To some extent, this makes it
possible for the company to pull to the same direction and adhere to uniform
standards concerning the delivery of quality. There is a platform to ensure that
communication of defects is timely and taken seriously. The company has a PR
manager that strives to publish accessible and informative content that can be of
great use to the people. The company wants dialogue with the stakeholders. One
outstanding aspect about this is the transparency about the social policies as well
as the inner workings.

Process approach

The company has also tried as much as possible to embrace the process approach.
For instance, the company is organized into four different main areas whereby the
IKEA of Sweden conducts the first area range. Secondly, the purchasing is
undertaken by the agents who are responsible for placing orders according to the
specifications of the company. Then there is the distribution and wholesale which

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undertakes the distribution and transports of the finished products to the regional
distribution centers of the company, and then across the globe. There are then the
sales functions, which are carried out by ensuring the uniformity of the selling
methods as well as the customer service standards in all the stores belonging to the
company. The four areas have direct implications on the quality management
system of the company because any procedural purchases that will lead to the
production of defective products will spell doom for the company.

Raw materials are developed in the primary sector, where IKEA designs it
commodities in Sweden while ensuring that the product meets the functional,
qualitative and effective distribution requirements. IKEA also ensures that the cost
involved in the production of home furnishing should be minimum. The company
bargains with its providers to ensure low cost of its products verifies the conditions
and value of the market, identify the social conditions of the supplier and analyses
the environmental impacts of the materials. The consumption of wood is reduced as
IKEA focuses more on developing a design solution that includes the use of recycled
plastic. Effective communication between IKEA and its suppliers is a critical factor
in the success of IKEA. in the secondary sector, the manufacturing of the products
takes place. IKEA designs its commodities in such a manner that the least amount
of resources are involved in the manufacturing of the best quality products. The
value of the manufactured goods is increased by the big IKEA retail stores, which
can store a large volume of products. The use of steel in its products has improved
the safety and ergonomic aspects of its design. The company is very conscious of
the environment as it utilises a large amount of wood as raw material for the
manufacturing of its products.

Continuous Improvement Initiative

The company designs and sells the ready to assemble furniture as well as the home
accessories. It has been known for its modern architectural designs while paying
much attention to the operational details, cost control and continues product
development. The quality of the products has remarkably been on the rise courtesy
of the continuous improvement and innovation measures. They have remained on
top of continues improvement and change. In a bid to achieve continuous
improvement, the company has strived to have a value system in place which

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supports innovation and continues improvement. It has a well-defined governance
and organizational structure that is meant to manage innovation.

Evidence-based Decision-making

The company has not been left behind when it comes to evidence-based decision-
making, which is a key aspect in the standardization of quality. Most of the decisions
that are made by IKEA are supported by some data that can easily be interpreted to
create a framework for decision-making. For instance, the company has
successfully addressed the problem of supplying cheap and attractive furnishing
courtesy of in-depth research that finally led to more informed decision-making in
improving quality.

Relationship management at the company

The company has a very comprehensive Customer Relationship Management

system that makes it possible for the company to improve the quality delivered
constantly. CRM has not only assisted in better customer service but also gives the
customers a better value preposition. The relationship management with the
suppliers has also impacted positively on the quality management systems in the
company.

Market penetration into Vietnam

From a small domestic market in Sweden, Ikea's managers soon realized that if they
wanted to grow, the company had to go beyond borders. Almost from the beginning,
international expansion was part of IKEA's strategy. This goes against the
conventional view of other chains that will seek out for foreign markets after their
native countries’ markets are fully mature.

By the beginning of 2019, IKEA announced their plan to invest 450 million euros into
Vietnam to develop a system of retailing centers and warehouses. If this system is
built in Hanoi, it will supply the entire Southeast Asian market. Earlier in October
2017, sharing with Bloomberg, CEO of IKEA, Torbjorn Loof, also confirmed the
information that he is planning to open the first store in Vietnam within the next 5
years. Hence, it seems that IKEA is trying to speed up the process of entering
Vietnam compared to the previous plan. In Southeast Asia area, IKEA also plans to
expand to the Philippines after being present in Malaysia and Thailand.

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IKEA is seen as a retailer that is diligent in balancing its general business
environment and consistent business model by adapting to local cultural levels. In
China, for example, IKEA stores offer on-site assembly, which is different from
IKEA’s tradition but is absolutely necessary in a country that is not in the habit of
doing it yourself. In the US, retailers discovered fairly early on that if they were going
to sell products like bed sheets and the sheets would have to fit the typical size of
this country.

It is estimated that in 2018, the total furniture consumption value of the Vietnamese
market reached about USD 4 billion. With an average demand for wooden furniture
of more than 21 USD/person/year, Vietnam's furniture market is an attractive piece
of cake in the eyes of both domestic and foreign businesses.

However, most of the well-known furniture chains on the market today such as Nha
Xinh, Pho Xinh, Nha Dep, Index Living Mall, BoConcept... all target the high-end
segment. Meanwhile, in the potential affordable segment, most users cannot name
another brand except JSYSK, a furniture brand from Denmark and Uma, a
successful furniture and decoration supermarket chain, established in Vietnam by a
Swedish owner. So far, JYSK has only 8 chain stores in Hanoi and 5 stores in Ho
Chi Minh City. Uma also has the same number of 8 stores in Hanoi and 9 in Ho Chi
Minh City. With this relatively modest number of chains, the mid-range furniture
segment still has a lot of room for a new brand like IKEA to build a foothold.

So far, IKEA's product segment has been suitable for apartments, small houses and
affordable modern furniture. Ho Chi Minh City or Hanoi in particular and Vietnam in
general are entering this orbit. Although some people think that IKEA products are
not of excellent quality compared to Vietnamese products, they can meet the needs
of today's young people who like change and like new things. For young people, the
design is simple and beautiful, focusing on usability, and the quality is just average,
every few years is what they aim for.

In terms of price, it is predicted that IKEA products will not be cheap compared to
popular furniture in Vietnam, but that price includes warranty services that "local"
products had not done well. Additionally, IKEA can follow the examples of Zara,
H&M, which is a popular foreign product but is marketed in Vietnam as a high-grade
product.

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Requires:

Please prepare a critical essay to address the following requirements:

1. Discuss how IKEA followed the TQM concept and made the business outstanding
in the marketplace. (CLO1.1, 1.4)

2. Based on the information given in the case study and the principles of total quality
management, discuss the Quality Management System and Quality Leadership
adopted by IKEA. (CLO 1.3, CLO 2.1)

Instruction for students:

- The essay should be 2000 words MAXIMUM, with exclusion of cover page,
data table (if any), appendices (if any), and list of references.
- The submission should be in MS Word or PDF, A4 page, font Times New
Roman or Arial, size 12, line spacing 1.5, all texts should be justified align at
each margin, the document should be page numbered.
- The critical essay should be written as a persistent report with the structure:
o Introduction (very brief with few sentences)
o Findings/Analysis/Discussion… you can name it (address the 2
requirements of case study)
o Conclusion (very brief)
- Appendices with extra data, graph, table, evidence, etc. are all welcomed.
- Theoretical based or evidence-based argument should be supported by
citations.
- Please submit your coursework via Assignment tab in the Microsoft Teams
of the module.
- Preliminary comments for improvement will be provided by lecturer via email:
hiephoang@neu.edu.vn with subject format as below.

QMCW1 – ‘student ID – Morning or Afternoon’ Class

Please replaced ‘…’ with your personal info.

- Deadline for submission is 14:00 10/08/2021. Submission time will be based

on lecturer’s receipt of your emails, so please do not wait until last minute for
submission, rather allow few hours for the case of technical issue (if any).
- Late submission within 24 hours, the mark will be capped at 50%.

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- Late submission after 24 hours, the paper will be marked as Failed.