Strategy Analysis

HTW Berlin
June 17th 2010
Atefeh Molaie, Isabel Wohsmann

IKEAs Supply Chain

Khurshed Alam,Bangladesh; Atefeh Molaie,Iran; Anastasija Sokolova,Belarush;

Isabel Wohsmann,Germany.
Strategy Analysis Global Business Strategy & supply Chain Management

17/06/2010

Presentation Outline

1.
2.
3.
4.
5.
6.

Company Overview
Internal & External Environment
IKEAs Supply Chain Strategy
Strategic Fit
Strategic Formulations
Conclusion

Strategy Analysis

17/06/2010

Company Overview

Leading home furnishing company

301 stores in 37 countries
Total sales of 21.5 billion in 2009
About 123.000 employees within the
IKEA group
Headquarters located in Delft, NL
Founded in 1943 by Ingvar Kamprad in
Ingvar Kamprad, IKEA founder
Smland, Sweden
Not listed on the stock market
Philosophy: offer home furnishing products of good design &
quality at prices much lower than competitors

Strategy Analysis

17/06/2010

Internal & External

Environment
Strengths

Weaknesses

A strong global brand

A democratic design-reaching an ideal balance between
function, quality, design and price
Focus on Corporate Social Responsibility (CSR) sustainable use of resources
Economies of scale bulk buying at cheaper unit costs
Efficient supply chain

The size and scale of its global business could make it

hard to control standards negatively affecting
consumer views of IKEA's products
Low-cost need to be balanced against quality
IKEA needs to keep its customers and stakeholders
informed about its environmental activities. The
scale of the business makes this difficult.

Opportunities

Threats

Movement from international to global status through the

development of Asia and Eastern Europe
Growing demand for products which do not harm the
environment
Continuing demand for low prices trends in the current
financial climate may result in consumers trading down
from more expensive stores

Strategy Analysis

Changing social trends e.g. the slowdown in first

time buyers entering the housing market (a core
market segment for IKEA products )
Market forces more competitors entering the low
price household and furnishings markets
Economic factors - people having less disposable
income due to recession
Subsidiaries are gaining too much power

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IKEAs Supply Chain Strategy

Self transport by
customers

Suburban locations/
ample parking

High traffic store

layout

Customer assembly

Limited Customer
Service

Self-Selection by
Customers
Limited staffing

Easy transport &

assembly

Catalogues, displays &

labels
Knock-down packaging

Onsite inventory

Design focused on
cost of
manufacturing

Modular Furniture
Design
Wide variety/ easy
manufacturing

Strategy Analysis

Low Manufacturing
Cost
Sourcing from longterm suppliers

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IKEAs Supply Chain Strategy

(Cont.)
Activities shown in the figure provide basis for IKEAs supply chain planning
Supply chain planning = ongoing challenge for IKEA
IKEAs supply chain: mainly make-to-stock (MTS)
highly dependent on forecasts
Planning concept has recently been revamped in order to achieve greater
control of supply chain & enhance performance
cornerstones: mutually integrated planning process, centralized planning
organization, focus on data quality & use of advanced software support
Today: global supply chain with both sales & purchasing in all major regions
in the world
Keeping total control of its design, pricing and supply of product ranges
globally through vertical integration

Strategy Analysis

17/06/2010

Strategic Fit
Present Environment
Continuing demand for low
prices due to current
financial climate

Supply Chain Management Fit

Ongoing focus on high efficiency in the supply chain;
recent revamping of the planning process leads to
further reduction in costs

Growing demand for

products which do not harm
the environment

Flat-packaging concept helps saving fuel and thus

reduce CO2 emissions, shift to more environmentally
friendly means of transport

Changing social trends e.g.

fewer first time buyers in
the housing market

Market forces: more

competitors offer similar
products & try to copy
supply chain strategy

Strategy Analysis

Flexibility due to vertical integration; shift to other

market segments would be possible

Brand loyalty & economies of scale make it hard for

new entrants to take market share away from IKEA

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Strategic Fit (Cont.)

Present Environment
Trend towards online
shopping - danger for stores

Supply Chain Management Fit

IKEA started developing online shops in some countries
already, but still needs to expand activities in this
area

Some countries where IKEA

products are made do not
implement the legislation to
control working conditions

The IWAY code is backed up by training and inspectors

visiting factories to make sure that suppliers meet its
requirements

Variety of customers
preferences & tastes in the
world

Concept of universal products; due to IKEAs image and

strategy of cost leadership, adaptations are not really
possible

Transportation costs
increased heavily over the
last years (due to oil prices
etc.) ongoing trend

Flat-packaging means that products can be

transported with greater efficiency by minimizing
wasted space and increasing the filling rate in
containers

Strategy Analysis

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Strategic Formulations

Further improvement of the supply chain planning:

Reduce manual intervention with supply plans Increase supply plan accuracy
Further implementation of software support

Focus on Corporate Social Responsibility (CSR)

Increase diversity of their products for all age groups and types of
households vital in time when the retail sector is depressed, as it
increases the potential market
Capture new business opportunities with upcoming trends, e.g. online
shopping rethink parts of the business model

Strategy Analysis

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Conclusion

IKEAs innovative business model was built over a long period of time
Nowadays, IKEA is leader in its niche due to the choices made in that
process
However, more and more competitors with similar products and prices are
entering the market
Need for IKEA to

Keep its position in the market

Sustain competitive advantage
Gain new target groups
Find new business opportunities

Strategy Analysis

17/06/2010