Ikea Case

Case write up

IKEA’s Global Sourcing Challenge: Indian Rugs

and Child Labor (A)

By Shengnan Liu ( Emma Liu )

Section 0501

UID 112615604

List and describe the key components of IKEA’s business strategy.

From where I stand , IKEA’s business strategy includes:

( Low price. The low price strategy is tightly knitted with IKEA’s low cost strategy as well as the founder’s ambition to “creating a better life for the many people”. To reach the goal of lowering price for the many, several measures are taken: First, all the furniture is just half -finished and is self-assembled by the customers themselves. Because the flat packages are easier to manage, the company save a lot on transportation and storage. Meanwhile, less workers needed on the assembly line, the producing cost decreases on the manufacturer side, which brings down IKEA’s purchasing cost as well.

Second, IKEA makes use of its suppliers off-season capacity to save cost. Just as the founder Ingvar Kamprad puts it : “ IKEA does things differently.” That is, IKEA would buy products from factories that are not specializes in certain items in their off seasons to take advantage of their unused capacity. Say, seat cushion may be made by sail maker or table frame by window factory,etc.

Thirdly, the company itself operates at a low cost. “Waste of resources is a mortal sin at IKEA.” said the founder, In this circumstances, expensive solutions are often eliminated. Besides, the management process is simplified.

In a word, the low price made IKEA highly competitive in the mass market and able to reach as many customers as possible.

(Long-term relationship with suppliers. Since IKEA itself does not produce goods ,it is important for it to seek alliance with its suppliers .Except from buying from them, IKEA also makes loans to its suppliers and allow them to pay back by future shipments. They even send technical tutors to their...