Student

Braga Ecaterina

Professor
Simona Bălășescu

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2
Analysis on Logistical System
of

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About IKEA
IKEA is a Swedish-founded Dutch-based multinational group, that designs
and sells ready-to-assemble furniture, kitchen appliances and home accessories. It has
been the world's largest furniture retailer since at least 2008. It was founded
in Sweden in 1943 by then-17-year-old Ingvar Kamprad, who was listed by Forbes in
2015 as one of the ten richest people in the world, worth more than 40 billion dollars.
The company is known for its modernist designs for various types of
appliances and furniture, and its interior design work is often associated with an eco-
friendly simplicity. In addition, the firm is known for its attention to cost control,
operational details, and continuous product development, corporate attributes that
allowed IKEA to lower its prices by an average of two to three percent over the
decade to 2010 during a period of global expansion.
As of November 2017, IKEA owns and operates 415 stores in 49
countries. In fiscal year 2016, €36.4 billion worth of goods were sold, a total that
represented a 7.6 percent increase over 2015. The IKEA website contains about
12,000 products and is the closest representation of the entire IKEA range. There were
over 2.1 billion visitors to IKEA's websites in the year from September 2015 to
August 2016. The company is responsible for approximately 1% of world
commercial-product wood consumption, making it one of the largest users of wood in
the retail sector.

History
Ingvar Kamprad founded IKEA in 1943 as a mostly mail-order sales business. It
began to sell furniture five years later. The first Möbel-IKÉA store was opened
in Älmhult, Småland, in 1958 (Möbel means "furniture" in Swedish). The first stores
outside Sweden were opened in Norway (1963) and Denmark(1969). The stores
spread to other parts of Europe in the 1970s, with the first store
outside Scandinavia opening in Switzerland (1973), followed by West Germany
(1974).
Amid a high level of success, the company's West German executives
accidentally opened a store in Konstanz in 1973 instead of Koblenz. Later that decade,
stores opened in other parts of the world, such as Japan (1974), Australia,
Canada, Hong Kong (1975), and Singapore (1978). IKEA further expanded in the
1980s, opening stores in countries such as France and Spain (1981), Belgium (1984),
the United States (1985), the United Kingdom (1987), and Italy (1989). The company
later expanded into more countries in the 1990s and 2000s. Germany, with 53 stores,
is IKEA's biggest market, followed by the United States, with 48 stores. At the end of
the 2009 financial year, the IKEA group operated 267 stores in 25 countries.
The first IKEA store in Latin America opened on 17 February 2010 in Santo
Domingo, Dominican Republic. As of July 2013, the company's presence
in developing countries remains minimal.

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 IKEA was awarded the Nordic Language Award of 2017 for introducing
Scandinavian language and culture to a global audience.
Founder Ingvar Kamprad died on 27 January 2018.
 IKEA has a code of conduct called the IKEA Way of Purchasing Home
Furnishin Products (IWAY).

Catalogue of products
 Upholstered furniture, coffee tables, rattan furniture, bookshelves, media
storage, doorknobs
 Beds, wardrobes, hall furniture
 Dining tables and chairs
 Bookcase range
 Bathroom articles
 Kitchens
 Chairs, desks
 Fabrics, curtains
 Garden furniture
 Carpets
 Lighting
 Bedlinen, bed covers, pillows/cushions
 Children's items
 Curtain accessories
 Kitchen utensils
 Boxes, wall decoration, pictures and frames, clocks

Finance Data-Year 2015

Strong sales, continued expansion and a €3.5 billion net profit.

FY15 was a year of strong growth. Sales in comparable stores, the opening of
new stores and online expansion all contributed to the result. IKEA have worked hard
to improve the quality of their home furnishing offer and they continue to lower their
prices.

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Markets

Growth was well distributed across their markets, and sales were highest in
Germany, the US, France, the UK and Italy. In December IKEA opened its first store
in South Korea, and they continued to advance their retail plans in India. In total, they
opened 13 new stores and three new pick-up and order points, where customers can
view a selection of the IKEA range and pick up pre-ordered items.

Performance

In FY15, total sales translated into Euro increased by 11.2% compared with
FY14, to €31.9 billion. Adjusted for currency impact, total sales increased by 8.9%
and sales in comparable stores grew by 5.1%. Together with the rental income from
their shopping centres, total revenue was €32.7 billion – 11.5% more than in FY14.
This increase is partially due to the €140 million increase in rental income from
acquiring remaining shares of the shopping centre companies Inter IKEA Centre
Group and Ikano Retail Centres.

The biggest growth came from comparable stores, with new stores and online
sales contributing to the positive result. They had 1.9 billion visits to IKEA. com and
online sales, established in 13 of our 28 markets, exceeded €1.0 billion. IKEA Food
increased sales by 9.5%. The cost percentage increased from 31.2% to 31.8% due to
larger investments in business and IT developments required for the future growth of
the IKEA Group.

Also, the acquisitions of the shopping centres, which have a different cost
structure, contributed to the increased cost percentage. The gross margin remained
stable at 42.9% with the lower prices to the customers being offset with lower
purchase prices and increased efficiency in supply chain. The net financial result
decreased slightly due to unfavourable interest rate movements. This was partly
compensated by currency gains. They did not incur any credit losses on their
securities portfolio.

Net profit was €3.5 billion, 5.5% more than in FY14, which reinforces their
strong financial position for the coming years and provides a base for future
investments. Total assets increased from €44.7 billion to €50.0 billion, following the
acquisitions and growth of the business. IKEA maintained an equity ratio of 70%. In
FY15 IKEA paid a dividend to the owner, Stichting INGKA Foundation, of €666
million (FY14 €660 million).

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 Top Selling Countries

Retail sales per country as a percentage of total IKEA Group sales

14% 14%

8%
7%

5%

Germany USA France UK Italy

Top Purchasing Countries

25%

19%

8%
5% 5%

China Poland Italy Sweden Lithuania

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Sales Per Region

67%

18%
10%
5%

Europe America Asia and Australia Russia

Purchasing Per Rerion

60%

35%

3% 2% 1%

Europe Asia North America Russia South America

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Finance Data-Year- 2016
Thanks to solid sales worth, EUR 4.2 billion net profit and an increasing focus
on multichannel retailing, FY16 was another good year. IKEA saw salesgrowth in
comparable stores, as well as new stores and e-commerce. They also have their focus
on integrating physical and digital commerce to enable customers to shop and interact
with us in ways that suit their needs.
Markets
In FY16, the sales grew in 27 out of 28 markets with China remaining one of
the fastest growing countries for IKEA Group together with Canada, Poland and
Australia. The five largest retail markets based on sales value were Germany, USA,
France, United Kingdom and Sweden. IKEA opened 12 new stores and 19 pick-up
and Order Points during FY16, and further developed our multichannel distribution
net-work to increase accessibility for customers. They welcomed 783 million visits to
their stores, 2.1 billion visits to IKEA.com and 425 million visits to our shopping
centers. In addition, they continued working on opening their first stores in India and
Serbia.
Performance
In FY16, total sales for IKEA Group amounted to EUR 34.2 billion. Total sales
of goods translated into Euro increased by 7.1% and adjusted for currency impact,
sales increased by 7.9%.Sales in comparable stores grew by 4.8% compared to
FY15.In FY16, IKEA offered e-commerce in 14 out of 28 markets and related sales
grew by 29% to EUR 1.4 billion.They plan to roll out e-commerce to all their markets
in the coming years.
Together with the rental income of EUR 0.9 billion from IKEA Centers, their
total revenue amounted to EUR 35.1 billion, an increase of 7.4% compared to FY15.
The rental income increased by 18.0% compared to FY15.
Gross margin ended on 46.1% an increase due to different sales mix and strong
performance in the cost out agenda. Operating expenses as a percentage of revenues
increased to 33.2%. The acquisitions of IKEA Centers in the course of FY15 and
increased expenses form business development contributed to the higher cost
percentage in FY16.
IKEA’s financial net result of EUR 0.9 billion was significantly above last
year’s. During the year, cash and securities increased by EUR 6.5 billion to EUR 23.2
billion with a large contribution from the sale of shares in their product development,
supply chain and production companies to Inter IKEA Group. The estimated cash
consideration for the shares is EUR 5.2 billion.
Net profit was EUR 4.2 billion, an increase of 19.6% compared to FY15.Total
assets increased during the year from EUR 50.0 billion to EUR 54.0 billion while they
further increased their solvency with 38.9 billion of equity at year-end. IKEA’s
strong financial position enables them to continue investments in co-workers, their

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 stores, digital technology, the distribution network, as well as shopping centers
and renewable energy.
In FY16 IKEA did not pay a dividend to their owner Stiching Ingka Foundation
out of the result from FY15. However, a dividend of EUR 840 million will be paid out
in FY17 out of the result from FY16.
Top Retail Selling Countries

14% 14%

8%

6%
5%

Germany USA France United Kingdom Sweden

Sales per Region

69%

18%

9%
4%

Europe America Asia and Australia Russia

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Finance Data-Year- 2017
As a result of the last year’s transaction,the revenue for IKEA Group in FY17
does not include whole sale of goods (EUR 1.2 million in 2016) but does include
other services (EUR 1.2 billion in FY17).
Following the transaction,IKEA Group results do not include the gross margin
and operating expenses from the production and supply chain companies that were
sold.Therefore, in FY17, the gross profit decreased by 8.6% points to 34.6% of total
revenue and operating expenses decreased by 4.4% to 26.3% of total revenue.
Operating result was EUR 3.0 billion (EUR 4.5billion in 2016).The decrease in
operating result was mainly driven by the loss of profit from the companies that were
sold in the transaction, as well as increased costs in IKEA Retail to support
multichannel growth and expansion.
IKEA’s financial net result was EUR 0.3 billion. Corporate taxes incurred in
2017 amounted to EUR 0.8 billion which equals an effective tax rate of 24.9%
(2016:21.6%). Other taxes and duties, such as property taxes and customs duties
amounted to EUR 0.4 billion.The net profit for the year 2017 was EUR 2.5 billion.
In FY17 they paid a dividend to their owner Stiching Ingka Foundation of EUR
0.8 bilion out of the result from FY16.Total assets amounted to EUR52.9 billion and
they further increased their solvency to EUR 39.9 billion of equity at year-end.

IKEA Retail
IKEA Retail sales grew by 3.5% in Euro and 3.8% adjusted for currency impact.
Sales grew in 26 out of 29 markets, with China remaining one of the fastest growing
markets together with Portugal and Poland. The five largest markets based on sales
value, were Germany, USA, France, United Kingdom and China. Business areas
Kitchen and Cooking grew the most together with strong performance from
Mattresses and Storage.
In FY17, IKEA opened 13 new IKEA stores and acquired two existing stores
and Australia from Cebas Pty Ltd. They continued to roll out e-commerce and grew
their multichannel distribution network through new customer distribution centers,
pick-up and order points and parcel units, to increase accessibility for their
customers. IKEA welcomed 817 million visits to its stores, 2.1 billion visits to
IKEA.com and 460 million visits to their shopping centers. In addition, they opened
their first store in Serbia and continued working on opening their first store in India,
to be opened in FY18.

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Centers
Rental income for their shopping center business grew by 10.8% compared to
prior year, with Centers China showing the strongest growth supported by increased
visitation and tenant sales.
Top Retail Selling Countries 2017

15%
14%

8%

6% 6%

Germany USA France UK China

Retail Sales Per Region 2017

66%

19%

11%
4%

Europe America Asia Pacific Russia

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IKEA’s Target Audience
The demographics and psychographics of IKEA’s target audience includes but
is not limited to, both age groups of 18 to 34 and 35 to 49 years, but mostly a unisex
mix of college or post-graduate aged individuals typically living in metropolitan and
urban college areas. These age groups encompass both the younger, educated students
as well as the young adult professionals. Their salaries range anywhere from $15,000
to $50,000 and they usually allocate this money to update their computers, PDA’s and
mobile devices. Hence, this audience usually includes early adapters of technology
who travel abroad, take risks and have a transient lifestyle that may require them to
move often, most likely from apartment to apartment, or perhaps upgrading from an
apartment to a new condo or small home. The result of this lifestyle makes them first-
time furniture shoppers.
Their modest income usually indicates a modest choice of “extras,” influencing
their vehicle choices and clothing shopping habits. This audience may drive
moderately priced, but perhaps a trendy and practical Camry, Mazda or Volkswagen
(unless they utilize public transportation, and take the train or metro). They also tend
to dress casually and shop for both business and social gatherings, because they’re
usually trying to balance new jobs and having fun. However, their budget requires
them to shop at community center or regional type malls and outlet centers, as
opposed to high-end boutiques and specialty fashion centers. These shoppers are most
likely down-to-earth, laid back and/or creative and artistic. They’re also considered
somewhat fashionable and trendy, yet “thrifty.” This target audience contains
individuals who have a limited attention span and want to be instantly gratified. They
want to do things themselves (embracing the do-it-yourself attitude of IKEA), and
care about the environment. The values of this audience are so compelling, they are
willing to travel long distances to shop at IKEA – maybe because of their concern for
the environment or because of the cost-conscious products that are exclusive and
exotic to IKEA. An additional segment of IKEA’s target audience is budget-conscious
families most likely getting ready to branch into a more domestic way of life. These
families have usually 0 – 2children, but still encompass similar characteristics,
lifestyles and habits of the rest of IKEA’s target audience.

Suppliers
Steel
By using high strength steel in its products, IKEA has realized that it can improve
the ergonomic and safety aspects of its designs, while reducing the weight of the
products decreases costs and helps the environment.

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 Baoshan Iron & Steel Co., Ltd. is a worldclass steel conglomerate,
headquartered in China, and the largest production base of high quality steel
products, which is the most advanced at home and one of the most
competitive steel companies in the world.
 Baosteel specializes in producing a full range of carbon steel, stainless steel
and specially alloyed steel products represented by auto sheets, steel sheets for
home electrical appliances, ship plates, steel for the energy industry, electrical
steel and other high grade products.
 In 2012, Baosteel stainless steel has passed the certification of IKEA Sweden
headquarters, and started supply stainless steel for export only for IKEA’s
suppliers. This is also a break through Baosteel has made in European and
American trade barrier by green manufacturing process. IKEA’s foremost
reason for choosing them as their supplier is their high concern for the
environment protection, and sustainable development.

 Steel Stone Co.Ltd was established in 1999, in Taiwan and primarily deal with
the production of nuts, bolts and screws for all kinds of furniture.
 IKEA’s reason for preferring Steel Stone is that they are able to supply a very
high quality of their products at the cheapest cost, due to their low cost of
labour.

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Wood
IKEA is likely the world’s largest single consumer of wood

 The company needs so much wood, in fact, that Swedwood, a subsidiary

company, handles production of all wood-based furniture. Outraged as many
may be, critics and their eco-conscience friends might pause before deciding
to chain themselves to a forest of Scandinavian trees, the company has a
sustainability plan for all this wood.

Textiles & Leather

Currently, IKEA’s sourcing from Asia, including China, accounts for 32% of its
global sourcing; it sources 64% from Europe and the rest from America. Within South
Asia, 70% of the total volume sourced comproses textiles, including rugs and towels.
 Tirupur, which is more about latest fashion, designers, internationalbuyers
and now,somewhat idling factories.
 Asian Fabricx, one of the oldest and largest Indian suppliers to IKEA, the
worlds largest furniture and furnishing chain.
 Tuticorin, the port that ships out dedspreads, curtains, kitchen linen and
cushions made by Asian Fabricx to European shores, to be sold across 300
IKEA stores worldwide.
 Ramesh Flowers, an IKEA supplier that deals with dried flowers for
potpourri,home fragrances.

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  Established in 1986, Royal Leather Industries is a vertical unit producing
finished leather for shoes, garments, hand bags and furniture. It comprises of
leather Tannery and Stitching factories for garments and furniture articles. The
Tannery is equipped with the most modern imported machinery from Italy,
France, Germany and Netherlands.
 IKEA approved Royal Leather as its supplier of finished leather, in 2012 from
Pakistan, especially for its environmental and social compliance capacity.

Dyeing unit

 IKEA GreenTech, an IKEA Group venture capital company, announced in

2013 that it has invested in DyeCoo Textile Systems, a Dutch company that
has developed the first commercially available waterless dyeing
technology.Using recycled carbon diocide, the technology avoids the large
amount of water and chemicals used in traditional dyeing processes.

Polyurethane Foam

 PARALLEL Ltd Sevlievo is specialized in the production of foam

polyurethane (KOVAFOAM). The company is located in Central Northern
Bulgaria.

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  IKEA recently added Solrac Coatings Co. Ltd to its stable of liquid coatings
suppliers, of which there are only ten worldwide

Organizational Chart of IKEA

Stitching Ingka Foundation
Owner of the IKEA Group

The IKEA Group

(Ingka Holding B.V and its contolled entities)

The IKEA Group

(Ingka Holding B.V. and its controlled entities)

Group Functions

Commercial IKEA Business Navigation &

Business Finance
CUSTOMER
solutions
CENTRES RETAIL FULFILMENT Corporate
communications Corporate Finance, Tax,
Customer Treasury
Experience
People &
Culture Property
Expansion

Marketing & Risk

Com&In Management&Compliance

Sustainability

SERVICE FUNCTIONS

FINANCIAL ASSET MANAGEMENT

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Warehousing
Do-It-Yourself Assembly Lowers Packaging Costs
Most IKEA furniture is designed and sold in pieces for the customer to
assemble. The pieces are placed into convenient and efficient, flat packages for low-
cost transport because they take up less room in trucks, maximizing the number of
products that can be shipped.
The unique packaging also take up less space in warehouse bins and reserve
racks, allowing for more room to stock additional items for order fulfillment. What
the company saves in fuel and stocking costs is passed on to customers.
Combining Retail And Warehouse Processes
Every IKEA store has a warehouse on the premises. On the main showroom
floor, customers can browse for items. They then obtain the products themselves from
the floor pallet location with racking as high as the typical person could reach, where
furniture can be purchased and taken home. Additional products are stored in reserve
racks above these locations.
Inventory is let down to the lower slots at night (forklifts and pallet jacks are not
used during store hours for safety reasons). About one third of the lower level is
comprised of a warehouse off limits to customers. This space contains items too bulky
for customers to load without help from the staff. Since IKEA wants as much self-
service as possible, it works to minimize the number of items in this bulk storage area.

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Usage Of High-Flow & Low-Flow Warehouse Facilities
IKEA’s store operations are supported by high-flow facilities (focused on the
20% of SKUs that account for 80% of the volume) and low-flow warehouses that are
more manual. In its high-flow warehouses, IKEA employs automatic storage and
retrieval systems to drive down its costs-per-touch. Products stocked in a low-flow
facility are not in high demand, and operations rely on manual processes since
workers will not be shifting and moving inventory around too much.
These strategies have made IKEA the world’s most successful furniture retailer
with low operating costs and high product demand. This allows the company to stay
competitive in the industry as it continually seeks more advanced methods to
streamline supply chain management.
IKEA has a clear vision supported by complementary cross-functional logic.
This not only differentiates IKEA from its peers, but also provides it with a
competitive advantage that is difficult to duplicate at other organisations.
While it may be hard for other organisations to copy IKEA’s successful formula
with stock management and order fulfillment, IKEA’s supply chain strategies pushes
against boundaries. This will hopefully inspire you to develop your company’s
inventory strategies suited for your company’s particular operations.
To end off, IKEA sets an optimistic trend where more companies will move
away from traditional and out-dated supply chain management strategies used for
generations to seek creative and better-suited solutions to handle inventory.

Inventory Management
Cost-Per-Touch Inventory Tactic
Having customers select the furniture and retrieve the packages themselves is an
inventory management tactic called ‘cost-per-touch’. As a rule of thumb, companies
find that the more hands touch the product, the more costs are associated with it.
For example, imagine when someone selects a piece of furniture to buy. The item is
then ordered, shipped from the manufacturer, moved from the delivery truck into
storage in the warehouse, moved from the warehouse to the customer’s vehicle or
delivered by the furniture retailer to the customer’s home. Every time the product is
shipped, moved, and loaded, it costs money. The fewer times someone moves or
touches the item, the fewer costs are associated with it. IKEA saves costs with this
guiding principle to minimize touches because it doesn’t have to pay the customer to
retrieve the furniture and take it home.

Maximum/Minimum Settings As Proprietary System

The in-store logistics managers use an inventory replenishment management
process developed by IKEA called ‘minimum/maximum settings’ to respond to store-
level inventory reorder points and reorder products.

Minimum settings: The minimum amount of products available before reordering.

Maximum settings: The maximum amount of a particular product to order at one time.

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 Due to the fact that all IKEA inventory is only stocked at night after opening
hours, the logic of its min/max settings is based on the number of products that will be
sold from the reserve stack of bin in a single day or two-day period. The process
meets customer demand while minimizing ordering too few or too many products.

This strategy also ensures that IKEA has ready inventory to meet customers’
demands, lowering the cost of lost sales.

Using IKEA’s proprietary inventory system, logistics managers know what is

sold through point-of-sale (POS) data and how much inventory comes into the store
through direct shipping and from distribution centers through warehouse management
system data. From these data, they can forecast sales for the next couple of days and
order in the suitable amount of products to meet that demand.

If the sales data doesn’t match the projected number of items that should have
been sold that day, the logistics manager goes directly to the pallet and bin to
manually count the product stock.

IKEA believes its process and system allows for the right goods to be in the
store with greater certainty, and at a lower cost, than the traditional retail forecasting
and replenishment process.

Order Fulfillment

IKEA allow customers to have choices of payment. The payment is accepted in

terms of cash payment, credit or debit card payment or by IKEA family Card points
payment. Once IKEA customer has place his or her items in the counter for payment
this activity flow diagram starts when:

 The customer has place the item on the counter

 Once the cashier has scan items
 The customer chooses the choice of payment
 The cashier would collect the cash from the customer
 If customer has given the exact amount the activity flow will end
 If customer did not give the exact amount the cashier would return the change
the activity flow will end
 The customer has the choice of card to choose
 If the customer has chosen to use debit card the cashier would prompt the user
to swipe the card and the customer would enter the pin to verify in once it has
been verified the activity flow will end
 If the customer has chosen to use credit card, the cashier would prompt the
user to swipe the card and once the amount has been verified , the customer
will sign the receipt , the activity flow will end. If the customer has entered the
wrong pin, he has to re-enter the pin, then the activity flow will continue.

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  If the customer has chosen to use the IKEA family card, the cashier would
check for availability points. If there is sufficient points, the cashier would
prompt the Customer to use the points, once the Customer has confirm that he
or she would use the points to pay, the activity flow will end. If there is
insufficient points in the card, the customer will have to reselect the choice of
payment.

Delivery and Assembly process

IKEA provides delivery service and Assembly services. Once the customer has
purchase their goods, they would go to the delivery counter that provides delivery
service. On weekend their delivery charge for goods below 400$ is 55$, and for goods
between 400$ and 600$ are 60$, and goods anything above that the delivery charge is
65$.If a customer wants a delivery to be made on weekend the delivery charge is 15$
more than the weekdays delivery charge. While providing customer delivery, IKEA
also provides assembly service to IKEA customers too. This activity flow diagram
starts when the customer has made his or her payment and wants IKEA to deliver the
goods to their house.

 The customer would request for a delivery would visit the delivery
counter
 The delivery counter would receive the order form from the customer
 The customer would then fill the particular
 The customer would select their delivery
 The customer would then confirm if they need assembly service or not
 The delivery counter would then prepare the order and receive the
payment from the customer
 They would then inform the warehouse
 The warehouse would check for availability of stock, if stock is not
sufficient then the warehouse would purchase the goods
 The warehouse would pick the regarding goods
 The delivery department would deliver it to the customer

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 SWOT Analysis of IKEA

Strengths
 IKEA likes satisfied customers. The business manages to score highly in
customer satisfaction surveys. Many marketing research companies rank
IKEA in their top 10 companies for customer satisfaction. They managed to
enhance their brand association with such great results.
 IKEA is probably the biggest furniture retail name in the world. This is a
business with more than 10,000 products available on every continent. They
offer low prices and products that offer good value. If you want hard wearing
and long-lasting, you will pay more for it elsewhere. IKEA has positioned its
business offering away from high-quality and high price, and also a way from
low quality, low price. It is in a very enviable position.
 Clear concept which translates into an array of products that can be
assembled by the customers themselves leading to humungous cost reductions
which are then passed on to the customers. With its single-minded focus on
cost leadership, IKEA has emerged as the world’s leading retailer of furniture.
 IKEA measures its strengths using Key Performance Indicators (KPI).

Weaknesses
 The business is experiencing problems in one or two home markets. For
example in the European market of the United Kingdom, IKEA has recently
opened more stores which means that the number of visitors is divided by a
greater number of retail outlets. So in the past the consumers would travel
many miles to visit stores and each store had a large number of visitors, now
these consumers have not really increased in number, but are now able to visit
a more local store. This has reduced the footfall per store and any sales
density.
 One problem experienced by IKEA is that its flagship stores are not located in
city centres, or even secondary locations near large populations. They are out-
of-town stores. So consumers have to travel large distances to visit the stores.
Their customers have to not only cost their travelling expenses, but they also
have to collect large packages and take them home. This would be a
competitive disadvantage.
 Need to keep communication with customers and stakeholders about
environmental activities.
 A growing demand for greener products.
 Demand for reduced water usage and lower carbon footprints.

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Threats
IKEA deals with threats by generating new ideas;
 Social treads (building online help to guide customer).
 Market forces (lower prices and economic scale).
 Economic factors (price strategy).

Opportunities
 Perhaps the biggest opportunity that the company has is its cost leadership,
which means a single-minded focus on cost at the expense of everything else.
While this has raised concerns about quality, the customers do not seem to
mind as they are getting their money’s worth and the addition of value to the
customers is another significant opportunity.
 The other opportunity lies in the company’s expansion into the emerging
markets and the developing world where it has an untapped customer base that
can be leveraged for effective profitability. IKEA is already drawing up plans
to enter markets like China and India with a clear strategy of cost leadership,
which it hopes, would yield benefits to the company.
 Strategic partnerships with other brands.
 Production in India and China.
 Adding premium quality products.

Solutions to improve the company

 IKEA should open less stores in each country so the number of visitors and
the sales density could be increased.
 IKEA stores should transport their large products to the consumers that live
far away for free.
 IKEA should ask customers for more methods about environmental activities
(by giving them a questioner).
Some factors IKEA can use to improve their eco-efficiency:
 Reduce material intensity,
 Reduce energy intensity,
 Reduce the toxic dispersion,
 Enhance recyclability,
 Maximize the use of renewable resources,
 Extent product durability,
 Increase service intensity.

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  IKEA can use more recycled products for its manufactures for example using
recycled aluminum frames, using solar power in order to light up its stores,
limiting the usage of heavy metals by using other alternative products,
because the extraction of heavy metals from the earth is very damaging.
. Minimize water usage by
 Identify unnecessary uses of water
 Re-circulate water within a process or a group of processes, or reuse water
sequentially.
 Treat and reclaim used water.
 Replace potable water supplies with water from non-potable water supplies
when possible.
 Install meters on high-flow processes and equipment to track and reduce
water use.
 Identify alternative processes that are less water-intensive.
Reduce the carbon footprint by
 Reduce energy usage (lighting, switching off the unnecessary equipment,
heating in stores, cooling in stores).
 Use LED or energy saving bulbs as they use far less energy (and cost less to
run) than old style incandescent bulbs. Even better, install ‘occupancy sensors’
which are motion sensing.
 A living wall is a great PR opportunity and looks fantastic, but simply planting
a tree or some flowers is a good start toward carbon offsetting. IKEA can
sponsor or organize a corporate tree planting day to involve the employees too.
 Adding solar panels to a building reduces the energy needed from the National
Grid.
 Encourage staff to turn off computers, lights and other electronics when they
leave for the day.

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 Conclusion

IKEA is a long established company which has maintained the IKEA Concept
from its original foundations. The IKEA Concept exists in every part of the company,
from design, sourcing, packing and distributing through to the IKEA business model.
This case study has shown how IKEA’s vison and mission and its strong values both
contribute and drive the development of its sustainable strategy with the overall aim
of helping more people live a better life at home. A business strategy is not simply
about creating a competitive advantage, but by having a clear vision of what it wants
to achieve underpinned by strong values, means that a company can still be a market
leader but not compromise on its integrity as a business.
IKEA is a well-known global brand with hundreds of stores across the world. In
order to improve performance, it must assess its external and competitive
environment. This will reveal the key opportunities it can take advantage of and the
threats it must deal with. IKEA responds to both internal and external issues in a
proactive and dynamic manner by using its strengths and reducing its weaknesses.
Through this, IKEA is able to generate the strong growth it needs to retain a strong
identity in the market.
IKEA's passion combines design, low prices, economical use of resources, and
responsibility for people and the environment. The company's products, processes and
systems all demonstrate its environmental stance. For example, clever use of
packaging and design means more items can fit into a crate, which means fewer
delivery journeys. This in turn reduces IKEA's carbon footprint.
IKEA believes that there is no compromise between doing good business and
being a good business. It aims to go beyond profitability and reputation. IKEA is
intent on becoming a leading example in developing a sustainable business. This will
create a better everyday life for its customers. IKEA has discovered a business truth
being sustainable and responsible is not just good for customers and the planet, it is
also good for business.

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References
https://www.researchgate.net/figure/The-organization-structure-of-
IKEA_fig3_299706608
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https://research-methodology.net/ikea-value-chain-analysis/
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https://www.cheshnotes.com/2016/09/ikea-swot-analysis-2016/
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https://www.ikeafoundation.org/

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