Ikea-Value Chain

IKEA implements new product service design and development to offer their quality products at a cheaper price to suit people’s contemporary needs and circumstances. They focus on the price and quality, design and function, environment and health of their new product service design and development to minimize waste and

IKEA established itself as the largest furniture retailer in Sweden by the early 1970s by reinventing the wheel of furniture manufacturing at that time. Majority of furniture manufacturers in Sweden produced expensive products with designs that were basic or passed down generation to generation, additionally other manufacturers stores where located in downtown congested areas. IKEA’s strategies which consisted of low cost low priced furniture, brave intricate designs, self-assembly,

The IKEA vision is to create a better life for many people who purchase their products. Their main objectives are: - IKEA produces cheap and affordable products for the customers - The company wants better life for those who cannot afford expensive products - IKEA always helps to produce right product for the right consumer - IKEA always tries to sell their products at low prices - The company’s global developments and its continual commitment is to have a positive impact on people and

1. IntroductionIKEA, the famous Swedish company, is the one of the largest furniture retailers in the world, which specializes in modern but inexpensive Scandinavian designed furniture. According to Echeat (2006), the IKEA had more than 175 stores spread over 31 countries at the end of 2002 and worldwide sales of about 12.8 billion euros in 2004. During the IKEA financial year 2001-2002, a total of 60,000 people are employed by IKEA worldwide and there are 323 million people visited IKEA stores around the world (Kronos, 2006).

Ikea's mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that as many people as possible can afford to buy them (www.ikea.com)

As IKEA stores are located away from the urban areas, many customers may only patronize the stores during weekends. Hence, the store may be relatively quiet during the weekdays and highly packed with shoppers over the weekends. In the case of IKEA, although it adopts the self-service concept in their stores, it actually still maintains a high level of contact with their customers. To ease and facilitate consumer’s shopping, IKEA provides catalogues, measuring tapes, shopping list and pencils. In addition, IKEA stores are designed to have a ‘family shopping experience’ with customer services and facilities such as a restaurant, day care facilities and a Swedish shop. Parents can leave their kids in a supervised play area, or keep their children with them in pushchairs provided (Slack, Chambers and Johnston, 2007). The key point about IKEA is that it is different to the rest of its industry. In typical furniture stores similar products are grouped together and the final delivery of products to customers may take several weeks.

IKEA is the largest furniture chain in the world, and in 2011 the Swedish company operated over 270 stores in 25 countries. In 2011 IKEA sales soared to over $35 billion, or over 20% of the global furniture market. Most of its stuffs believed IKEA will massive growth throughout the world in the coming decade because IKEA could provide what customer wanted: good design, and good made contemporary furniture with an affordable price. In one word, IKEA’s global approach focuses on simplicity, attention to detail, cost consciousness, and responsiveness in every aspect of its operations and behavior. (Jones, 2013)

They have integrated this concept in every business decision and global strategy, and have never strayed from the original objective of IKEA. The pioneer of IKEA’s concept was the standardized process of providing customers with disassembled furniture to be arranged at home also known as the ready-to-assemble kit. This helped increase storage and maintain large inventories at the store, which in turn eliminated warehousing costs and permitted the consumers to obtain ownership of their purchase on the same day itself. Involving customers in the value chain was a historic move by IKEA as it drastically reduced costs on every level. IKEA’s shoppers are half-consumers and half-producers because they have to self-assemble their purchases. Even though IKEA provides assistance, the customers prefer to order, carry and transport their own goods. The concept of flat packaging has further encouraged self-handling of purchases. It has also improvised storage capabilities and further reduced shipping costs. This new store model allowed IKEA to have its staff focus on boosting rapid movements of consumers and in store displays, rather than handling and delivering huge, bulky furniture items. The self-service strategy has become popular amongst the shoppers as well as IKEA’s competitive

IKEA is a worldwide expanded company. They enlarge their showrooms to North America, Europe, Australia and Asia. Customers can check out IKEA’s product in the show rooms and also by checking out IKEA’s websites to get their selected products to be home delivered. This is an effective way of selling their products as customers who are busy with their own work can purchase their preferred

* IKEA’s low cost structure has been the very core of its success. It’s low-cost and high-quality strategy fits with the current state of the economy. Offering convenience factors within IKEA’s stores would fit well with IKEA’s low cost structure. It maintains its low-cost business model by creating a different furniture shopping experience. IKEA supplies customers with all possible materials needed to complete their shopping when they enter the store (that are, measuring

Even though there have been many changes in the economy Ikea has been able to regulate the changes with their success in obtaining the lowest production prices. The company continues to provide high quality furniture that goes with their original concept of stylish furniture for a low price. Ikea offers all kinds of products that cater to most any lifestyle and budget. Ikea still mostly operates their business in the European market. Consequently, they are able to reach more customers in different countries based on the location of their production and distribution centers. Even with the many changes to the economy Ikea has managed to stay in business with their low pricing by developing different products that is in demand by

IKEAs brand image is built on their long term strategic focus to produce products from sustainable materials in an aim to care for the environment and earth’s natural resources. This aligns with IKEAs vales to promote social, environmental and economic development. IKEAs concept of customers shopping for mass produced, standardised products in a ‘self-service’ environment allows for cost efficiency

IKEA, founded in 1943 by Ingvar Kamprad, has a vision “to create a better everyday life for the many people”. With its business idea of “offering 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”, IKEA’s operational processes continues to focus on creating quality products and services at low costs as well as environment sustainability. (IKEA, 2016) More than being a furniture merchant, IKEA sells a brand that is easily recognizable, chic, stylish, minimalist and modern. It believes that everyone will leave IKEA store with something they like, be it the products or services. Its success is evident internationally where there are more than 300 stores in 35 countries. (Freden, 2015) The case study will

IKEA’s vision is to design a better life at home. Making it affordable as possible so that many people could have admirable furnishing. IKEA use function, quality, design and value to obtain their customer needs. IKEA learn to synchronise the contingency of the supplier and needs of the customers. Using that strategy to sustain the low prices. In order to gain a good condition of a product, IKEA go in for highly automated production. Together with mass producing and keeping long-term relationship with the supplier, IKEA is able to prolong their vision and aim to serve their customers. (Ikea.com/sg)

The services and products offered by IKEA provide value to its customers in various ways. For one, the products and services are very affordable. The products and services are not priced highly and therefore, the average customer can enjoy them. At the same time, the products are of high quality. From IKEA’s slogan “low prices but not at any price”, it is clear that the company prices its products lowly but that does not mean that the quality is compromised. IKEA satisfying its customer’s needs through providing them value for their money as they provide quality products that will last for a long time, and at affordable costs. The fact that the company has set the minimum acceptable standards for its wood, implies that it is also keen on quality and on the environmental impact of its action of making furniture ( Edvardsson, Enquist & Hay, 2006).