Supply Chain Management Of Ikea Marketing Essay

Ikea is a global renowned large furniture retail established in 1943 by Ingvar Kamprad in Sweden. The main business likes stationery of mail order, grocery and so on. Then finally turning to furniture as its main business. At present, it has 292 large-scale outlets in 34 countries and regions around the world. Ikea has been promoting the motto of “better life for everyone” since its inception. It focuses on low price, good quality household furniture to do. So, Ikea strive to create customer and social benefits as the center of business.

Business Model of Ikea

Complete industrial chain

Ikea have the supply of raw material, product design and development, production and processing manufacturing, sales flow and customer service five processes. It firmly seized the product design and sales of the two profit maximum link, at the same time will service into the sales, return low link the basic way of outsourcing complete industry chain synergy.

Powerful R&D design ability & standardization of innovative thinking

First, Ikea have a comprehensive market survey each three years, it is to listen to the customer to the product of the reaction. Second, in order to further reduce the cost, it use of environment friendly materials like re-cycle of raw materials wood instead of deforestation. The introduction of new technology, it will gas injection composite plastics in order to save material and reduce weight and faster production product. Third, the household product of Ikea is split assembly goods, products divided into different modules, separate design.

Experiential marketing

Ikea the way of experience marketing is grasp the customer psychology. It doesn’t introduce products to customers but let customer to experience products. It has gained the trust of customers and let the customer know its quality assurance. It is a more kind more life of the marketing strategy.

Supply chain management of Ikea

According to porter (1998, p55) a “strategy is the creation of a unique and valuable”。Supply chain management (SCM) is the term to describe the management of the flow of materials, funds and information through whole supply chain, from supplier to manufactures to warehouses to retailers and ultimately to the consumer.

Ikea had 1,400 global suppliers, 60% its suppliers are from European countries. And the large supplier market in China and Poland. The rationale of Ikea’s relationships with suppliers lies in the company business idea of producing low price products in a socially responsible and environmentally friendly way. all its products are manufactured in accordance with a specially designed code of conduct” the Ikea way on purchasing home furnishing products”(IWY), which also provides a basis of the company’s relationships with its global suppliers. in additional, the retail concept of Ikea from the traditional showroom to warehousing, retail outlets act as ware houses .unlike most furniture companies, Ikea has ready inventory to meet customers’ demands. Their distribution centers located worldwide to cater to demands of its retail stores. It had 42 distribution centers with the large inventory and wide array of products. Ikea minimizes logistics costs by the customers as part of their supply chain; customers collect their furniture’s from self-serve area without long waits and assemble the furniture themselves.

Ikea’s innovative method of designing and packaging of product

4.1Ikea’s innovative method of designing of product

Ikea first made a target price before designing a product. This practice was generally followed method of designing the products first and then the price according to the cost and other furniture manufacturers. Ikea’s designer to accommodate all of the cost such as raw materials, manufacturing and transportation until the products reached the shop into the given target price. “Wood and cotton” are their main raw materials, and it’s belonging to renewable resources. Ikea is very hard to ensure that from the responsible way management of forest and farmland, and between men and nature-oriented at all times. Look this, we know that Ikea followed like a method at a relatively low cost to develop a high quality products so let more people can afford it. The company’s aim was to provide low cost and high quality products to customers.

4.2 Ikea’s packaging of product

Ikea has taken a flat packaging system packaging in order to reduce the air quantity for its furniture that namely free space furniture in transportation and storage. It is especially focus on design practical furniture that can be dismounting and transported to its shops. In the case of these products cannot be load into flat package, Ikea had to make them stackable. Transporting part in flat packaging allowed Ikea to optimize the vector space, so when cost cutting compared to other furniture retailer which transportation assembly products. Although the company’s focus on selling affordable furniture, it does not compromise the innovation design products and the utility they provide. The flat packaging not only can the convenience of our customers to transportation products by self, but also helps save the company’s transportation cost. Moreover, it also helps Ikea in the utilization of the best of warehouse space and minimizing the types of trays used to storage the products.

How Ikea’s SCM can reduce the cost

Ikea reflect the basic business philosophy “cheap but not inferior” on the entire supply chain management, from various aspects of the design, production, suppliers, logistics, sales to the implementation reduce the cost.

Design, Ikea reflected its low cost strategy on the design. For example, design product not only from the function and processing into consideration, early should be investigation for choice of raw materials, packaging and transportation factors. For example, try to use light color coating instead of brunet paint, because brunet paint expensive, design detachable easy to transport structure and so on, reduce transportation cost, and through the internal design team cooperation, muilti-sectoral public with discussion of product design program to reduce cost.

Manufacturing, Ikea using within global scope for manufacturing outsourcing way into production, to maximize reduce manufacturing cost. It creates the “horse race” mechanism for suppliers, and encourages the free competition among suppliers. In addition, Ikea annually to its suppliers will put forward fixed reduce production cost index, makes the manufacturing cost can enter a continuous decrease of virtuous cycle. So Ikea can concessions consumers at low price, in the market its more competitive.

Logistics, Ikea is often said that “we do not transport air,” Ikea adopt the “flat packaging” way to transport goods through the elaborate design logistics system, and maximize the use of the means of transport of the transportation space, reduce the ineffective transportation, at the same time transportation material used repeatedly.

Sales, Ikea allow customers do-it-yourself assembly furniture, customer can choose pay shipping or do-it-yourself way to save money. Not only save the operation cost, and back to the customer a free relaxed space.

6.0 Strength & Weakness of Ikea’s supply chain

6.1 Strengths of Ikea’s supply chain

Strengths include Ikea’s specialized marketing approach or its market position. From any aspect of the business that increases value to its product or service.

Ikea’s strengths include:

• A strong global brand which attracts key target groups. It promises the same quality and global scale

• Its vision – “to create a better life for the many people every day”.

• A ‘reasonable design’ – achieved a good balance between quality, function, design and price. Ikea’s Cost Consciousness’ means that low prices strategy are considered first when each product is designed from the beginning.

These strengths are benefits for Ikea being able to attract and keep its customers.

6.2 Weaknesses of Ikea’s supply chain

Ikea has to recognize its weaknesses in order to develop and administrate them. This can play a important role in helping it to establishing purposes and develop new strategies.

Ikea’s weaknesses include:

• The size and scale of its worldwide business. This could make it hard to control standards and quality. Some countries where Ikea products are made do not appliance the legislation to control at work environments. This could signify a weak link in Ikea’s supply chain, effecting customer opinions of Ikea’s products. The IWAY code is backed up by teaching and checkers go to see factories to make sure that suppliers meet its requests.

• Ikea need for low cost supply. It needs to be balanced against manufacturing high quality. Ikea also needs to discriminate itself and its products from competitors.

• Ikea needs to retain good communication with its clients and other shareholders about its activities of environmental. The scope of the business makes this a difficult assignment. Ikea produces periodicals in print and online. Such as ‘People and the Environment’, and carries out key TV programs and radio propaganda to enable the business to connect with different target groups.

7.0 Conclusion and suggestions

In short, Ikea’s successful factors can boil down to its different theory. Ikea business concepts support the Ikea empire expanding growth, its global scale influence and value concept continuous reveal. Although it has towards globalization, but still did not forget localization, their strategies in an increasingly uncertain economic environment timely adjust. Based on the Ikea existing business model, supply chain, innovative product design and renewable raw materials, Ikea will get better in further.

In the other hand, Ikea should pay more attention to its target groups who in metropolitan areas and universities, through making it easy for them to come to the store and make purchase. Because those areas where the populations are move house frequently. And it should build up high-value consumers, by staying in touch with them and encouraging them to return.