IKEA Flashcards
1
Q
What is IKEA’s 3 Roads Forward strategy?
A
- Affordability
- -> needed to work with supply chain, smarter construction - Accessibility
- -> new markets, multi-channel shopping - Sustainability
- -> positive impact on society + planet, climate neutral and circular by 2030
2
Q
IKEA Operations in brief
A
revolves around running their stores
3
Q
IKEA operations in detail
A
- stores built to drive volumes up, keep costs down
- shopping in a sort of warehouse with a showroom
- stores deliver a consistent experience
- added restaurant and smaller items to make people buy things when they realized that people would come without buying anything (want impulse purchases)
- maze-like store (this makes impulse purchases more common since have to walk through everything, 60% of purchases were unplanned)
- stores mostly outside city centre, people willing to drive to the store
- stores designed for you to spend hours in them
- price of items are determined before things are made
- 14 designers based in Switzerland, external design consultants
- self-service stores
- –> lower cost for labour, shorter waiting time
- store-set-up:
- -> maze promotes impulse purchases
- -> adding smaller items, restaurants, increases purchase
- -> daycare increases time spent
4
Q
IKEA supply chain management
A
- standardized products–> more efficient, lower costs
- IKEA products sold in flatpacks
- everything driven by final price–> supply chain is price driven
- established good relationships with suppliers (had long term relationships, avg 11 years)
- 1000 suppliers in 51 countries
- supply chain geographically dispersed
- sourcing of materials dependent on where lowest cost is
- –ex. US supplied by Switzerland since not worth it to have suppliers there
- high volume, low prices
- -> high volume allows IKEA to put downward pressure on suppliers
- highly rational, mass production, specialized supply chain that reduces costs by 20 to 30%
- —> this is what drives the high volumes, low prices
- offers suppliers technical and financial support to help upgrade factories with modern tech, achieve safety, and tech standards
- unconventional suppliers–> ex. shopping cart company
- high volume
- -> advantage of economies of scale –> competitors can’t compete
- –>creates barriers to entry
- bought production capacity rather than product quantities
- outsourcing:
- -> design is core activity–> this is done in house
- -> can reduce cost (manufacturing), which is needed when products are price driven
- ->with growing volume/demand, IKEA doesn’t have to keep investing capital
- 2000 new products annually into a product portfolio of 9500 items (IKEA range)
5
Q
IKEA distribution
A
- at first, furniture industry/distribution was based on catalogues
- showrooms to show quality after price wars decreased quality
- IKEA used big blue box stores
- stores in 53 countries, may be able to get to know suppliers better
- adjusting items for different markets hurts IKEA business model since they are based on standardization, mass production
- adusting items de-risks IKEA
- –> multiple different markets
- vast distribution network helps economies of scale
- –>can place larger orders, sell across border lines
6
Q
IKEA marketing and sales
A
- consistency and design of store
- ->consistent brand image, being upsold by smaller products
- focus on accessibility–> low cost
- brand perception is increasing –> particularly in western countries
- strong brand identity
- -> big blue box, an experience rather than just shopping
- revenue is increasing
7
Q
IKEA follow-up service
A
- relatively weak
- call center
- limited because of cost reduction strategy
- -> business model depends on do-it yourself
- tried to cut this as much as possible
- redesigned recently so that products can be disassembled and reassembled (the snapping in place tech)
- different geographic markets have different demand for follow-up service
8
Q
IKEA HR Management
A
- strong company values and culture (almost a religious belief)
- ->frugality and honesty are key
- informal hierarchy–> team-based, non hierarchical
- co-workers, not employees
- a family, refer to people by first names
- leader visits often
- senior management team is required to work a week in the store
- ->doesn’t get too distant from store
- CEOs have been at IKEA for a long time
- -> promote internally
- hire people who first IKEA culture; kind, not egocentric
- unified, keeps good talent–> more loyal (retention)
- save money on travel, hotels
- strong working culture gives them common values
- intrinsic motivation makes better service
- –> customer experience and consistent employee values enforce brand image
- lower turnover costs
- higher retention
- avoid unionization
- –>creates less flexibility for company when unions exist
- keeps employees happy
9
Q
IKEA Finance
A
- privately-held
- ->makes them independent
- since they are frugal, likely have to take on less debt
- “save for the rainy day”
- ability to spend when changes are necessary
- tax savings by moving headquarters to Netherlands, and franchise system
- ->also owned by two non-profits
10
Q
Management IS
A
- *Weakness
- poor IT systems
- -> 500 systems intertwined–> have caused problems with stock
- need to streamline IT operations
- expensive to change though
11
Q
IKEA core competencies
A
- store operations
- strong culture/HR management
- supply chain management
- “we have a good track record of taking costs out, a great sense of pride”
- cost advantage–> committed to this
- ->high volume, low prices
12
Q
external trends
A
- rise of e-commerce
- -> empowers customers
- -> drives prices down
- -> can put small brick and mortar places out of business
- customers increasingly prefer delivery
- –>convenience
- -> increases competition (Amazon)
- increased income and standards of living among customers
- car ownership decreasing
- environmentally conscious consumers
13
Q
Threats against IKEA
A
- Wayfair
- -> greater selection (14M items from 11 000 suppliers) compared to 9500 items from 1000 suppliers (IKEA)
- lower prices of competition
- ->IKEA 52% more expensive
- Alibaba (in China)
- Amazon
- slow down of visitors + sales in physical stores
- decreased driving
- shifting away from DIY culture
14
Q
opportunities for IKEA
A
- Latin America
- China, India
- ->numbers, growing economy/middle-class
- expansion in current markets
- smaller, urban stores
- –> population growing in large cities
- leader in sustainability (potentially)
- rental market/renting furniture
- selling used furniture
15
Q
what’s IKEA’s goal
A
- reach 3B customer-base globally (from 1B to 3B)
- want “thin wallets” since it’s 1.8B/3 they want
- ->but wants them because the middle market is more competitive, those with middle-income have more choices
