Ikea Case study.pdf

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Dave Swanston

IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labour (A) Ikea faced with decision to cut off one of company’s major supplier of Indian rugs. German TV station had just broadcast an investigative report naming the supplier as one that used child labour In production of IKEArugs. Birth and Maturing of Global Company Ingvar Kamprad started company called IKEA– name combined initials with those of his family farm (elmtaryd and agunnaryd) IKEA’s vision: creating a better life for many people. Offer wide range of home furnishing items of good design and function at prices so low that majority of people can afford to buy them. Managing Suppliers: Developing Sourcing Principles Ikea’s new concept began to encounter stiff competition causing other retailers to collude and try to force manufacturers to not sell to ikea  those who did had to make deliveries at night in unmarked vans • Caused kamprad unable to meet demand b/c of constrained supply – had to look at international suppliers (Poland) • Ikea supply technique: assures quality control and reliable delivery by teaching processes and providing machinery to new suppliers – led IKEAto make loan to its suppliers at reasonable rates, repayable thru future shipments – supply contracts led to long term business partner relationships • Supplier + ikea = mutual dependency • Ikea supply philosophy: not buy products for supplies but buy unused production capacity (off season production  sail makers making seat cushions in their off season) Growing Retail : ExpandingAbroad Expanded abroad by opening new store in Norway, Germany Saved 2 of the costliest part of traditional furniture retailing  home delivery and assembly by providing furniture in flat packed boxes that customers could drive home in their cars Expansion involved concept refinement and design consistency: entrance immediately followed by living room interiors, playroom for children, low priced resteraunt, “Sweden shop” for groceries, etc Emerging Culture and Values Company foundation created: selling affordable, good quality furniture to mass market consumers around world Culture: no waste of resources, non-bureaucratic management 1986 kamprad steps down andAnders Moberg steps in as CEO. Kamprand remained as chairman and plays heavy influence in ongoing daily operations and guarding IKEA’s deeply embossed culture and values Waking up to Environmental and Social Issues By 1994: net profit = 2.9 billion and sales = 35 billion Ikea worked with over 2300 suppliers in 70 countries  strong relationship with suppliers began to change with the emerging of environmental problems wi
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