Strategically, Having More Than 1,000 Suppliers Result In A Complex Task Of Managing Those Supliers, Ensuring The Quality Of The Products, And Maintaining The Ikea Brand. While We Will, Address.docx

Question 3 Strategically, having more than 1,000 suppliers result in a complex task of managing those supliers, ensuring the quality of the products, and maintaining the IKEA brand While we will, addr[.]

Question 3: Strategically, having more than 1,000

suppliers result in a complex task of managing those supliers, ensuring the quality of the products, and

maintaining the IKEA brand While we will, address global supply chains later on, from a global strategy standpoint how would you manage IKEA's global

suppliers?

IKEA's strategy for expansion

1 Wholly-Owned Subsidiaries IKEA holds 100% of the market share for these subsidiaries, which consist of 367+ stores

administered by INGKA Holding B.V (located in the

Netherlands)

2 International Franchising: The Inter IKEA Group, which links all of the franchises, operates 38+ stores

Benefits include:

- Aids in operational control, standardization, and easy

entry into new markets;

- Compel IKEA to realize location and curve economies;

- Easily achieve economies of scale;

- produce more products at the same or lower cost;

- lower average production costs;

- achieve cost leadership (IKEA Strategy)

IKEA’s suppliers

• Many suppliers due to wide range of products they sell

• IKEA manufactures certain standard models of products; but

o They also manufacture certain modified versions of

products

o E.g., products sold in Europe are smaller than USA, but larger than China and

Japan

IKEA manufactures some standard models of products, but they also manufacture some modified versions of products For

instance, products sold in Europe are smaller than those sold in the United States, but larger than those sold in China and

Japan IKEA has a large number of suppliers because of the variety of products they sell

Production at IKEA

• 90% of goods are created externally by 1,000+ suppliers in 50+ countries, with the remaining 10% produced internally by IKEA

• IKEA works closely with its suppliers to:

 Assure good quality & affordability

 Acquires expertise by manufacturing goods internally

 Shares that information with its suppliers to boost

productivity

 Productivity equals costs along the supply chain

 Produces economies of scale

 IKEA’s suppliers

o Many suppliers due to wide range of products they sell

o IKEA manufactures certain standard models of

products; but

 They also manufacture certain modified versions of

products

 E.g., products sold in Europe are smaller than USA, but larger than China and

 Japan

How to handle IKEA's international suppliers in terms of global strategy:

1 Consult with them frequently

2 Establish risk management and vendor assessment

3 Establish quality guidelines or standards (such as IWAY)

4 Check their certifications before doing business with them

5 Create open lines of communication