PART 1

Identify in max 20 seconds, by applying a methodology from class, the Business

Strategy of IKEA

“IKEA's business strategy is based on Michael Porter Strategies which focuses on cost
leadership and differentiation.”

“It uses an efficient supply chain, flat-pack design, warehouse-style store layout, and a self-
service model to reduce shipping, storage, and labor costs.”

“It also offers a unique shopping experience through a showroom concept, offering stylish,
functional, and minimalist furniture at competitive prices.”

Demand; interpret the supply chain strategy and sketch the impact of demand, delivery
and returns in your elaboration.

Ikea strategy is focus on long time forecast on their demand created with the help of AI
supporting with Mass production and Standardized products.

This Demand is fulfilled by internationally spread retailers, and flat-pack goods enable Cost
effective shipping.

As IKEA uses direct-to-store shipping their delivery is highly effective.

Returns are facilitated by flexible policies, but they aim to minimize them by ensuring
product quality and customer satisfaction

https://www.ikea.com/global/en/stories/design/using-artificial-intelligence-for-smarter-
demand-forecasting-210527/

Sourcing; examine the supplier relationship involved (5 points- LO1). Involve the
uncertainties in supply and demand and distinguish how you would overcome them.

IKEA's strategic approach to supplier relationships involves long-term partnerships, global

sourcing, strict quality standards, a sustainability focus, and cost-effective production. This
approach fosters trust, collaboration, and collaboration among suppliers, ensuring high-
quality products at competitive prices.
IKEA's Challenges in Quality Assurance

• Large-scale operations in multiple countries pose challenges in maintaining consistent

standards.

• Quality assurance is a major flaw due to the company's focus on cost leadership.

• Rising costs of inputs and raw materials have impacted financial performance.

• Poor product quality is a major concern, with furniture falling within days of installation.

• Quality is increasingly important in everyday purchases.

Some of other uncertainties IKEA Currently facing are

Global Supply Chain Disruptions

• Raw Material Shortages
Rising Transportation Costs
• Freight and Shipping Costs:
• Logistics Bottlenecks
Sustainability and Environmental Challenges
• Sourcing Sustainable Materials
• Green Logistics
Geopolitical Risks
• Trade Barriers and Tariffs
• Regional Instability
Circular Economy and Product Lifecycle Management
• Reverse Logistics
• Managing Second-Hand Markets

Supply chain diversification: IKEA can better handle disruptions and lessen its dependency
on any one source by sourcing from several suppliers in various locations.

As IKEA ensures its suppliers adhere to the IWAY code of conduct, which outlines
environmental and social sustainability standards, ethical labor practices, and product
quality. Challanges with Quality will can be reduced substantially

https://www.ikea.com/global/en/our-business/how-we-work/iway-our-supplier-code-of-
conduct/
Strategic Fit; argue, based on the above, where you would put IKEA in the strategic fit
figure. Defend why that is and why you think they reach a strategic fit or not.

IKEA's strategic fit with a cost leadership strategy is evident in its global sourcing strategy
and cost-effective production. This approach minimizes costs while ensuring quality
assurance. However, it also exposes IKEA to supply chain disruptions and variations in
quality. Despite these challenges, IKEA has integrated sustainability into its core business
strategy, focusing on sustainable and ethical practices. Their IWAY supplier code of conduct
emphasizes these goals. By fostering long-term partnerships and ensuring compliance with
the code, IKEA fosters collaborative supplier relationships, reducing risks associated with
poor product quality and raw material shortages.

While there are clear challenges, IKEA does reach a strategic fit because they are effectively
managing a cost leadership strategy with a strong emphasis on sustainability and
differentiation. In line with changing consumer values, they have managed to maintain
competitive prices while simultaneously establishing a reputation for ethical business
practices and sustainable goods.

Network design; examine how the described network design impacts the supply chain
efficiency and interpret the responsiveness of IKEA.

The successful operation of the supply chain is greatly influenced by network design. It fits
in with IKEA's competitive strategy, which highlights global sourcing, cost leadership, large-
scale production, and effective logistics. IKEA can maintain affordability, optimize resource
allocation, and maintain a broad supply strategy by comprehending financial constraints.
Additionally crucial are risk management, cost optimization, demand forecasting, and
regional facility configuration. Reducing response times, transport costs, and guaranteeing
product delivery all depend on site selection, logistics expenses, and infrastructure
decisions.

Judge, based on the above, how IKEA maximises the supply chain surplus to create
continuity and argue how IKEA could head for a sustainable future.

IKEA is optimizing its supply chain surplus for operational continuity. IKEA maintains low
prices and high value for customers by using a Just-in-Time (JIT) system, centralizing
procurement, lowering per-unit costs, producing furniture in bulk, and optimizing regional
facility configuration. The total surplus is also influenced by advanced forecasting, vertical
integration, risk reduction through supplier diversification, and flexibility in responding to
market developments. These tactics preserve supply chain quality and guarantee long-term
continuity.

IKEA is embracing sustainability by integrating it into its operations through sustainable

sourcing, reducing waste, and investing in renewable energy. By sourcing 100% of its wood
and textiles from sustainable sources, such as recycled materials or certified forests, the
company can reduce environmental impact and secure long-term access to necessary
materials. By embracing circular economy principles, IKEA can design products with easy
disassembly and recyclability, extending product life cycles and minimizing waste.
Additionally, IKEA can invest in renewable energy sources, adopt eco-friendly transportation
methods, and implement sustainable packaging innovations. By maintaining ethical labor
practices, implementing full supply chain transparency, and implementing waste reduction
strategies, IKEA can further enhance its sustainability efforts and maintain its position as a
leader in ethical business practices.

Part 2

Add a maximum of 1 minute to your pitch in which you reflect on your learning in this
module. Choose one situation and mention your personal development. Use your PLD
class learnings to reflect.

The international education system's approach made this module feel more like a
professional training experience than a typical university course. It immersed me in the
supply chain community and gave me a solid basis in supply chain management. I got to
interact with real-world problems, which resulted in in-depth, useful brainstorming sessions.

The exposure to the different roles in the global market was one of the module's most
influential features. It increased my awareness of the wide range of exciting career options,
particularly in relation to changing business trends. Freek deserves special recognition for
his invaluable insights into firm expectations, including the increasing recognition of
sustainability and circular business models.