“Ikea was founded as a mostly mail-order sales business, which has been developed by its owner to vend furniture five years later on. In 1958, the first Möbel-IKÉA store was opened in Älmhult, Småland. Later on, the first stores outside Sweden were opened in Norway (1963) and Denmark (1969). In the 1970s the stores had begun to spread to other …show more content…
Europe presented 67% of Ikea’s sales in 2015. Four countries among the top five countries with the highest sales revenue are located in Europe. whereas Germany comes in the First place with 14% of the group’s sales, followed by France 8%, UK 7% and Italy 5%. (see the graphs below).
IKEA group yearly summary 2015, Finance Page 31
Last year was a year of robust growth to IKEA. The satisfying result was achieved through the opening of new stores (the opening of IKEA’s biggest store in Seoul, South Korea) and online expansion. Moreover, the improvement of the quality while lowering the prices is what makes IKEA different from their competitors. Sourcing In IKEA:
IKEA uses a market driving method, this method is based on changing the existing conditions. This approach is characterized by the ability to develop exclusive internal business processes, to form the market structure, to lead customers and propose them completely new offers.
Most of IKEA’s purchases are made in Europe (60%) and 33% are in Asia and Australia. The top five purchasing countries are China with 25% (china is known for being a low cost country which matches perfectly with Ikea’s strategy to provide good products at low prices ), Poland 19%, Italy 8%, Sweden 5% and Lithuania …show more content…
IKEA’s policy does not permit the suppliers to account more than 50% of their sales income on IKEA based contracts; the reason behind this policy is to avoid any financial disruptions when the company cannot order as much as it usually does. IKEA assists their supplier’s by recommending compulsory capital investments and probable new plants for them. Sometimes, IKEA offers loans at a lower interest rate compared to the market rate, which shrinks capital cost for the suppliers and the purchasing cost for IKEA. For smaller suppliers, Ikea recommends them to buy raw materials in bulk in order to save more costs. Furthermore, IKEA creates link between suppliers so that they can communicate with each other. The thing that allows the suppliers to supply each other, while expanding their own markets and obtaining competitive advantage through the cut in costs and also having access to bigger market. Whereas IKEA can ultimately cut costs and accomplish its goal to create low-cost but high-quality products. This strategy seems very efficient to control the suppliers, make them loyal and have a certain control over their business which gives Ikea the upper hand in this situation and enables it to achieve its goals and objectives by keeping a close watch over their