Ikea Outsourcing Essay

Outsourcing, a process of hiring another individual or company, either domestically or internationally, to handle the business activities for the firm. At this era, it is no longer an option as much as it is a necessity and has become a common business practice that allows small and medium size businesses to gain extra services and skills that are usually hard for them to develop due to shortage of manpower or financial restrictions, or maybe both. It allows the firms to be more focus on their core competencies, rather than tying up considerable company funds in something that can easily and cost effectively be done somewhere else and, more importantly, it will surely help the firm to cut the costs and improve their performances efficiently …show more content…
Ikea outsourcing is solely based on the dependency on capacity enable Ikea to reduce capital investments and achieve scale of economies. For instance, Ikea was able to save on procurement costs as compared to glass sourced from rest of the world. Collaboration between Ikea and stakeholders enables high volumes of glass manufacturing in China, thus achieving economies of scale for both the manufacturer and …show more content…
They outsource certain routine functions to offshore experts are capable of focusing on their core competency. For instance, the company outsource the IT solution from Wincor Nixdorft that they are not expert with the field and which may have consumed a lot of their time and resources whereas Wincor Nixdorft company have an experience team to handle the systems As we all know, Ikea become popular due to selling various types of furniture with reasonable price and they have sufficient stock in their warehouse and not in IT sites. This is why they cooperate with Wincor Nixdorft to aid them in the POS systems.

Next, outsource may generate a higher customer retention rates. There will be a dramatic increase in customer retention with a successful marketing such as advertisement, creative program and through various agents. The customers will buy and experience the products from Ikea and surely will repurchase again if they think that products bring benefits to them and therefore this also increase satisfaction and brand loyalty towards customers. On the other hand, the customer did not know whether the products are made by the company or outsource from the other companies, but they will have brand loyalty towards the company and