Value Chain of Ikea

The value chain for IKEA

                      Written by Yuehuanzi Zhang

1.0 Introduction and Company Overview

IKEA, a  global furniture  retail, is  founded  in Sweden by Ingvar Kampard on  the concept of providing well-designed home furniture and accessories with affordable price to its customers (Dudovskiy, 2015). From a small furniture retail shop to one of the  world’s largest home  furnishing retailer, IKEA  has grew and developed rapidly since it was founded  on 1943. To obtain competitive advantages,  IKEA  developed numerous  new and unique concepts  and practices, such as Do-It-Yourself concept, Cost-per-Touch inventory tactic, 3D planning tools and in-store logistics management to offer better  purchasing experience and service for its customers. In this report, it takes a critical analysis of IKEA  by applying Porter’s generic value chain model to examine  the  competitive  advantages  and  attractiveness   in  IKEA’s  supply  chain, human resource management  and service operation management.

2.0 Porter’s Generic Value Chain Model

Porter’s generic value chain model is a set  of valuable and analytical tools which assists  the  businesses  to  figure out  how  well  they  can  compete  through  their valuable service and product  in the  current  market  (Parker, 2012). In Porter’s value chain, business activities can be grouped into two categories: primary activities and support activities (Arline, 2015). Primary activities are the necessary elements used for producing products and offering services to help the company build up more competitive  advantages  from its inbound logistics,  operation,  outbound  logistics, marketing  and  sales,  and  service.  Support  activities  are  the  activities  that  the companies  operate  to  facilitate or support  the  primary activities.  As a secondary activities, support activities are organized in four categories, which are firm infrastructure, human resource management,  technology development and procurement.  Although support activities may not have a direct effect on company’s production  process,  they  can  improve  the  efficiency  and  effectiveness  of  the operation.

2.1 Primary Activity

2.1.1  Inbound Logistics

Inbound logistics refers to the raw materials that is used in the production process

(Arline,  2015). For  IKEA,  it  developed  a  unique  in-store  logistic  management   and

inventory  setting  system  and  it  can  be  thought  as  a  leading  furniture  logistics company.

In-store Logistic Management

Since there  are  thousands  of stocks handled  in warehouse  every day, it is quite significant for IKEA to guarantee  the flow and distribution of stocks to be as expedite as possible under  any circumstances. In order  to  be full control of the  inventory management,   IKEA  employed  in-store logistics  personnel of product  ordering to ensure the large amount of products and services that customers seek are available and efficient at stores (IKEA, 2016). The managers works directly in the stores instead of  sitting  in  the  office. The  responsibility  of  in-store  logistics  personnel  is  to attentively check the notices of delivery, record and arrange deliveries, allocate and detach the stocks, and place them to the specified sales areas or locations (Lu, 2016) . So as an in-store logistics manager  in IKEA, the role should be responsible for the following major duties (Al Futtaim Group, 2009) :