What Is the Role of Supplier Relationships in Ikea's Strategy?

6. What is the role of supplier relationships in IKEA.s strategy?

In many ways, this question gets at the heart of IKEA.s competitiveness and its ability to be innovative. IKEA makes very few products internally and relies almost totally on its network of hundreds of suppliers. These collaborative long-term partnerships with suppliers are rooted deeply in IKEA.s corporate history, and the character of these ties has become part of the culture. It is through the suppliers that IKEA has been able to make innovative designs featuring environmentally responsible materials and an efficient use of resources and translate them into bottom-line results. The key suppliers, in turn, use links with IKEA as vehicles to stay innovative, because innovation is the only choice if the supplier wants to retain this powerful buyer; IKEA is powerful enough to be coercive, and .the giant. is not to be dismissed easily.

Another aspect to consider in this case is a process that starts with regulation, which has prompted IKEA to work with key suppliers to meet the new requirements (pushing them to do so at equivalent or minimally increased costs). They develop a higher-quality product, which motivates IKEA.s competitors to match the design and materials innovations as well as the economic efficiencies. Meanwhile, the supplier.s improved skills and capacities make it more competitive, enabling it to expand its business with old and new buyers. Consequently, the industry is stimulated to match and exceed the IKEA example, the natural environment wins because waste or pollution is reduced or eliminated, and the customer benefits by being able to purchase a better-quality product. Students should emerge from the discussion with a sense of how IKEA illustrates the ripple effects through markets, industries, and societies of innovation around environmental concerns (and IKEA is not an isolated example, merely an illuminating one).

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