IKEA Value Chain Analysis

Assignment 3
Ana Albasini, 19223627
It all started in 1943 when Ingvar Kamprad created IKEA in a small town in Sweden. It’s
the current largest furniture retailer in the world with more than 200 stores all over the globe.
They are best known for their well-designed furniture combined with good quality and low
prices. Being cost-conscious is what best describes IKEA as they believe that everyone should
be able to afford their products. IKEA was the one who introduced customer self-service and
flat-pack furniture and that’s what differentiates them from other furniture retailers.
To better understand how a product’s value is created in IKEA, we can do a value chain
analysis. The core activities of the value chain’s model are directly related to the company’s
business and the support activities, as the name says, support the primary activities. This way
value is created.
Primary activities:
• Inbound logistics - IKEA has an alliance with more than 1000 suppliers in over 50
countries all over the word who are responsible for providing them raw materials. To
make sure that the production is being well done and good quality is present, IKEA
keeps a close distance with the suppliers and offers them financial and technical aid.
Swedwood, the largest producer of wooden furniture in the world, is owned by
IKEA’s Industrial Group and was created as a subsidiary just in case some of the other
suppliers were lost. Many of IKEA’s products come from them. IKEA has currently
280 stores operating in 26 countries and 27 distribution centers that are in charge of
serving those stores. As we know, all these stores have a warehouse inside them where
customers can look for their items. In every store there is someone in charge of
material handling logistics and the ordering process.
• Operations – As previously mentioned, they are operating in more than 20 countries
worldwide. Swedwood, which is owned by IKEA, is their main supplier and have
manufacturing facilities in 10 countries. The products are then distributed to the stores.
This distribution is very efficient because of their flat packs that allow them to carry as
many products per trip. The main source of value here is related to the cost benefits.
• Outbound logistics – The concept of self-service was firstly introduced by IKEA.
Customers are responsible for transporting their own items home. The flat-pack items
make it all much easier. Also, IKEA provides two types of delivery whose
transportation costs are not covered by them. They don’t use any intermediaries when
it comes to delivering their goods to the customers.
• Marketing and sales – IKEA’s main marketing channel is its annual catalogue. This
catalogue is distributed to people’s houses and it’s totally free. It’s a perfect way of
seducing new customers to the stores. IKEA also has a website that is crucial in
attracting new customers. TV ads and other types of media advertising are also used
by IKEA. Along with that, they arrange their stores in a way that no one can leave
them empty-handed. The paths created are a way of keeping the customers
entertained. While going around the store there are many small and so cheap items
that people can’t resist to buy them. There are also sales advisors in every store to
offer help to customers.
• Service – Customer service is not much provided by IKEA as the “Do It yourself”
idea is very present in them. As customers get home with their flat-pack furniture, they
have to build it by themselves with the help of the manual instructions provided.
Customers have the online and telephone services if they want to ask for a refund or
exchange of product and to give feedback.
Support activities:
• Procurement – As mentioned before, IKEA doesn’t produce their own products. They
have suppliers that are responsible for that. A well-established relationship with the
suppliers is maintained. Teams are present in the process of production to ensure good
quality.
• Technological development – IKEA has its own team of product design and
development that make sure that IKEA’s identity is reflected in their products.
• Human resource management – simplicity is crucial in the working environment in
IKEA. There’s not a defined hierarchy, whether they are a store manager or a sales
advisor, they are all treated as a co-worker. There’s a lot of teamwork present.
All the employees go through training and development programs. This is a way of
implementing IKEA’s cultural values in everyone. HR is responsible for creating a
good working environment.
• Company infrastructure – IKEA is divided into 12 organizational areas that are
efficiently connected with each other: Communication and Interior Design, Customer
Relations, Design and Product Development, Finance and Business Navigation,
Human Resources, Information Technology (IT), Logistics, Marketing and
Communication, Purchasing, Restaurant (IKEA Food), Sales and Sustainability and
TQE (Technique, Quality and Environment). This allows IKEA to be the leader in the
furniture retailing market.
References:
o John Dudovskiy. (2017). IKEA Value Chain Analysis. Retrieved from:

https://research-methodology.net/ikea-value-chain-analysis/#_ftnref4
o TradeGecko. (2018). IKEA supply chain: How does IKEA manage its inventory?
https://www.tradegecko.com/blog/supply-chain-management/ikeas-inventory-
management-strategy-ikea
o IKEA. (2019). https://www.ikea.com/us/en/
o Lisa Duke, Michael Jarret, Professor James Costantini. (2019, March). IKEA: a
furniture dealer. INSEAD.

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Assignment 3

Ana Albasini, 19223627

o John Dudovskiy. (2017). IKEA Value Chain Analysis. Retrieved from:

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