Risks in Ikea

By Suraparaju Deepthi​ and Sanandita Mukherjee (PGDRM Batch July’20-21)

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About the company

IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad, in Sweden in 1943. ​It has more than 9500 products and has more than 350 stores in 35 countries. Ikea has invested 800 crores in India for procuring sites.​ IKEA works for no profit. Because of tax rules for non-profits, IKEA pays about 33 times fewer taxes than their for-profit competitors. ​

The Ikea trademark and the concept is owned by another private company named Inter Ikea Systems.​ IKEA Group is one of Sweden’s best-known companies. IKEA designs, manufactures, and supplies quality furniture at low prices to make it accessible to the majority of people. IKEA’s furniture products are designed to be sleek and minimalist and manufactured to be easy to assemble and maintain.​

Their business model

The secret behind low prices

1. Entry into the food industry​
2. Savings in packaging and marketing
3. Saving in Shipping Costs
4. The type of material used​
5. Assemble-it-yourself
6. Economies of Scale due to bulk production
7. IKEA designers work around the price of a product

Top 3 value concerns of Ikea

•  Cost Consciousness​
  Their first priority is to make their product affordable to as many people as possible. They challenge themselves constantly to make the product more affordable without compromising on quality.​
• Renew and Improve​
  They always challenge themselves to try something new and to find a better way out.​
• Caring for people and the planet​
  They believe in caring for people as well as for the environment. They act as a force for a positive change.

How does Ikea’s value chain work?

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Risks faced by IKEA in the international environment​

Supply chain& Logistics Risks​

         Since Ikea is having stores across the globe, the shipping and logistics cost bared by the company would be very higher. For example- Shipping from Europe to other countries like USA or UK may take 1-2 months and shipping cost is way too expansive and there is a chance of goods getting damaged while shipping.​

Cross-cultural risks​

• Language barriers​
• Regulations ​
• Compromising on Ethical practices ​

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Read the complete research study here: Research study on Risks in Ikea Global Risk Management Institute

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Disclaimer

This report has been produced by students of Global Risk Management Institute for their own research, classroom discussions and general information purposes only. While care has been taken in gathering the data and preparing the report, the student’s or GRMI does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. References to the information collected have been given where necessary.

GRMI or its students accepts no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.

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