ASSIGNMENT

Assignment

Assignment

Part A

Ikea group is a private group that operates in the retail home furniture and other housewares sector. INGKA Holding BV is the parent company for all Ikea group companies, including the industrial group Swedwood, which manufactures Ikea furniture. INGKA Holding BV is wholly owned by Stichting INGKA Foundation. The group operates in Europe, the US and Asia. It is headquartered in Helsingborg, Sweden and employs about 127,800 people.

Macroenviromental analysis

The group has been involved in many product recalls in recent times. In 2008, the group recalled IRIS ALVIN tents due to lack of fermacorda application to the cords. In September 2008, Ikea recalled accessory drawers KVIBY due to injury threat by glass knobs while installation and usage. Further in the year, the group recalled baby sleeping bag NARNSLIG, spotlight wall / clamp femton on safety grounds. In January 2007, Ikea recalled Parodi and Apelsin glass vases from supplier #18347 due to a faulty base. Parodi has been sold on all Ikea sales markets and Apelsin has been sold in the EU only. Furthermore, in May 2007, the group recalled Ikea food labeled jar of marinated herring as a large piece of glass was found in it by two customers. Product recalls affect group's brand equity and sales which in turn have a negative impact on group's revenues and many a times group ends up paying heavy settlement costs / huge litigation costs.

Sourcing from China

Ikea sources a part of its inventory from China.The group sourced 21% of its purchases from China. The sourcing from low cost countries like China would reduce its costs and enable the group to concentrate on increasing its market share through competitively priced product offerings. Increasing online sales

Online retail spending is increasing in the US. Retail e-commerce revenue is expected to record $146 billion in 2008, an increase of 14.3% over 2007. Further, from 2007-2012, sales are expected to increase at an 11.3% average annual growth rate. In keeping with this trend, Ikea operate retail business through its website, www.Ikea.com. Ikea is well poised to benefit from the expected increase in online sales. New store openings During FY2009, the Ikea group is planning to open 26 new stores - four stores in the Russia, three stores in France, two stores each in Germany, Italy and the US. Further group planned to add a new store to its network in Austria, Belgium, China, Japan, Poland, Ireland, Switzerland and the UK.The group's new stores openings around the globe lowers the dependency on one country and diversifies the group's customer base.

IKEA products are known for its modern-day and practical design. The furniture is designed to be easily assembled by the consumer rather than being sold pre-assembled. This method allows IKEA to reduce costs because it is cheaper to ship an item that is unassembled and takes up less space. The flat-pack distribution method also allows a consumer to easily transport the product from the store to a customer's home for ...