Ikea Integration Strategy

Forward Integration

One of the most important integration strategies for IKEA is the integration of the warehousing part of the supply chain with the retailing part of the supply chain, while shifting the responsibility of product assembly towards the consumers. IKEA stores are massive warehouse where consumers walk through show rooms and select their products at the warehouse shelves, allowing IKEA to lower their prices through a decrease of handling and transportation cost. Customers purchase a product with all components and parts that require basic assembly at home, allowing IKEA to shift the cost of assembly towards the customers instead of bearing that cost themselves.

Backward Integration

According to the Guardian (2017), “IKEA has bought a forest in Romania and the Baltics, wind farms in Poland now it is investing in a plastic recycling plant in the Netherlands”. This strategy is not purely economically but a way for IKEA to be more environmentally friendly. By controlling supply sources towards wood, power, and plastic, IKEA is able to avoid environmentally damaging activities if it engages with other conventional suppliers that could be engaged in illegal deforestation or plastic waste pollution. This concern to be more environmentally friendly is important with increasing consumer awareness expected of corporations.

This type of integration may be effective as it fulfils one of the indicators of an effective backward integration which is to acquire needed resources for the organization. There is concerns that with the rise of climate change and stricter regulations placed on plastic producers, plastic will become a scared resource that is needed by IKEA.

Apart from the supply of raw materials, since IKEA is one of the largest consumers of wood in the world, IKEA also includes their own wood pulverizing production process, in order to meet the specific