IKEA and Vertical Integration

Chapter 10 talks about the concept of vertical integration in order to gain competitive advantage. Through corporate business strategies, a firm’s vertical integration choices define which business functions it will be in and which business functions it will not be in. The number of stages in a product’s or service’s value chain in which a particular firm engages defines that firm’s level of vertical integration. The greater this number, the more vertically integrated a firm is; the smaller this number, the less vertically integrated a firm is. Vertical integration is used as a means of cost advantage however, under times of uncertainty firms should be careful when deciding to vertically integrate to increase competitive advantage.

IKEA has been implementing their vertical strategy over the past several decades and have been successful in doing so, making them one of the top firms in the world in their industry. With the increasing awareness, implications, and seriousness of climate change, more and more companies are stepping up their efforts to be more environmentally friendly and sustainable. IKEA’s latest move to be more conscious of this was to invest in a plastics recycling plant. One of IKEA’s goal is to make all of its plastic products with 100% recycled plastic and this investment takes IKEA closer to that goal and is also an example of IKEA implementing their vertical integration strategy.

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