Group 112 – Sophia – Offshoring in Asia : the success story of Ikea

The world’s leader in furniture retailment is a great example of success. The company has included offshoring in its global strategy, step by step.


At the begining, the swedish firm chose to implement vertical offshoring.

From the 60’s to the 90’s, IKEA chose to get its supplies from Poland hence reducing purchase price by 50%. During the 90’s, it applied a new strategy firstly based on production offshoring towards low cost Asian countries. As a matter of fact, the firm developped purchasing departments in China, Inda, Pakistan, Bengladesh, Vietnam, Malaysia, Thailand et Indonesia. Thus, in 2000, 22% of IKEA’s global supplies came from Asia, among which 10% came from China.

Secondly, the firm decided to reduce the number of suppliers – 2,500 in 1990 to 1,120 in 2009. The advantages resulting in this decision were numerous: it became more efficient regarding logistics, transportation, productivity and control of quality. What we can also notice is that between 1990 and 2009, the firm’s revenue increased of about €18 billions.

Thirdly, Ikea reduced its prices and initiated more competition between pruchasing departments to rise emulation.


Since the end of the 20th century and the begining of the 21st century, the furniture company has established its horizontal offshoring strategy.

In 1999, there was just 4 shops in Australia and 2 in China, but it were huge potential markets. Thus, Ikea chose to create big concept stores in Asia. Although China was the first target for those kind of stores, the purchasing power level was too low to generate enough profit. That is why, while offshoring in China, the firm also did it in Japan. With this country’s high density of population combined with a considerable purchasing power, Ikea could settle in China – forecasting a rise in purchasing power- while making profit in Asia.

However, in the long-run offshoring in Japan was very risky: Japanese are very demanding on service and quality, they are not used to self-service and the Japanese culture is very different from the European one. Plus, the government set very strict rules regarding the presence of formaldehyde in furnitures. In fact, the maximum level allowed in Japan was equal to half of the one decreed in other countries. This meant that hundreds of IKEA products should be made especially for the Japanese market, and at a higher cost. It seemed unbearable on the long-run.
But IKEA decided to transform this issue into an opportunity. They made the bet that, sooner or later and for ecological reasons, all the other countries would adopt the same restrictions as Japan about formaldehyde in furnitures. So sooner or later IKEA would have to change their furnitures. Hence, they thought they might as well do it while entering the Japanese market !
 And this revealed to be very profitable. Today almost all the other countries in the world lined up on the Japanese norms. IKEA opened its first japanese store in 2006, in 2009 the company planned to open five more (three in Tokyo, one in Kobe and one in Osaka) and sold for 400 million of euros.

Today, IKEA has 43 manufacturing units in 12 countries. China now represents 22% of its global purchases – about 300 suppliers. In this country, the firm decided to locate their first local production base at Nantong. As this city is near the Yangtze River – numerous resources – and near Shanghai – where IKEA has its biggest warehouses, it allowed to reduce logistic costs.

As a result, the furniture company lowered its prices in China by 50% between 2000 and 2012. Moreover, urbanization has grown rapidly in this country, which has increased the demand. Therefore, IKEA has not stop growing and making profit in China.


Since the begining, the furniture company has offshored in countries with either market potential or reduction cost potential. They took risks but enshured back up plans and certain limitations. At the begining of the 21st century, IKEA bet that Chinese people’s purchasing power would rise while making shure to settle in another country with actual and wide market (Japan). We can conclude that the firm’s offshoring strategy was profitable, and well planned.

Sources :

Groupe 56 IMBD Sophia : The secret of Primark success.

Primark is an Irish clothing retailer with about 260 stores, it’s a subsidiary of Associated British Foods. Primark is experiencing a real success and became one of the leader in its field. The company succeed thanks to a really efficient strategy.

To be successful, a company must provide to its customers greater value and satisfaction than competitors: Primark do it with its low-priced strategy!

First, its ability to source supply cheaply by buying directly from factories, which allowed it to decrease costs.

Then they make clothes with simple designs and focus only in the most popular size, in this ways they can buy large volume, thus they are doing economy of scale.

Primark use the economy pricing policy as well as the value pricing policy by providing fashion up to day clothes at value for money prices. With the actual economic downturn, people are buying less and looking for greater value in what they buy. Primark set a right combination of quality, good service and a fair price.

Thus it covered the values and the economic trend with its cheap but latest fashion. That’s why the strategy of Primark is that successful.

The factors that enabled the company pricing its products that low are technology, efficient distribution, big volumes, as well as the low overhead costs.

Primark does not spend heavily on advertising and minimizes marketing cost, relying instead on word of mouth and digital and social media. This is an amazing working strategy, a lot of company depend severely upon marketing communications but Primark managed to bypass the need to conduct big advertising campaign to succeed. Primark shines for its talent to create a buzz with few resources. It has managed to create a real community, without very few costs.

Primark is looking for consumers loyalty in the long run: when Primark was affected by the price of cotton increase,  they did not raise the price of their  products in order to conserve their customer even if it implied short-term loss of profit for the company and it enabled them to remain the cheapest and to conserve their comparative advantage.

Quality had also efficiently leaded to success by gaining customer satisfaction through the value for money strategy.

An other success factor is the « distribution channel », Primark does not use any intermediate, enabled them to minimizes costs, and a way to choose by itself the place in which products are sold and match customer expectation. For example, before opening a new store, they have close interaction with consumer about the right place for them.

Finally and one of the most important factor is a clear focus on the target market. This is a very delicate issue that many businesses fail to understand. By segmenting the Market into different groups it is easier for the firm to better satisfy the needs of its potential customers.

In this case Primark is targeting young, fashion-conscious less than 35 years old, offering them high quality, fashion basics at value for money prices.

With an average item price of 4.5 euros and a shopping cart total two times lower than its main competitors in Europe, Primark understood how to become one of the favorite brands of consumers under 35.
But Primark’s cheap prices are not the only thing behind the success of the brand. Its ability to refresh its image in each of its European markets is also contributes to its growth.

To understand how successful Primark’s strategy is, you can see how they succeeded on the French market, which is diminishing since 2008. According to Kantar Worldpanel, only six months after the opening of its first French store, Primark’s sales in volume are just behind La Redoute, a well-known and historical French clothing brand. The average basket of Primark’s customers is six items, while its competitors struggle to reach the number of three. With just five stores, Primark is already extremely successful, a complicated thing on a market such as the clothing one. If things keep going this way Primark’s French future seems a preordained destiny, and it could become one of the leaders, if not the leader, in a short period of time, just as they did in Spain or Portugal.

Group38@SOPHIA(Msc IB)-Success story-How Samsung Group Become the Leader of Electronic Industry in the World.



Samsung Group was founded in 1938, its main early business was food exportation. Exporting fresh product such as dried fish, vegetables and fruits from South Korea to Beijing and Manchuria Chinese. In the beginning of 1950, Samsung has became the biggest trading company in Korea. One of the most critical decisions which made Samsung grow rapidly was decided to enter the electronic industry in 70’s. In 1969, due to the South Korea implemented the Electronic Industry Promotion Law, Samsung seized the opportunity to set up its technological branches, the Samsung Electronics.

Samsung first big break was the market extensions towards worldwide from the late 80s to the early 90s. Within these 10 years, both of its markets and production facilities had been spreads through North and South America, Western Europe, South East Asia and the mainland China. This made them able to produce both of the electronic device and separate electronic parts for self use or export. Throughout this period, Samsung was targeting themselves as a mid-low level in the industry.

 In 1993, Samsung launched a “new management” movement, which focuses on the innovation. Since the serious economic crisis in 1997, Samsung has re-organized within the group, by selling 10 of its brunches, and only keep those with high potential. After surviving the worst moment of the group, Samsung reallocate its own brand image in the industry by targeting wealth customer. Modeling its product as semi-high-end style, by unifying the advertising style of all different categories of products. Also take highly control of the point of sales by no longer have the product distributions in the low price chain supermarket such as WALMART.

 By the FORTUNE, in 2003, three of the enterprises under Samsung Group, have entered the world 500 strong cavalcade, nearly 20 categories of products captured the highest occupancy in the world market share. The brand value of $10,850,000,000USD, made Samsung ranked twenty-fifth out of the top 100 brands, also winning two consecutive years fastest growing brands.



Team #8 BCISM: Apple’s VS Zara’s offshoring strategies

Concerning the offshoring phenomenon, it can be source of issues, risks and threats. However, one should bear in mind that it can also and definitely be a fantastic success story that can lead some companies to increase their market share in one given industry.

As a famous example, we can refer to the offshoring strategy adopted by Apple with Foxconn in China. From a strategic point of view, the partnership could not be more successful. Remember: in 2010, Foxconn successfully invested billions of dollars in building enough capacity in China to manufacture Apple’s iPhone on the scale required. Consequently, it built a uniquely flexible and responsive supply chain for the American firm. On one recent occasion, according to a report in the New York Times, Apple redesigned the iPhone’s screen at the last minute and Foxconn woke up its workers in the middle of the night to get the job done in time. According to many specialists, one of the reasons Apple is what it is today is Foxconn. Throughout time, the two companies have been inextricably bound to each other.

However, if the “Apple-Foxconn” began as a success story, in the long-term run, conditions have increasingly changed and has led Apple to adapt its own strategy and be less dependent on Foxconn. After a spate of reports of poor working conditions for the firm’s employees, Apple’s chief executive, Tim Cook, ordered an investigation: then, Foxconn has had to adapt itself to the changing conditions and the new work framework (stricter legal conditions, riots and suicides of employees, increase in oil prices that make transportation costs higher). In December 2012, Mr Cook took an important decision and announced that Apple would bring some production of Mac computers back from China to America. “Made in America” is (maybe?) back !

In a nutshell, an offshoring strategy may definitely be a success story if the home company is continuously adapting its strategy to the changing conditions in a given industry. Last but not least, the home company should diversify its strategy in order not to be dependent on one single “offshoring actor). Otherwise, a offshoring “horror story” could definitely happen and impact the home company in a larger scale.

However, one should bear in mind that a “non offshoring” story can be a success story as well, even in labour-intensive industries. Zara, the main clothing brand of Inditex, has adopted this strategy by making its high-fashion clothes in Spain itself and in nearby Portugal and Morocco. By having a short and flexible supply chain, Zara can respond quickly to changes in customer tastes and has made this « close-to-home » decision its main source of competitive advantage!

Zara’s limited offshoring strategy:

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Apple’s VS Zara’s offshoring strategies : offshoring or non offshoring, that is the question !

Apple’s offshoring strategy in China: coming back to the “Made in America” (or “Made in Mexico”) ?

Group 115 @Sophia – Nike Offshoring

Nike’s profile

Nike is an American MNC specializing in clothing, sportswear and equipment supply. The company employs 48,000 people worldwide and brings around $24 billion of revenue. With 150 million of Nike shoes sold yearly, it is a leading manufacturer of sports footwear in the world as it has reached 38% of the market share in global footwear market. Nike outsources its manufacturing offshore to factories fully owned by subcontractors. Around 500,000 people are involved in production for Nike account. The factories’ output is majorly Nike products, which leads to their dependency on Nike decisions and strategy.

Offshoring: the reasons

In the 1970’s, Nike started to offshore, mainly into the third world countries like in Asia for example. What are the reasons to such a strategy? Actually, Nike opted for two offshoring strategies. First one is the horizontal offshoring strategy which means that Nike wanted to produce closer to the large Asian market in order to benefit from lower transportation costs and faster delivery networks. The second one is the vertical offshoring strategy. It primarily allowed Nike to benefit from the lower labor and taxes costs in Asia. However, Nike took advantage of the situation, offering, poor working conditions, among other things, to the local people that led the company to face many accusations.

Discovery of poor working conditions

As we have seen in the two videos below, the workers conditions has been improved and into the factories, we can assume that there is no child labour and that Nike is doing its best to make the factories at the norms. However, the videos show that the wages are still too low,1,25$ for more than 12 hours a day, which do not allow the them to live in a decent way. Jim Keady or Michael Moore tried, at their level, to contact Nike and to ask questions about the way of how indonesian peoples are living, but in all cases, they have been dismissed politely without any real answer. We can see that the situation is a bit obscure, even if Nike has tried to improve the workers conditions across the years. In all cases, the videos show that people are proud to work for nike, nevertheless, they want to earn enough money to fulfill their basics needs.

The Nike founder, Phil Knight confronted:

Nike Sweatshops: Behind the Swoosh:

Corrective actions

After all of the accusations, Nike began an internal review of overseas operations and take swift action to remedy the situation. The first thing was to use a new material instead of a toxic adhesive called toluene which has the side effects on workers’ health. Phil Knight, the CEO of Nike, assured the public that Nike would continue its research to have all Nike factories meeting US Occupational Safety and Health Administration (OSHA) standards in indoor air quality. The second action was to raise the minimum age of all footwear factory workers to 18.

In addition Knight announced an expansion of education programs in the factories. Free classes including junior and senior school equivalency courses would be offered during the non-working hours. Last but not least, Phil Knight added that Nike would increase support of its Micro Enterprise Loan Program to a thousand families each in the nations of Indonesia, Pakistan, Vietnam, and Thailand. This program provides loans to women who wish to create small businesses.

It seems Nike responded to the public by taking steps to improve its tarnished brand image and they actually succeeded! However, taking a deep view of these actions, Nike did not address the issue of low wages of the workers since their salary was set at the legal minimum wage only and not at the minimum required to help workers with their basic needs. They limited their action to few countries only, for instance Nike announced that the pay of Indonesian workers would be increased by 25% in Oct,1998, but at the same time the wages in China and Vietnam remained the same. In addition, Nike has not adequately addressed the issue of the workers’ right to organize and form labor unions.


All in all, after deeper analysis, the perception is that Nike still benefits from the cheap labor in third world and few efforts were taken to really improve the workers’ well-being. It seems Nike has handled the crisis well, the brand image is now improved, the sales are back to normal. But there is something that is less easy to find, how all these announced measures work in reality, for local people? Nike shows lack of transparency in this respect. We would like to know more!


‘Marketing Management in 14 edition’ by philip Kotler , chapter 1

The Nike Controversy , by Matt Wilsey,Scott Lichtig

Nike:offshoring, by Antmwagner

Carrefour China: Lessons From A Global Retailer

Carrefour’s hypermarkets in China are the Bosporus of retailing–commercial centers where East and West splash against each other. Tanks of live fish, eels, bullfrogs and turtles dominate the fresh food sections, while vacuum-packed strips of bacon and slices of pepperoni lie in refrigerated cases a short distance away. Modern formats mix with local tastes in the French retailer’s stores: Shoppers stroll down wide, brightly lit aisles, past displays of dried pork snouts and whole ducks hanging limply by the neck, as “Hotel California” plays on the speakers overhead.

Carrefour, whose name means “crossroads,” wasn’t the first foreign retailer in mainland China to open a hypermarket–a giant outlet that offers “everything under one roof,” from consumer electronics to groceries. [ Wal-Mart is also becoming interested in China.] But since Carrefour opened its first store, in 1995, it has become the largest. Today it operates 73 hypermarkets in 29 cities, from Urumqi (in the western reaches of the Middle Kingdom) to Harbin (near the Russian border) to Kunming (in the south). Carrefour also operates the Champion supermarkets and Dia convenience stores. Its 2005 turnover was about $2 billion (including value-added tax), making China Carrefour’s fifth-largest market. The company expects its sales in China to go on growing by 25% to 30% annually over the next five years.

Jean-Luc Chéreau, who came to the mainland after running the company’s business in Taiwan for seven years, has led Carrefour China since 1999. He recently met with Peter Child, a director in McKinsey’s Paris office, in his 25th-floor office in the Shanghai Stock Exchange building and discussed Carrefour’s hits and misses as it expanded beyond China’s largest cities.

The McKinsey Quarterly: What were your first experiences in China when you took over Carrefour’s mainland operations?

Jean-Luc Chéreau: When I arrived here, in 1999, the market was just beginning to open. We were in the main cities–Shanghai, Beijing, Guangzhou and Shenzhen–but not much in the others. I had only 17 stores in 6 cities. Step by step we increased the number of stores, and today we have 73 hypermarkets in 29 cities. We learned about the Chinese consumer by starting with the main cities on the coast and continuing into the rest of China.

In reality, though, we began our experience in China 18 years ago, in Taiwan. For the hypermarkets in the big mainland cities, we have exactly the same hypermarket style as in Taiwan. But as you enter middle and western China, there is a much less mature market. For example, 50% of the televisions offered in a store in Shanghai would be flat-screen TVs. When you go into the middle of China, it’s only 20% because today flat screens are too advanced and too expensive for those areas. For MP3 players, digital cameras and so on, it’s the same. The people are not able to buy, at least not enough for us.

How did your experience in Taiwan influence your activities in mainland China?

We discovered Chinese culture and the way to work with the Chinese in Taiwan when the retail sector in mainland China was totally closed. International companies that decided to enter Taiwan–not Hong Kong–15 or 20 years ago have a fantastic advantage in China, and that was the case for Carrefour.

For example, you learn how to adapt. When Carrefour arrived in Taiwan, we had a very clear picture of what we wanted to do–open a 10,000-square-meter store on the ground floor, with a big parking lot in front, just as in France. But it was impossible to do that kind of store. Then we tried something different: We opened a 3,500-square-meter store in a basement in Kaohsiung, Taiwan’s second-largest city, with 250 parking spaces for motorcycles. That was the beginning of Carrefour in Taiwan.

Another aspect was Chinese business dealing. When I arrived in Taiwan, my former boss told me I was lucky: I was set for the first year because he had already signed five contracts for five new stores. Then I started talking with one of our Chinese partners who had signed those contracts, and nothing seemed to be happening. Finally, my assistant told me, “Just because he signed a 20-year contract two years ago with your former boss–a person who is not you–does not mean he will respect the contract.” That was a big shock to me; the contract was notarized and everything. But we started to renegotiate article by article. Five years later, during the Asian crisis, I invited this same partner to my office and said, “Just because I signed a contract with you does not mean I will respect it. We are in a crisis.” So he said, “Fine,” and we started to renegotiate, to reduce the rent.

It was these very interesting experiences that showed me that we are in another world. If you come to China with preconceived ideas after having been successful in Europe or the U.S., you make mistake after mistake.

AstraZeneca conquering China – Paris, IMBD, Group 13

Offshoring, i.e. transferring specific services or/and business processes overseas to gain competitive advantage, is a common practice in the pharmaceutical world. The Anglo-Swedish pharmaceutical behemoth AstraZeneca is a good example. Willing to establish in Asia, the pharmaceutical group decided to move a big part of it’s production to China.

According to Steve Yang, Vice President and head of R&D in Asia, the primary reason for the relocation in China was due to three main attractive factors: first a favorable macro environment regarding the financial and human resources, second the ability to shorten R&D time and so gain on competitiveness, and third the possibility of creating a new and more innovative R&D model due to a limited innovative pharmaceutical R&D work already existing in China.

China is also a strategic location to enter the Asian market and has great opportunities with the rise of chronic diseases, such as diabetes, and of lung, gastric, and liver cancers; AstraZeneca implementing here an horizontal FDI strategy.

AstraZeneca’s long-term strategy shows itself successful. Indeed the company’s turnover rate is well below the industry average, revealing its attractiveness. Moreover, despite a risk of being affected by China’s drug quality scandals, the large data the company collected thought the Innovation Center China launched in 2007 contributed to global oncology research and built credibility and a strong team locally. 

AstraZeneca is now the largest multinational pharmaceutical company in China’s prescription market.


41@sophia : Majencia: story of a reborn

Majencia is the French market leader in the office furniture and layout of work spaces, located in Noyon, Picardie.

It supports all development projects from conception, through the design, manufacture of furniture, installation and services.

In 2004, the company “Samas France” (now Majencia since 2009) is in crisis.

Indeed, since the end of 90’s its market continues to decrease.

So, the company decides to offshore its production line of desk pedestals to China in order to reduce the production cost and so the sales price with the aim of increase its volumes produced.

But it’s not sufficient and the Samas France’s object cannot be achieved:  business is continuing to be penalized by insufficient volumes and Samas France is going into bankruptcy filing and receivership and its Noyon site’s employees are confronted to technical unemployment.

The company is facing uncertain futures.

At the end of 2004, the company decides to ask Vincent Gruau’s help to restore the financial situation and help it to get back on track.

Thanks to Vincent Gruau, Samas France chose to change all its organization (commercial, trade, logistic…) with the aim to become the leader of office’s market at the end of 2010.

The best decision Mr Gruau took is to relocate the production line of desk pedestals delocalized in China.

This strategic choice allows the company the management of the whole production chain from conception to manufacture; a model that Majencia is the only one to follow in its market.

Wishing to enter the business with a view of sustainable development, Vincent Gruau, in September 2008, decided to conduct a Management Buy- Out ( MBO) and offers six executive members to join him.

Then, the Samas France’s turnover increased by over 5% (105 million €) and Samas France becomes Majencia.

Majencia gains in independence, development and autonomy and becomes the leader we know today.

Group 3 FMI Raleigh – Stabilo

Today, two Stabilo pens are sold every second in the world.
Let’s consider how a small Bavarian family paper maker has created the empire that is Schwan Stabilo today.
1855: creation of a paper firm in Germany by the family Schwanhäusser
1906: Regional Bavarian Exposition: Exposition of a 30 meters-high pencil
1925: first Stabilo with the small and strong “mine”
1971: first Stabilo Boss, revolutionary idea. Hundreds of Stabilo Boss has been given to CEOs and to the chancellor Willy Brandt. The same year the company opens offices in England.
1990: 500 million Stabilo sold since 1971

Today, the company is ruled by the fifth generation of the Schwanhäusser family, and Stabilo has become a generic word to describe a highlighter pencil.
Stabilo launched an international advertising campaign called “Stripe up your life”, the smartphone application dedicated to the campaign has been downloaded 12.000 times during the first week.
Stabilo is not only a leader in highlighter pencil but has also become an expert in cosmetic eye-pencils.
Schwan Stabilo made a profit of 400 millions Euro last year and employs 3.500 persons all around the world

Group108@Sophia Success Story : Bharti Airtel

How an Indian Telecommunication leader reshaped the ecosystem in Africa


Of course, offshoring is a great global trend since the 1990s, developed countries offshore to reach new markets with high potential or to benefit from the low costs of labor in developing countries. But what about the internationalization of emerging market firms? The Indian telecommunication leader Bharti Airtel is a great example of a successful international strategy.

In June 2010, Bharti Airtel, India’s largest mobile services operator, acquired the African assets of Bahrain-based Zain Telecom for $10.7 billion. It was the largest cross-border deal ever seen in emerging markets. The firm had decided to replicate the business model it had developed in India in Africa. The executives thought at that time that they could become the largest telecom provider in Africa thanks to the lessons they had learn in the Indian market.

Although the idea seemed brilliant at the beginning, Bharti’s executives soon faced challenges they did not expect : differences between Indian and African employees, poorer infrastructure than they had expected with higher-than-anticipated costs, a monopolistic distribution network, strong competitors, a weak partner ecosystem, and a market that was unresponsive to tariff cuts while Bharti’s strategy consisted in high-volume low-cost telecom model.

In 2012, the company understood they could not run their business in Africa as easily as they thought and changed its business model : customer service operations and IT were outsourced and a unified, culturally integrated brand was launched. By the end of that year, Bharti Airtel provided 189,416,000 GSM mobile in India & South Asia and accounted 61,687,000 GSM mobile customers in Africa with a presence in 18 countries in this continent.

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Profit margins and market share keep on growing and both India and Africa took the benefit of this internationalization operation : Bharti entered a new market with high potential while Africa got its entire telecom ecosystem reshaped. On September 12th 2014, the company launched its 16th 3G network in Africa contributing again in the development of this area. It was even able to make economies of scale through selling more than 3,500 of its mobile phone masts to Eaton Towers, an African telecom tower company that will take care of the maintenance.

This success story is a great example to show us that emerging market firms are also able to internationalize and to become global actors thanks to their innovation and the lessons they learnt in their home countries.

  • Case Study, Bharti Airtel in Africa by Krishna G. Palepu, Tanya Bijlani (Harvard Business School)