IKEA Drops Chinese Suppliers In Favour of Italian Manufacturers
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Swedish furniture giant, IKEA, has said it will be closing several plants in China and Malaysia as the company sought to expand its investment in Italy. According to IKEA, the decision was motivated by cost savings, as Italian manufacturers are able to produce better quality goods at lower prices.
In a statement released on Tuesday, CEO of IKEA Italy, Lars Petersson, said Italy was capable of providing better quality products at a competitive rate. Explaining IKEA’s decision, he said:
Swedish furniture giant, IKEA, has said it will be closing several plants in China and Malaysia as the company sought to expand its investment in Italy. According to IKEA, the decision was motivated by cost savings, as Italian manufacturers are able to produce better quality goods at lower prices.
In a statement released on Tuesday, CEO of IKEA Italy, Lars Petersson, said Italy was capable of providing better quality products at a competitive rate. Explaining IKEA’s decision, he said:
[quote] The company is permanently seeking to increase its purchases from Italian suppliers and it has found new Italian partners that substitute some Asian suppliers thanks to their skills, commitment and ability to produce goods with better quality and lower prices than Asian competitors. [/quote]Related: Italy Trade, Exports and Imports
Related: Italy Industry Sectors
Italian newspapers yesterday celebrated IKEA’s decision with many calling it a strong validation of the ‘Made in Italy’ brand. Another leading paper, La Stampa, called it a victory over Chinese suppliers.
Speaking to Radio 24, Petersson said plans are underway to increase its investment in Italy, citing strong business relationships and flexibility of Italian suppliers.
IKEA Italy’s head of public relations, Valerio di Bussolo, added that the company will open two new plants in Verbania and Novara, in the north-west industrial region of Piemonte. Italy’s largest automobile maker, Fiat, has its headquarters in Torino, Piemonte.
Projections show that by the end of 2012, Italy will produce 8 percent of all IKEA products, making Italy the company’s third largest supplier after China and Poland.
In contrast, Italy handled just 4 percent of all IKEA production in the late 1990s.
IKEA is one of the few companies with a sizable foreign direct investment in Italy. Foreign investment in Italy is often hindered by the obscurity of legal provisions and the uncertainty of laws, a weak judicial system and corruption.
Italy’s labour laws are also often described as dated, with the notorious Article 18 of the country’s employment rules virtually guaranteeing many employees a job for life. As a result, companies are often unwilling to hire workers on permanent contracts, and workers in permanent positions are unwilling to move from their roles.
Undeterred, Petersson stressed that IKEA’s investment in Italy is for the long-term, and IKEA wants to “work and grow with people who works for us”. Instead, Petersson says that the problem lies with labour laws that prevent flexibility in internal reassignments and work schedules.
Referring to risks for the company, Petersson provided this overview:
[quote] Article 18 is not a problem for IKEA. Rather, it is the unpredictable nature of the Italian bureaucracy, and its politics. [/quote]
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