He offered Klara to carry out her degree project in an exciting textile project and urged her to get in touch with him within two days, if she was interested.
Klara Södergren had more and more realized how important it is for a multinational company to have an efficient, unique value chain back to their suppliers. Therefore she thought it would be interesting to write her Master’s thesis about a global company’s strategic choices and actions as regards sourcing in China. When contacted by Ikea, the answer was obvious.
- I was already interested and I had been in contact with different persons at Ikea in Hong Kong without really getting a lucky break. When the offer from Shanghai came, it was an easy decision to say yes.
The team was formed in San FransiscoShortly after accepting, Klara visited San Francisco in one of Chalmers’ exchange programmes with Berkeley and Stanford. Every other year, 40 students from the Industrial Engineering and Management undergraduate programme get the opportunity to participate in this exchange programme and this time also the student Katarina Lindh was there. Katarina didn’t hesitate when Klara asked if she wanted to do her degree project at Ikea together with Klara.
- Ikea doesn’t usually have Master’s thesis students in Shanghai so, I suppose, we were lucky. The Trade Manager that contacted Klara was very interested in carrying out the project, but didn’t have the internal resources to place in a project at such an early and exploratory stage. Consequently, it was perfect to assign two students to it, Katarina says.
Once on location in Shanghai, the students from the Department of technology management and economics began to work with an analysis of Ikea’s possibilities to start and run an in-house textile production in Western China. The students’ different experiences from the two Master’s programmes Supply Chain Management and Management and Economics of Innovation were a good combination for the scope of this degree project. Klara and Katarina spent six months in Shanghai while they were working on their degree project, worth 30 credits.
Strategically important textile regionThe result of the project indicated that Xinjiang, despite high transportation costs, is the cheapest region in China as regards manufacture of textiles. Therefore, Klara and Katarina came to the conclusion that Ikea should be present in Xinjiang, preferably by investing in textile production together with a local, experienced producer of textiles. The students see mainly three reasons why Xinjiang, of all regions, is such an important textile region strategically.
- The nearness to raw material is important, as Xinjiang has 16 percent of the world’s cotton and Ikea already carries out a sustainability project together with cotton farmers in the region to reduce the environmental influence of the cotton farming. The cost of raw material is the largest cost for cotton textiles and, even if China today has higher cotton prices, we believe that the nearness to raw material can give a greater insight and control of the prices, Katarina and Klara think. Furthermore, Xinjiang has the lowest water and electricity prices in China, as it is a region with large natural resources. This greatly influences the production costs for processes further on in the textile value chain.
The third reason they see is that the Chinese government wants to move the textile industry inland and supports this through tax reductions, subsidies and industrial zones with a focus on textile industries.
The new Silk RoadThe degree project is based on the assumption, according to Klara and Katarina, that China is becoming more and more expensive with regard to manpower and costs such as electricity. They think this affects the textile industry and some companies move to cheaper developing countries, while others contemplate moving back to their home market in, for example, the US. At the same time, the consumer market grows in China and certain companies therefore want to keep their production in the country.
- While we were in Shanghai, CNN made a documentary on “the new Silk Road”, which refers to the development of goods transport roads between China and Europe, which go through Xinjiang. This will make Xinjiang an even more important region for China and, today, there are many large industrial investments in the region, Katarina and Klara inform.
The results of the degree project have been presented to leaders at Ikea Trading Office in Shanghai, who will discuss the result together with their current textile suppliers in China. Next, the project will be presented to global textile managers at the head office in Älmhult.
Open the eyes to opportunitiesThe tutoring of the degree project was done from Sweden by Jonas Hjerpe who is the director of the Master's programme Management and Economics of Innovation. The communication has functioned smoothly via Skype meetings and e-mail contacts, while Facebook has been the main forum for contact with family and friends.
According to Katarina, students who want to go abroad should open their eyes to all amazing opportunities there are and not just look for degree projects for companies at home.
- One tip is to check with the Swedish Chamber of Commerce to find out which companies are represented in the country they want to travel to. There you can often get good contact persons at different companies. Of course, it’s a matter of being stubborn too, Klara says.
She will graduate in April and Katarina will continue her studies until the end of the year. They will not let go of Ikea in a hurry, the project has received positive response and they now try to find out what opportunities there will be in the company later on.
Text: Caroline Örmgård
Photo: Klara Södergren