Company background
IKEA is a Swedish Multi-National home furnishing Company (MNC). The IKEA concept based on a low price offer is one of the most studied business cases of the century. It was founded in Almhult, Sweden in 1943 by only a 17-year old boy Ingvar Kamprad who started selling farm implements at a reduced price under the name IKEA, which is acronym for his name, farm and village where he was born and grew up. At the beginning IKEA sold small items such as food containers, pen, picture frames, wallets, jewelry and watches before becoming internationally known. At that time, Ingvar’s business transactions were done through mail-order, so he held his stock at home on the farm in Elmtaryd. In order to make his deliveries, he used the country milk van. Each morning, the milk-collection van would gather the goods and carry them to the train station. And from there, they were mailed to the customers.
Due to the success of furniture line, Ingvar Kamprad decided to put an end to all the other products focusing only on furniture. In 1950 furniture entered the IKEA product for the first time and in 1951 the first IKEA catalogue was published and later in order to reach a lot of people a showroom was built that gave an opportunity to its customers view the furniture before making a purchase. Nowadays, IKEA has turned into the world’s largest furniture retailer, with more than 300 stores in more than 35 countries since its first outlet opened in Almhult, Sweden in 1958 and visited by 600 million visitors around the world and plans to develop further. Turnover of all IKEA stores (sales tax not included) was 22,713 million EURO in 2009. Top five sales countries are: Germany (15%), USA (10%), France (10%), UK (7%) and Sweden(6%).
In spite of its great expansion, IKEA is still privately owned company. Ingvar Kamprad still has some control over the company through a unique organization. Currently, the company is owned by a Dutch-registered foundation controlled by the Kamprad family. All IKEA stores-new as well as existing ones-operates under franchise agreement with Inter IKEA Systems B.V. Every IKEA store is given the rights to operate the IKEA Concept on a defined market.
IKEA’s vision is:
‘‘ … offer a wide range of well- designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”
IKEA competitors are primarily in the Home Furnishings & Housewares Retail industry. IKEA also competes in the Floor & Window Coverings Retail, Grocery Retail, and Nonstore Retail sectors. IKEA’s success in the retail industry can be attributed to its experience in the retail market, cost leadership and product differentiation. The company targets the customer who is looking for value and is willing to do a little bit of work serving themselves, so they pick up the furniture, carry it home and make it themselves. The typical IKEA customer is young low to middle income family
IKEA does not have its own manufacturing facilities but uses subcontracted manufactures around the world. To facilitate shopping, IKEA provides catalogues, tape measures, shopping lists and an Internet website to help the consumer with fitting the furniture into the room. So, IKEA’s success is based on the relatively simple idea of keeping the cost between manufactures and customers down.
The company emphasized its Swedish heritage in its international advertising, even going as far to insist on “Swedish” blue and yellow colour scheme echoes the colours of the Swedish national flag for its stores. And stores themselves include restaurants that serve Swedish meatballs
There are 18 stores in the UK to date, the first of which opened in Warrington in 1987. The largest IKEA store is in Webley, in North London.
The IKEA brand is associated with simple, low cost, stylish products.