HOW DID IKEA

CHANGE FURNITURE RETAILING FOREVER?!

Advanced Strategic Management June 2013 152112130 Paulo Alves Professor Adriano Freire!
TABLE OF CONTENTS!
!02 IKEA AT A GLANCE & STRATEGIC POSITIONING!

!12 FURNITURE AT A GLANCE & STRATEGIC GROUPS!

!23 IKEA INNOVATION MANAGEMENT!

!30 IKEA UNCERTAINTY MANAGEMENT!

!41 IKEA ORGANIZATIONAL CULTURE AND LEADERSHIP!

IKEA !
AT A GLANCE !
!45 BIBLIOGRAPHY!

!47 APPENDIXES!

!!

& STRATEGIC
POSITIONING!

2
 IKEA TIME LINE!

1920s! The founder of IKEA, Ingvar Kamprad, is born.!

IKEA AT A GLANCE 2011!

IKEA is founded by Ingvar Kamprad aged 17 in a small farming village in Sweden.
The Name IKEA was formed from the founders initials (I.K.) plus the first letters of
1940s! Elmtaryd and Agunnaryd, the farm and village where he grew up. Originally IKEA sold
everything from pens and wallets to picture frames, watches and even ladies
stockings.!
STORE VISITS !
In 2011, the IKEA Group stores had 655 million visits.!
Production of the first IKEA catalogue in 1951 and the first IKEA advertisements
appear in local newspapers. Ingvar distributed his products via the county milk van,
which delivered them to the nearby train station. In the late 1950s Ingvar decided to
stop selling everything except furniture items IKEA AS WE KNOW IT TODAY WAS
BORN! The first store opened in Almhult, Sweden.!
IKEA FOOD SERVICES!
IKEA food turnover for the year was
MISSION:! 1.2 billion.!
1950s!
VISION:! TO OFFER A WIDE RANGE OF WELL
DESIGNED, FUNCTIONAL HOME
TO CREATE A BETTER EVERYDAY FURNISHING PRODUCTS AT PRICES
LIFE FOR THE MANY PEOPLE! SO LOW THAT AS MANY PEOPLE AS
POSSIBLE WILL BE ABLE TO AFFORD
THEM.!
PRODUCTS!
The IKEA range consists of
1960s! First IKEA stores opened outside Sweden - Norway and Denmark! approximately 9,500 products.!
IKEA.COM!
IKEA keeps on going and expanding its business. Switzerland was the first store IKEA website had 870 million visits in
1970s! outside Scandinavia country where IKEA opened a store. Followed subsequently by 2011.!
Germany, Australia, Canada, Austria and the Netherlands.!

1980s! USA and UK opened its first stores. IKEA won the Excellent Swedish Design Prize.!

IKEA introduces is product line for children and keeps on expansion through Hungary,
1990s! Poland, Czech Republic, United Arab Emirates, Spain and China.!

Stores opened in Russia and Japan. Everything for the bedroom and kitchen is
explored and presented in coordinated furnishing solutions. This period also sees the
successes of several partnerships regarding social and environmental projects.! TOTAL SALES FY11!
Sales increased by 6.9% compared to
2010. Total sales amounted to EUR 24.7 PRINTED CATALOGUES,
IKEA GROUP!
billion.! LANGUAGES & EDITIONS!
The IKEA group has operations in 41 countries. 29 trading offices are located in 25 of The IKEA catalogue was printed in more
these countries. The remaining 16 countries are home to 26 distribution centers and than 208 million copies in 30 languages
11 customer distribution centers.! and 59 editions.!

2000s! SUPPLIERS IN 2011!

IKEA had 1,018 suppliers in 53 countries!
INDUSTRIAL GROUPS! CO-WORKERS PER FUNCTION!
Purchasing, distribution, wholesale,
- Swedwood, a manufacturing group within IKEA group had 16,000 co-workers and range & other: 14,300!
33 production units in 10 countries! Retail: 100,000!
- Swedspan, an industrial supplier within the IKEA Group, had 700 co-workers and 5 Swedwood: 16,000!
production units in 5 countries.!
- IKEA industry investment & development (IIID) is an advisory and investment
Swedspan: 700!
Total in FY11: 131,000!
4
service company and has 13 co-workers.!
TOP SELLING COUNTRIES!
Germany: 15%!
PURCHASING PER REGION!
USA: 11%!
Europe: 63%!
France: 10%!
North America: 33%!

IKEA AT A GLANCE 2011!

Italy: 7%!
Russia, Asia & Australia: 4%!
Sweden: 6%!
TOP PURCHASING COUNTRIES!
China: 22%!
Poland: 18%!
Italy: 8%!
Sweden: 5%!
Germany: 4%!

287!

IKEA GROUP STORES

WORLDWIDE! SALE PER REGION!
Europe: 79%!
In 2011, the IKEA Group opened 7 new CO-WORKERS PER REGION! North America: 14%!
stores in 7 countries. As of 31st August 2011, Europe: 106,500!
the IKEA Group had a total of 287 stores in North America: 16,500!
Russia, Asia & Australia: 7%!
6
26 countries.! Russia, Asia & Australia: 8,000!
 WHAT ABOUT THE FUTURE?!

IKEA STRATEGIC POSITIONING!

The future of the IKEAs positioning is difficult to imagine. They can keep on improving
directly their core business with a larger range of products or they might prefer to do it
indirectly by improving their service standards with differentiated customer oriented activities
or a new business offer. !

We took a view on both. Firstly, in order to directly improve their core business it is only
possible to forecast a new positioning taking into account few industry trends: society is
BACK IN THE LATE 1950s!
growing and becoming more and more urban; simplicity and quality are core demands;
growing individualization and rising e-commerce.!
the young entrepreneur, Ingvar Kampard, saw an opportunity in the furniture industry. By being used to
sell everything he could at lower prices than traditional local retailers, this young man decided to build a
LINE(S) OF BUSINESS!
business from the scratch, a business that ended in revolutionizing the furniture retailing forever. !
Narrow View! Broad View!
But, how did he do that? Well, that is the question we will be answering through this report. Regarding the
MASS CUSTOM-MADE!
companys strategic positioning it is important to go some years back and look at the market opportunities MASS CUSTOMER-ORIENTED

Short-medium term!
FURNITURE!
as it was back then. The following table summarizes these opportunities:! FURNITURE!
- Modern furniture!
- Modern furniture!
- Stylish designs!
LINE(S) OF BUSINESS! - Large range of products!
- Large range of prototypes !
- Design driven!
- Customer oriented service/product!
Narrow View! Broad View! - Customer oriented service!
- Cost efficient production/network!

TIME FRAME!
- Immediate delivery!
LUXURY FURNITURE! - Low price furniture!
Short-medium term!

TRADITIONAL FURNITURE RETAILERS! - Cost efficient production/network!

RETAILERS!

- Traditional furniture! MASS SPACE-SAVING! MASS CUSTOMIZED MULTIFUNCTIONAL

Medium-long term!
- Modern furniture!
- Low range of products! FURNITURE! FURNITURE!
- Stylish designs!
- Replacement driven!
- Truly expensive!
- Sales oriented! - Modern furniture! - Space saving furniture!
- High-end customers!
TIME FRAME!

- Delayed delivery! - Large variety of product bundle! - Stylish designs!

- Customer oriented service!
- Fairly expensive! - Technology driven! - Large range of prototypes !
- Customized service! - Customer oriented service! - Customer oriented service/product!
LOW-COST FURNITURE RETAILERS! - Cost efficient production/network!
NEXT GEN FURNITURE RETAILERS!
Medium-long term!

- Low price furniture!

- Cost oriented production! - Modern furniture!
- Cost efficient network! - Large range of products! Looking at the table above, one thing is sure about IKEAs future. They cannot lose the
- Short-product life cycle! - Design driven! competitive advantage of massive production. It is the only way they found profitable to
! - Customer oriented service! combine low price with customer oriented service and supply.!
! - Immediate delivery!
! - Low price furniture!
! - Cost efficient production/network! However, there are things where they can take a position. Nowadays, customers seem to
have an higher interest on having products based on their personal wishes not on those of
In one hand, a fragmented market, full of local and traditional players where it was possible to find a low the mass market. IKEA already provides some freedom to its customers by selling
innovative product and service driven by the customers need to replace an old furniture or furnish a new complementary products separately (such has drawers and handles), by providing an online
place. On the other hand, a customized service for the high end customer. A luxury market driven by the tool where the customer is allowed to design its own room, and by having already some
creativity and demand of the own customer.! prototypes that can be complemented with the customers preference. Nevertheless, mostly
due to the lower supply, it stills very different and distant from the traditional customized
Faced with this reality, Ingvar Kampard realized the opportunity to deliver a low cost product/service. furniture retail. In the short-term a market opportunity for IKEA is to position himself as a
Ingvars innovative idea was to offer a home furnishing product of good function and design at prices much mass custom-made furniture retailer by keep on developing and design more and new
lower than competitors by using simple cost-cutting solutions that did not affect the quality of the product. prototypes. This will allow to increase the customers freedom to assemble its own furniture
His concept guided the way IKEAs product was designed, manufactured, transported, sold and and keep on with the same costs strategy.!
assembled.!
In the medium-long term IKEA shall start thinking on space-saving furniture. The urbanization
What looked like a model of low prices, rapidly became what I like to call the next gen (for that time) rates will keep on growing, the cities are becoming overpopulated and apartments are
furniture manufacture, a mass customer-oriented business. Through the high success of its first store in smaller in this regions. Entire families will get used to leave with smaller spaces, which
Sweden, Ingvars rapidly started to internationalize, allowing him to achieve economies of scale and to makes this possible positioning very attractive.!
develop its business without loosing margins.!
IKEA already offers some furniture in this sense, but mostly for children. It is necessary to 8
Indeed, Mr. Kampard have shown to the market that was possible to combine a customer oriented design new prototypes where a simple table can be complemented with something else. The
product/service with a low costs/price policy. In few years, IKEA stores started to offer a huge range of perfect stage forecasted in this sense is too combine this two market opportunities in a mass
products, advisory services, a catering service and suggestions for complete home sets.! customized multifunctional furniture retailing.!
SPACE SAVING FURNITURE/APARTMENT!

In what concerns to an indirect improvement on IKEAs core business, the options are
limitless and hard to predict. IKEA could go in very different ways and be successful in all of

IKEA STRATEGIC POSITIONING!

them. Such reality is consequence of a high valuable and powerful group. Indeed, IKEA is the
43th most powerful brand in the world, according to Forbes (business magazine).!

By complementing the right partners with the wide range of competencies and strengths
within the group, most probably, the sky is the limit.!

However, for this particular analysis it was taken into account, once again the industrys
macro environment and some speculative news and trials that IKEA is being taking in order to
diversify its business.!

LINE(S) OF BUSINESS!

Narrow View! Broad View!

CUSTOMER-ORIENTED FURNITURE SPECIALIZED CUSTOMER-ORIENTED

Short-medium term!
BUSINESS! FURNITURE BUSINESS!
- Differentiated product line (as previously seen)! - Online planning!
- Advisory Services! - Online store!
- Catering Services! - Online advisory service!
- Assembly services! - Smartphone application!

TIME FRAME!
- Product immediately pick-up! - Kitchen Equipment (stoves and ovens)!
- Product home delivery! - Home decoration (Paintings, photo
- Product catalogue! frames, curtains,)!

! CUSTOMER-ORIENTED HOUSE ON

Medium-long term!
CUSTOMER-ORIENTED HOME HAND BUSINESS!
BUSINESS!
- Real estate industry!
- Furniture complementary business! - Cost efficient construction!
- Home technology (TVs, computers, - Home distinctive design!
sound systems, movie systems,)! - Home furniture assembly!
- Kitchen equipment (Fridges, - Delivery of a completely equipped
Microwaves,)! house at a low price!

By taking a look over the table above, more specifically to the broad view on the short-term, it
is true that IKEA already covers most of the features in this type of business. However, it still
has many flaws to fade. IKEA has assumed this positioning a long time ago, but the high
development on the technology industry and their 1st mover behavior make it look complex
and difficult to manage for the customer. Also the smartphone application despite being able
to see 3-D animations, videos, and pictures, it only lets the customer look at the catalog
without being able to make any note or bookmark.!

Before moving abroad, IKEA should pay attention to these flaws and improve its core service.
Indeed, e-commerce is becoming more and more trendy and it is important for IKEA to follow
the market behavior.!

Regarding the medium-long run, IKEA has the opportunity to diversify its core business by
offering home technology and kitchen equipment inside its stores. It is common to find in the
IKEAs room sets some prototypes of these products made in paper. Nevertheless it would be
smart for them to start selling this kind of equipment. !

It is true that the customers are becoming more sedentary. E-commerce is just a proof of this
reality. By joining the useful to the pleasant, technology and kitchen equipment are one
opportunity that IKEA should take into account.!

Finally, in a broad view of the IKEAs long-term positioning, we have the low cost real estate
business opportunity. IKEA is already partially present in this position. In a matter of fact,
since 1996 that they have been supplying the Boklok houses with discounted furniture.
Furthermore, IKEA has recently projected to join the construction business by themselves.
10
Some effort have been done in this sense with IKEA neighborhood, which is a completely
new condominium built by IKEA that will be launched in 2014 and might result in a once again
very profitable decision. !
IKEA NEIGHBORHOOD!
SPACE SAVING FURNITURE/APARTMENT!

FURNITURE!
AT A GLANCE !
& STRATEGIC
GROUPS!

12
INDUSTRY KEY FIGURES! INDUSTRY KEY TRENDS!

FURNITURE AT A GLANCE!
VALUE:! MARKET SEGMENTS:!
MARKET SEGMENTS:! INTERNATIONALIZATION
LARGE FURNITURE RETAILERS CONTINUE TO STRENGTHEN THEIR NETWORKS AND GEOGRAPHICAL COVERAGE

$450bn! E-COMMERCE
In 2012! A RISING NUMBER OF FURNITURE RETAILERS ARE OFFERING ONLINE SALES ADDITIONALLY TO THEIR STORE
OFFICE
FURNITURE!
38%! STRONGER COMPETITION
HOME THE PROFITABILITY IS FALLING AND THE MARKET POWER OF RETAIL DISTRIBUTION NETWORKS IS GROWING
FURNITURE!
62%!
10 TRENDS ON THE FURNITURE PRODUCT LINE:
$630bn! GREEN FURNITURE IS BECOMING MAINSTREAM
By 2015! INCREASING REQUEST FOR FURNITURE WITH A SMALLER PROFILE
INCREASING REQUEST FOR MULTIFUNCTIONAL FURNITURE
Source: Report Linker!
Source: Report Linker! TECHNOLOGY DRIVEN FURNITURE DESIGN
HOME FURNITURE SEGMENT INCREASING POPULARITY OF VINTAGE FURNITURE
INCLUDES FURNITURE AND TASTES ARE BECOMING GLOBAL
HOME DECORATION ITEMS.! GROWING IMPORTANCE OF OUTDOOR FURNITURE
CUSTOMIZATION KEEPS EVOLVING AND BEING DEVELOPED
MAJOR 200 FURNITURE MANUFACTURES - PLANTS LOCATIONS:! GROWING INTEREST FOR SPECIALTY SLEEP SURFACES
LEATHER FURNITURE KEEPS FINDING NEW LOOKS

INDUSTRY ENVIRONMENTAL TRENDS!

CENTRAL, EASTERN EUROPE, RUSSIA & TURKEY! SUPPLY! DEMAND!
109 PLANTS!

Austerity Policies will keep increasing in developed

-! -!
countries!
WESTERN EUROPE!
POLITICAL!
243 PLANTS! Improved macroeconomic policies. National Governs
more transparent.! +!

European Recession keeps delaying the market growth

-! -!
OTHER ASIA! potential!
77 PLANTS!
AMERICA!
ECONOMIC! Overall GDP per capita will increase. Forecasts tell
356 PLANTS! DEVELOPING ASIA! developed countries will keep the higher numbers.
199 PLANTS!
Although merging economies are faced with an huge -! +!
expectation for middle class increasing.!
OTHER COUNTRIES!
14 PLANTS!
The population keeps ageing! -! -!
Source: CSIL!
Urbanization rates will keep on growing! +! +!
WORLD FURNITURE PRODUCTION US$BN:! SOCIAL!
Increasing Individualization (higher interest on products
ADVANCED ECONOMIES! EMERGING ECONOMIES!
based on personal wishes)!
CONSUMPTION 500!
450!
Increased Healthcare, Security and Time Management
RATES LED BY 400!
concern. People will tend to be attracted for simplicity -!
MIDDLE AND LOW 350!
and effective performance goods. !
300!
INCOME 250!

COUNTRIES! 200!
150!
Emergence of new Information technologies! +! +!

(44%)!
100!
50!
TECHNOLOGICAL!
Overall retailers are becoming more efficient and vertical
+! +!
14
0! integrated!
2002! 2003! 2004! 2005! 2006! 2007! 2008! 2009! 2010! 2011! 2012!

Source: CSIL! Source: CSIL! Technology driven designs! +!

THE FUTURE OF FURNITURE!

INDUSTRY GLOBAL PLAYERS (examples excluding IKEA)!

FURNITURE AT A GLANCE!
COUNTRY OF
Italy!
ORIGIN!

Brand Image!
COMPETENCIES!
Huge product quality!

Focus on sofas and armchairs both in B2C

Product-Markets!
and B2B markets!

Full integrated on conception, prototyping,

Vertical Integration!
STRATEGY! production and commercialization.!

Present in 123 countries all over the world

Internationalization!
mostly through organic growth!

Diversification! The business is not diversified!

NET SALES ($)! 618 million USD (2012)!

COUNTRY OF
China!
ORIGIN!

Cost efficient production!

COMPETENCIES!
Large range of Brands!

Complete product line for Home, office and

Product-Markets!
hotels!

Full integrated business model both in mainland

Vertical Integration!
China and USA.!
STRATEGY!

Internationalization! Present all over the world mostly through M&A!

Diversification! The business is not diversified!

NET SALES ($)! 423 million USD (2012)!

COUNTRY OF
Germany!
ORIGIN!

World class distribution and warehousing infrastructure!

COMPETENCIES!
Deep knowledge of the African market!

Complete line of products for all types of

Product-Markets!
customer through different brands.!

Vertical Integration! Integrated on sourcing and manufacturing!

Internationalization! Present in Brazil, Africa, Europe and Asia!

STRATEGY!
Business diversified into different retail
businesses (footwear, automotive) logistics
Diversification! (communications, transport of passengers and
goods), industrial services, and financial
services!

NET SALES ($)! 579 million USD (2011 - just from furniture retail)! 16
 WHAT ABOUT TODAY?!

STRATEGIC GROUPS!
Today, the furniture industry became much more globalized. It is possible to find many more
players and strategic groups competing among each other for sales and customers attention.!

The main goal of this analysis is to figure how did IKEA answer to the industrys demands and
to see how did other players adapt to him. !

Below it is possible to find a table that summarizes the strategic groups that are possible to
find today in this particular industry: !

CONCEPT! KEY SUCCESS FACTORS! PLAYERS (BRANDS)!

It offers a large range

MASS FURNITURE - Cost efficiency! - IKEA!
and product line. Relies
RETAILING! - Brand awareness! - Conforama!
on cost efficient
! - Catchment area! - Home Depot!
production.!

- Williams-Sonoma
Mostly offering
Home!
CATALOG/ONLINE traditional furniture for - Marketing!
- Ebay!
RETAILERS! all tastes and prices - Innovation!
- Restoration
! through a catalog or - Distribution network!
Hardware!
online.!

Stores that offer an

Indeed, the furniture industry has clearly changed since Mr. Kamprads first store opened. However, since OWN BRAND - Local recognition! - Natuzzi!
entire line of products
we are trying to understand how he could be so successful in a so short period of time, it is important to MANUFACTURERS! - Customer service! - Chateau dax!
made by themselves
take a view on how the market was grouped back then, more specifically the Swedish market.! ! - Vertical integration! - Drextel Heritage!
and their own brand. !

The graph below appears as a narrow view of the market, where we may perceive the gap that Mr.
Kamprad tried to fill. !
Stores that buy furniture
PRIVATE-LABEL! - Bargaining power! - Pottery Barn!
As we already understood on the strategic High! from a broad range of
Quality! STORES ! - Brand image! - Moviflor!
Luxury manufacturers and sell
positioning analysis, Mr. Kamprad was faced with a Furniture ! - Margins! - DFS!
it under their brand.!
market composed by traditional retailers - small Retailers!

stores, without a brand, with few range of products

Luxury Furniture
within the same line, and very local -, and luxury appears with a
high quality
Traditional
furniture retailers most of the times without a store, product line TRADITIONAL Includes local stores - Duresta!
QUALITY!

Furniture
because they were
working together with the customer in exclusive and Retailers! - Local recognition!
more or less able
to supply
FURNITURE with a selection of
- Distribution network!
- Andante!
single furniture production according to their request, IKEA appeared in expensive wood
RETAILERS ! brands at various - Kincaid Furniture!
the market with Traditional furniture according - Margins!
and relying mostly on the word-of-mouth marketing.! more or less the Furniture retailers to the customer
! prices. !
same product line were recognized needs.!
and quality as by being the most
traditional furniture similar to a
Looking at such reality Mr. Kamprad founded its first retailers. However,
IKEA distinguished
nowadays mass
retailer. However,
store where it was possible to find good quality himself by customers did not
- Wal-Mart Stores,
products with an innovative design and at
empowering new have much
It offers a large variety - Product range!
designs, with the opportunity to Inc.!
same quality at a choose or fill its of products at appealing - Convenience!
reasonable lower prices. By changing the rules of the Low!
lower price.! truly needs.! HYPERMARKETS! - Carrefour S.A.!
prices under the same - Bargaining power!
market, the traditional retailers - the most similar Quality! - Tesco PLC!
roof, including furniture.! !
business model to the one founded by Mr. Kamprad - !
Low ! High!
joined in a price war with IKEA.! Price! Price!
PRICE!

Struggling on keeping up with the quality at the same time that competitors were doing pressure by It carries a variety of - Sears Holdings
DEPARTMENT categories and it has - Brand recognition! Corp.!
lowering their prices, IKEA decided to go abroad and search for scale economies (Norway, 1963). ! broad assortment for - Customization! - Macys, Inc.!
STORES!
! the high-end customer, - Availability! - Kohls Corporation! 18
It was the starting point for the IKEA that we know today. By moving abroad, where markets were also including furniture! !
facing more or less the same reality as the Swedish furniture market, IKEA was able to apply the same
concept that Mr. Kamprad has once projected.!
It is a fact. The industry has completely change its behavior since the creation of IKEAs concept.
However, it is also a fact that IKEA has become the global furniture market leader with at least twice the

STRATEGIC GROUPS!
size of other furniture retailers. !

In order to explain how it all evolved and how it appears to be nowadays, we rely on three strategic group
analysis. Firstly let us compare how IKEA distinguish himself from competitors when analyzing the
geographical reach of the company with the size of its store:!

Mass Furniture Retailing!

Large!

DID YOU KNOW AN

IKEA CUSTOMER
Department Stores!
SPENDS IN AVERAGE
3 HOURS TO VISIT
STORE SIZE!

THE WHOLE STORE?!

Private-Label!
Medium!

Hypermarkets!
Stores!
Another interesting analysis to make in this sense is to see how IKEA evolved in the market
regarding its product line and the depth of their lines:!

Mass Furniture Retailing!

Complete!
Line!
Traditional Furniture
Retailers!
Catalog/Online!
retailers!
Own Brand!
Manufacturers!
Small!

Own Brand Manufacturers!

PRODUCT LINE!
Local! Regional! Global! Private-Label!
Stores and Traditional
GEOGRAPHICAL REACH! Furniture Retailers!

In a matter of fact, IKEA distinguish himself by its global reach. In one hand, it was the consequence of
being so successful among customers but, on the other hand, internationalization was also the only way
found by IKEA to keep up with the production in scale. Also since IKEA is recognized by having huge
stores with great catchment areas, it would not make sense for IKEA to be very concentrated in one
country because 2 or 3 stores may already be able to pull customers from a whole country (depending on Hypermarkets! Department Stores!
its size). !

The interesting precision to take from the graph above is that nobody is able to achieve the strategy Narrow!
preformed by IKEA. Even other mass furniture retailers are way far from IKEA. Most certainly due to brand Line!
power and recognition that IKEA has earned in the market. By being a so successful first mover and by
constantly follow the customer trends, it was possible to never lose and even increase its market position.!
Little Choice! High Depth!
Nowadays, Hypermarkets have also become a threat for IKEA. With the same low-end customers, more LINE DEPTH!
or else the same reach and catchment area, this stores might still some market share from IKEA mostly Here we perceive one of the greatest IKEAs advantages. In fact, IKEA offers to its
due to the convenience that these stores offer to their customers. ! customers a large depth in most of the products line, killing the previously stated
competition from hypermarkets.!
Regarding the overall picture to take from this graph, we can say that as local a company looks to be as
smaller it is in size. The exception are the own brand manufactures. Some of these companies are It is a huge product differentiation from the other strategic groups, where despite having 20
recognized for their high quality and luxury design, which make them pursue both regional and global most of the times a more or less complete products line, the range of different designs and
players.! sizes within the same line of product become really smaller than when compared with
IKEA. !
 IKEA CHRISTMAS ROOM SET!

But, let us go deeper in this issue and look on how the IKEAs product life cycle (in the store) behaves
according to the value for the customer:!

Long! Traditional Furniture

Retailers!
PRODUCT LIFE CYCLE (IN THE STORE)!

Private-Label!
Stores!

Catalog/Online!
retailers!

Own Brand !
Manufacturers!

Hypermarkets!
Department Stores!
Short!

Mass Furniture Retailing!

Unique ! Price/Quality! Low !

features! ratio! Price!
VALUE TO THE CUSTOMER!

Another amazing and distinguishable positioning for IKEA, where it is possible to perceive that as faster
the customer identifies a retailer by its unique features as longer the product life cycle of their products
become. Indeed, it is the consequence of a time consuming and costly production. However, IKEA
emerges as a product within an average quality but at a lower price for the customer perception. This is a
truly cherry on the top of the cake and IKEA knows that.!

By having more than 280 stores (as we previously saw), 28 distribution centers and 11 customer
distribution centers, IKEA is not only allowed to produce in scale but also to keep the product life cycle
short in the store. Adopting a flat packaging, rail and see transportation, and fuel-saving techniques, IKEA
is allowed to be cost-effective and environmentally friendly at the same time as they keep the customer
interested and entertained with constant new products and product replacements. Usually, IKEA changes
most of its products according to the season. It is the consequence of promoting a fashionable and trendy
product.!

The bottom line of all these strategic groups analysis is to understand how did IKEA evolved since Mr.
Kamprad entrepreneurial idea. We were able to realize that IKEA was not only able keep up with the
market requests but, it has also go much more deeper. By creating a position in the market with what is
quite impossible to compete, IKEA became the most valuable company in the private domain. Most of that
reality is consequence of different variables combination that we have seen here in these analysis.
Recalling a global reach, a large store size, a depth and large product line, a low price value to the
consumer and a short product life cycle (in the store). These are labels that made and are making IKEA
successful. !
22
Indeed, global reach is most probably the base for all its success because it not only allowed to reach
more customers but also to keep on producing at costs that seem to be unreachable by other strategic
groups.!
 BACK IN THE LATE 1950s!

IKEA INNOVATION MANAGEMENT!

As we previously mentioned, IKEA has been changing since Almhult. The first signal of
innovation in IKEA appeared with the concept and brand idealization itself. Mr. Kamprad has
projected a business model that was not being applied anywhere at that time. Indeed, it is a

IKEA!
real proof of his entrepreneurial behavior and project innovation.!

COMPETITIVE STRENGTH!

EXISTING! NEW!

INCREMENTAL INNOVATION! ARCHITECTURAL INNOVATION!

EXISTING!
IKEA was idealized from existing materials,

INNOVATION!
components, technologies. However the business

TECHNOLOGIES!
model was completely designed to target a new
market that was being underserved by the furniture
retailers of that time.!

DISRUPTIVE INNOVATION! RADICAL INNOVATION!

NEW!
MANAGEMENT! Nevertheless his goals to implement his own furniture retail chain did not stop just by
providing furniture at low prices. Mr. Kamprad wanted more and he have decided to make
furniture an appealing, fashionable and trendy industry. Through design innovation, Mr.
Kamprad created a line of simple, effective and attractive products that were a success.!

This type of products were already a trend in the Swedish design but Mr. Kamprad was
allowed to project it at lower prices and the same quality. How could he do that? At the
beginning just by lowering the profit margins but as the company started to evolve and the
competition to get closer, Mr. Kamprad designed a truly innovative process. IKEA started to
offer simple cost-cutting solutions that did not affect the quality of the products for example:
customers used to select, pick up products, transport them home and assemble them by
themselves; designers used to use leftover materials from the production of one product to
create an entirely new one.!

Indeed Mr. Kamprads innovative idea was the starting point for the furniture industry
revolution that we are answering with this report.!

COMPETITIVE STRENGTH!

WEAK! AVERAGE! HIGH!

SERVICE INNOVATION! CONTINUOUS CONCEPT INNOVATION!

HIGH!
MARKET ATTRACTIVENESS!

Immediate pick up! IMPROVEMENT! Low cost furniture!

AVERAGE!

DESIGN INNOVATION! TECHNOLOGICAL PROCESS INNOVATION!

Simple, Fashionable, and REORGANIZATION! Simple cost cutting
effective furniture! solution!

24
PACKAGING REFORMULATION! BRAND CREATION!
LOW!

INNOVATION! IKEA brand creation!

IKEA INNOVATIVE MARKETING IDEA!

AFTER 50 YEARS, DOES IKEA STILL INNOVATIVE?!

IKEA INNOVATION MANAGEMENT!

Nowadays, being truly innovative is an issue that is becoming harder even for IKEA.
However, during all this time IKEA did not step back and it has tried indeed to keep the
customer interested in its business. Below, it is possible to meet a timeline where the most
important innovation behaviors from IKEA were underlined.!

INNOVATION TIMELINE:!

pt
C o n ce n !
tio
Innova

IKEA is founded by Ingvar

1943!
Kamprad!
d!
Bran on!
ti
C re a

Furniture is introduced into

1948! the IKEA range!
vice
Ser ation!
v
Inno
The first IKEA catalog is
1951! published! vice
Ser ation!
o v
Inn
Furniture showroom open in
1953! Almhult, Sweden!
Se
Inn rvice
ova
tion
!
The first IKEA store opens in Sweden. !
Gillis Lundgren designs the TORE drawer unit!
1958! ice
(simple, practical storage unit for home furniture)! Serv tion!
va
Inno

Design
The 1st IKEA restaurant
1960! Innovation! opens in Almhult store!
OGLA chair design Desig
Innov n
1961! comes out for sale! ation!

Marian Grabinski
1962! designs the MTP
bookcase!
1963! IKEA goes abroad with a
store opening in Norway!
Process! s!
ces
Innovation! Pro ation!
n o v
In Practical Board makes its mark
(inexpensive, hard-wearing and easy-to-
1968! process material is a natural fit for IKEAs
production)!

Concep
Innovatio t
n!

pt Denim is used for the first

1973! Conce on!
Innova
ti time for furniture.!
Introduction on SKOPA chairs.
1974! (Developed by a supplier that
n
Desig on!
ati
Innov usually makes plastic buckets
POEM is launched and bowls)!
1976! classic chair made from
laminated wood.! n
Desig on!
ati
Innov
1978! Billy bookcase is born!
n
Desig on!
ati
Innov

1980! Brand new KLIPPAN and LACK product line arrives at IKEA
(resistant, simple, low-priced and functional)!

1982! IKEA Group is formed.

Owned by a 26
foundation with
headquarters in
Netherlands!
 vice
Ser ation!
o v
Inn In one hand, continuous improvements on its product line and continuous innovation on its
IKEA family is launched production process were core competencies for its success within a more competitive
n
1984! Desig n! (customer club that has
atio environment. On the other hand, by promoting innovation within the store meaning service

IKEA INNOVATION MANAGEMENT!

In n o v nowadays about 15 million
1985! members)! innovation and exploring the powerful tool of marketing, IKEA was able to keep the
MOMENT sofa is designed
by Niels Gammelgaard! customers attention and to increase its power and catchment in the furniture retail industry.!

Contin
u
Improv ous More than staying above competitors, in a matter of fact, IKEAs main goal is to be sure that
ement!
customers will keep visiting its store regularly. Indeed such strategy was only possible due to
The first environmental policy the its astonishing size.!
1990! ess!
Proc tion! at IKEA!
va
Inno

1991! Swedwood the industrial group IKEA! Still there are other important innovations within the company that were not underlined in the
Des
(IKEA acquires its own sawmills and Innov ign
ation
innovation timeline and that we try now to show you through the GE/Mckinsey innovation
production plants)! !
MAMMUT comes out and matrix where it is possible to meet a summary of all the innovations undertaken by IKEA with
IKEA gives the 1st evidence special attention to the ones that were not mentioned on the timeline:!
ign
1994! Des tion! of getting in the Childrens
va
Inno
The first IKEA PS furniture segment! COMPETITIVE STRENGTH!
Conti
1995! collection is launched! Impro nuous
veme
nt! WEAK! AVERAGE! HIGH!
IKEA goes officially on the
childrens furniture with the SERVICE INNOVATION! CONTINUOUS CONCEPT INNOVATION!
1997! launch of Childrens IKEA.! IMPROVEMENT!
ess!
Proc tion!
- Maze store layout.! - Continuous seek for a new
Inno
va IKEA also launches the 365+ - Outstanding marketing in-store - Always looking for the next concept. Ultimately they have

HIGH!
1998! Conc The first forestry manager product line composed by and outside the store.! customer need.! launched the IKEA
Inno ept - Catering services! neighborhood project and the
vatio
n!
is employed at the IKEA preparing, cooking, serving - Always re designing new room
group.! and eating goods.! - Advisory services! sets.! 2013 catalog with augmented
IKEA customers can shop

MARKET ATTRACTIVENESS!
! - Always working to improve their reality that is revolutionizing the
2000! online for the 1st time.! Pr product line.! way customers interact with a
Inno ocess!
vatio
n!
catalog.!
2001! IKEA Group trials running
ept its own rail operations DESIGN INNOVATION! TECHNOLOGICAL PROCESS INNOVATION!
Conc tion! IKEA recovery is launched!
2002! Innov
a
through IKEA Rail AB.! REORGANIZATION!
(product-recovery concept is - Seek for new and functional - Unconventional producers!

AVERAGE!
implemented in more than designs (12 internal designers - Utilization of leftover materials
e
100 stores)! Servic n! and about 80 freelancer always from the production of one
tio working for the next functional product to create an entirely
2004! Innova and appealing design).! new one!
ous t!
tinu
Con oveme
n 1st environmental report! ! - Immediate pick up!
r
Imp Everything for the bedroom under one roof!
2005! - By the end of 2015 all the
(A complete and coordinated collection of bedroom furnishings is product materials shall be
launched)! Conce
p
renewable!
Innova t
tion!
PACKAGING INNOVATION! REFORMULATION! BRAND CREATION!
2006! IKEA food is launched!

LOW!
- Flat, easy to transport - IKEA do not rely anymore in
Concept packaging never seen before.! brand creation. They keep
Innovation! everything with the IKEA name.!

2012! IKEA starts idealizing IKEAs neighborhood.!

Indeed, the maze store layout was an IKEA innovation. As we previously stated it takes in
average three hours for a customer to visit the whole store. This concept was designed to
stimulate the customer to buy their products once they get into the store since it forces the
customer to run all the ikeas product line before acquiring the product they were looking for.!

By being a first mover sometimes and a mere follower in others, the true is that IKEA never stopped
innovating and complementing its business. IKEA did not event the next generation furniture or a new
extraordinary concept within the furniture product line. However, by being able to catch opportunities
sometimes from different industries, IKEA was able to adapt and keep up an architectural innovation that
is worthy to special attention.!
PRODUCT/SERVICE!
The IKEA collaborators are also stimulated to provided to most complete and attentive
service possible through flexible work design, comprehensive benefits, quality of work life,
and employee training and development.!
Interestingly only 10% of the IKEAs furniture is produced by themselves. Indeed, they have
some unconventional producers for example like having a shirt factory produce their
upholstery.!

PRESENT! NEW! The bottom line that is important to take from the innovation management strategy is that
IKEA makes everything based on cost efficient production, not because they want to remain
MARKET PENETRATION! PRODUCT/SERVICE the most efficient company in the furniture business but because as their mission statement
PRESENT! (Process, service, design and EXTENSION!

MARKET!
packaging innovations)! says: they want to deliver a good product at the lower price possible.!
28
MARKET EXTENSION! DIVERSIFICATION!
NEW! Service Innovation! IKEA is also not afraid to make a first move when it is necessary, that is the great advantage
from keeping its capital structure privately held and from its high competitive strength. !
By taking a look over the matrix: Phases of the industry lifecycle vs. IKEAs competitive strength, we
perceive that if in one hand, IKEA is doing what the theory demands concept and process innovation
(strong competitive strength and medium-high attractiveness) -, on the other hand, IKEA still relying in
different innovation strategies, mainly to keep their core business stimulated, which is fundamental due to
the medium-high volatility of the demand, the stronger competitive environment, and the shorter product

IKEA!
life cycle (in store).!

PHASES OF INDUSTRY LIFECYCLE!

ESTABLISHMENTS! INTRODUCTION! GROWTH! MATURITY! DECLINE!

PROCESS BRAND CREATION!

HIGH!

UNCERTAINTY!
CONCEPT PROCESS INNOVATION!
BRAND CREATION!
INNOVATION! INNOVATION! PROCESS
BRAND CREATION! INNOVATION!
COMPETITIVE STRENGTH!

CONTINUOUS
AVERAGE!

TECHNOLOGICAL
IMPROVEMENT!
CONTINUOUS REORGANIZATION!
REFORMULATION!

MANAGEMENT!
IMPROVEMENT!
TECHNOLOGICAL
REFORMULATION!
REORGANIZATION!

SERVICE DESIGN
INNOVATION! INNOVATION!
LOW!

SERVICE
INNOVATION!
DESIGN PACKAGING
INNOVATION! INNOVATION!

IKEA INNOVATIONS!

30
 HOW DID THEY MANAGE UNCERTAINTY AS THE WORLD AND THE BUSINESS
BECAME MORE GLOBALIZED?!

IKEA UNCERTAINTY MANAGEMENT!

It is hard to say how is IKEA managing this reality. Indeed, they are a private company and
the information disclosed stills very limited. However, we are allowed to understand the big
picture by analyzing the sources of uncertainty and the main strategies of the every day
business of the company.!

SOURCES OF UNCERTAINTY:!

!
LEVEL OF UNCERTAINTY!

HIGH! LOW!

TRUE AMBIGUITY! ALTERNATE FUTURES!

- Overall GDP per capita will increase - European recession keeps delaying
with special attention for the increase the potential market growth
of the middle class in emerging Economy.!

POTENTIAL CONTROL OVER SOURCES OF UNCERTAINTY!

economies - Economy.! - Increasing individualization Society.!
- Increasing healthcare, security and - Increasing mobility Society &
time management - Society.! Economy.!

LOW!
- Emergence of new information - Stagnation of the real estate market -
technologies - Technology.! Economy!
- Technology driven designs
Technology.!
- Increasing single households
BACK IN THE LATE 1950s! Society.!

HOW SHOULD IT BE MANAGED?! HOW SHOULD IT BE MANAGED?!

the world was much more closed to what is today the trade market. Looking at an Europe totally STRUCTURAL MANAGEMENT! TECHNOCRATIC MANAGEMENT!
devastated by the II World war, people and even less companies were ready to disclose any kind of
information. Facing an industry made mostly by local companies, the uncertainty was high and contracts A RANGE OF FUTURES! A CLEAR-ENOUGH FUTURE!
were difficult to enforce both with financial and non-financial institutions because of an unpredictable and - Austerity policies will keep on rising - Population keeps ageing Society.!
corruptive legal system. It was impossible to find any kind of insurance system or protection for Politics.! - Urbanization rates will keep on
- National governs are becoming more growth Society.!
entrepreneurs and new managers. Even Mr. Kamprad was involved with the Swedish Nazi group and transparent Politics.! - Increasing in labor, energy and raw
stayed close to sympathizers well after the war, which may have resulted in a not so good starting point.! - Tastes are becoming standard material costs Economy.!

HIGH!
Society.! - Increasing environmental concern
Facing such reality, Mr. Kamprad clung to what he had in his reach and started to build up a business. He - Society tends to be attracted by Society.!
simplicity and effective performance !
started by selling pens, jewelry, and nylon stockings with some money that his father has given to him as a goods Society.!
reward for succeeding in his studies. Goods that were most in need by his neighborhood, which already - Tighter trade policies in emerging
shows some technique to manage the risk/uncertainty that he was taking on not selling the goods. ! economies Politics.!
HOW SHOULD IT BE MANAGED?! HOW SHOULD IT BE MANAGED?!
Furthermore, he expands and starts advertising his business. By being unable to leverage its business or POLITICAL MANAGEMENT! CONVENTIONAL MANAGEMENT!
to defend himself from a possible business failure, Mr. Kamprad starts using the local milk van to deliver
products to the nearby train station (uncertainty management). During this period of time Mr. Kamprad - POLITICAL!
also perceives that he was able to buy some furniture, lower the prices and still make good profit.! - ECONOMICAL!
- SOCIAL!
The business started to exponentially grow and few years after, already with the brand IKEA becoming - TECHNOLOGICAL!
locally known, he opens its first store and instantly gets in a price war with its main competitors. Watching
his margins getting lower and lower in shorter periods of time, Mr. Kamprad decides to move abroad with
its business. !

This was indeed the first clearly risk/uncertainty management strategy that he took. His goal was to get a
strong competitive advantage by achieving scale economies and match a production cost that was
impossible to be taken by its local competitors traditional furniture retailers.!
32

Indeed, the market environment has some big challenges for IKEA. IKEA has to take special attention to
what is going on in Europe. Remember that this region represents almost 80% of the companys revenue.!
In one hand, this region is living a strong financial crisis that is struggling the low end customer (IKEAs
main target) and, on the other hand, the population if becoming more and more aged and unemployment
rates are keep on growing.!
Regarding the 2nd step of this analysis, you may find below an analysis done over the IKEAs micro
environment were we will meet the sources of uncertainty from suppliers, clients, competitors and
community:!
LEVEL OF UNCERTAINTY!
HIGH!
TRUE AMBIGUITY!
POTENTIAL CONTROL OVER SOURCES OF UNCERTAINTY!
- Increasing single households
Clients.!
- Demand high volatility Clients!
- The furniture industry is highly
LOW!
fragmented - Competitors!
- Different tastes, cultures and values
according to different countries -
community!
HOW SHOULD IT BE MANAGED?!
STRUCTURAL MANAGEMENT!
A RANGE OF FUTURES!
- Increasing complaints on the store
maze layout Clients.!
- Furniture retailers have to compete
today with mass retailers
HIGH!
Competitors!
- Increasing price competition -
Competitors!
HOW SHOULD IT BE MANAGED?!
POLITICAL MANAGEMENT!
- CLIENTS!
- COMPETITORS!
- SUPPLIERS!
- COMMUNITY!
The environment is becoming more competitive day after day. Indeed, the customer is
becoming more demanding, suppliers more expensive and competition is arising from other
IKEA UNCERTAINTY MANAGEMENT!
sides of the overall retailing industry.!
The environmental concerns together with corporate social responsibility are key topics for
companies nowadays.!
To understand a little bite more from this, we may find below an analysis over the
uncertainty surrounding the firm itself:!
LEVEL OF UNCERTAINTY!
HIGH! LOW!
LOW!
TRUE AMBIGUITY! ALTERNATE FUTURES!
POTENTIAL CONTROL OVER SOURCES OF UNCERTAINTY!
ALTERNATE FUTURES! - Increasing vulnerability to disruption - High dependence on internal
as IKEA becomes more global investment Financial Resources.!
- Low end customer are getting Human Resources.! - Vertical Integration planning is very
struggle with the European crisis - Narrow information disclosure time consuming- Organizational
clients.!
LOW!
Organizational Resources! Resources!
- Increasing overall production costs - Highly volatile customer Financial - Almost 90% of the production is
Suppliers.!
Resources! outsourced Organizational
- Strong dependence on suppliers Resources!
performance - suppliers!
- Increasing safety concerns
community! HOW SHOULD IT BE MANAGED?! HOW SHOULD IT BE MANAGED?!
STRUCTURAL MANAGEMENT! TECHNOCRATIC MANAGEMENT!
HOW SHOULD IT BE MANAGED?!
TECHNOCRATIC MANAGEMENT! A RANGE OF FUTURES! A CLEAR-ENOUGH FUTURE!
A CLEAR-ENOUGH FUTURE! - Difficult store monitoring Human - Power Centralization
Resources.! Organizational Resources!
- Seek for better performance goods - Tighter financing capacity Financial - Keep on reducing CO2 emissions
Clients.! Resources! Organizational Resources!
- Increasing environmental concern
HIGH!
- Increasing concern on creating a
Community.! sustainable product line
- Increasing elderly in Europe
Organizational Resources!
Clients!
- Increasing need for CSR -
community! HOW SHOULD IT BE MANAGED?! HOW SHOULD IT BE MANAGED?!
! POLITICAL MANAGEMENT! CONVENTIONAL MANAGEMENT!
HOW SHOULD IT BE MANAGED?!
CONVENTIONAL MANAGEMENT!
- HUMAN RESOURCES!
- FINANCIAL RESOURCES!
- ORGANIZATIONAL RESOURCES!
34
Bottom line, the environment is getting tighter, competitive and demanding from all sources of uncertainty.! VERTICAL INTEGRATION! MANAGEMENT DIMENSION!

- Structural Management (core

IKEA UNCERTAINTY MANAGEMENT!

It is know time to see how IKEA answers to this environmental reality and for that we rely on an analysis activities strength; sequential
- Strong adherence to low-price strategies, with OEMs
over the most important IKEAs strategic issues (Product-Markets, Vertical Integration, Internationalization, who fail being simply tossed aside!
decision)!
- Conventional Management
Diversification), where we will underline the type of management within the uncertainty level that this
(statistical forecasting)!
specific strategy suggests:!
- Structural Management (core
- IKEA designs does not manufacture!
activities strength)!
PRODUCT-MARKETS! MANAGEMENT DIMENSION!
- Increasing emphasis on cheap manufacturing sources - Technocratic Management
- Structural Management (core such as china! (contingency planning) !
activities strength)!
- IKEA defined a formula for product presentation and sale!
- Conventional management - Most of the production is done in Poland as well as - Political Management
(statistical forecasting)! Sweden! (Alliances)!

- Structural Management (core - The company delivers CSR and sustainability report - Political Management
- Particular attention to style (light and modern)! every year! (Institutional initiative)!
activities strength)!
- IKEA has internally management over design, - Structural Management (core
marketing, logistics, and distribution/retailing! activities strength)!
- Structural Management (core

INTERNAL DEVELOPMENT!
- Products are redesigned at regular intervals!
activities strength)!
- Structural Management (core
activities strength; sequential
- Maintaining low costs and high volume production
decision)!
- Store location in relatively cheap suburban areas, and do-it- - Political Management (Institutional requests!
- Conventional Management
yourself approach to marketing and distribution! initiative)!
(statistical forecasting)!
INTERNAL DEVELOPMENT!

- IKEA does not deliver, although it will organize delivery at the - Technocratic Management
- Structural Management (core
purchasers cost, if it needed. At a cost it will even organize (contingency planning) !
activities strength)! - Inventories are kept down to a minimum!
assembly to the customer ! - Conventional Management
(statistical forecasting)!
- They provide crches and playgrounds or video room for older
- Political Management (Institutional - The cash registers of the retail stores are directly - Technocratic Management
children, both available in order to free the parents from outside
initiative)! connected to the distribution centers, providing (early warning systems) !
distraction in their shopping.!
monitoring and immediate information on changes in - Conventional Management
demand patterns! (business modeling)!
- There are also free buggies, reasonably price restaurants and - Structural Management (core
cafes! activities strength)! - Structural Management (core
- The warehouses are at the same time storage facilities,
activities strength)!
logistical control points, consolidation centers and
- Conventional Management
- Structural Management (core transport nodes!
- Promotion is centered on their catalog! (business modeling)!
activities strength)!
- 70% of the total product line is handled by centers, the - Structural Management (core
- Structural Management (core other 30% go directly to the store! activities strength)!
- Colorful and attractive nature of the retail!
activities strength)!
- Before designing a new product, the first step is to set
- By 2015, IKEA want to introduce a totally sustainable (renewable) - Structural Management (core the price, which is suggested by the location of the
product line! activities strength)! product in a matrix of price range and product style - Structural Management (core
created by the strategists. The second step is to choose activities strength)!
a manufacture. Only at the third stage does the
- Structural Management (core
- Easy communication of sales information! company design the product!
activities strength)!

M&A!
M&A!

- X! - X!
- X! - X!
EXTERNAL DEVELOPMENT!

ALLIANCES!
EXTERNAL DEVELOPMENT!

STRATEGIC

- More than 1,800 suppliers within 55 countries!

ALLIANCES!
STRATEGIC

- Strong long-term relationship with its suppliers! - Political Management

- Suppliers mainly in Europe! (Alliances)!
- T-Mobile, marketing partnership! - Political Management (alliance)! - WWF for CSR partnership! !
- Whirlpool, a microwaves manufacturer!

- IKEA, through its engineers, provide technical

TRANSACTIONS!
TRANSACTIONS!

assistance to reduce costs and improve quality. IKEA

does everything, from leasing equipment to suppliers to
MARKET
MARKET

offering frequent advice, in order to bring production up Political Management (Alliances;

institutional Initiatives)!
- X! - X! to world standards and keep down costs!
- IKEA owns larger scale outlets, but it is prepared to
franchise in markets which are smaller or carry a bigger
!
36
risk!
 INTERNATIONALIZATION! MANAGEMENT DIMENSION! In order to have a narrow vision on what can be the future of IKEAs strategy we have
forecasted some scenarios and suggested some strategies according to each dimension of

IKEA UNCERTAINTY MANAGEMENT!

- Technocratic Management
uncertainty. For that we have chosen two key issues in each dimension that should be
INTERNAL DEVELOPMENT!

- Close attention to the cultures of the countries! (scenario planning)!

- Structural Management (core
- Local HR manager to better understand what was expected!
activities strength)!
managed through technocratic management and we have developed a personal judgment
analysis, which you can meet below:!
High!
Most probably Europe will reborn
stronger than ever and IKEA will be GET OUT ! THEY ARE BACK
able to get most of the its revenues OF EUROPE!! AGAIN!!

- Product is homogeneous worldwide!

- Structural Management (core from this market. However, they shall Europe prevails and they

and goods mobility!

activities strength)!
- Conventional management (Long-
- The company relies mostly in organic growth!
term investments)!
take some few more years of crisis The crisis seem to never are indeed a market
end and the emigration rate opportunity again!!
with more and more people moving keep on growing and
abroad constantly. On the other hand, growing!

People !
a region that already does not seem
M&A!

- X! - X! to have any crisis but that lives with

European Recession! Fades !
the instability of falling back and
EXTERNAL DEVELOPMENT!

away!
WHAT IS GOING ON?!
relapse again. One way or the other it
TRANSACTIONS! ALLIANCES!
STRATEGIC

INSTABILITY!
does not look like the European crisis
- X! - X! will stay longer and indeed IKEA does More austerity, more crisis. Europe is afraid of a new
Someone is doing relapse and mobility
not have to be afraid of watching its something terribly wrong.! policies got tighter because
business fall down in this region.! of that.!
MARKET

High!
- X! - X!
WHAT?! HEY! THINK
CAREFULLY! Looking at the micro environmental
Massive production seems scenario, IKEA needs to be aware of

Dependence!
to have no rules.! IKEA needs to make sure
DIVERSIFICATION! MANAGEMENT DIMENSION! his suppliers are reliable! what politics their suppliers are
implementing in the work environment.

Supplier
DEVELOPMENT!

The communities and ONGs are aware

INTERNAL

of what is going on and they are ready

- Structural Management
- Real estate through IKEA neighborhood! (diversification)! to collapse a brand name like IKEAs.
Safety! High!
concerns! The same history lived by Mr. Kamprad
HOME PRODUCTION IS with the information disclosure about the
THE ANSWER?! BETTER WORK
ENVIRONMENT = BETTER Nazi Swedish group may come back
IKEA changes politics and PRODUCT! again without a so lucky solution.!
M&A!

looks for better solutions

- X! - X! through home production! IKEA decides to produce in
home to ensure safety
EXTERNAL DEVELOPMENT!

policies!
ALLIANCES!
STRATEGIC

- Real state through Skanska!

- Political Management (Alliances)! High!
- Mobile industry IKEA family mobile!

Regarding the firm environment, IKEA IN-HOUSE IS BETTER! KEEP ON MOVING!!

TRANSACTIONS!

might focus on keep on growing with the IKEA invests on in-house

same policies. However by getting more

Investment!
MARKET

production! IKEA keeps on expansion!

- X! - X! confidence from banks, is most likely to

Internal
rely more in the financial institutions to
make investments.!
Outsourced! High!
One way or the other, it does not seem Production!
As it was possible to conclude, IKEA as innumerous strategies to fade the strength of such uncertainty. In
likely to see IKEA going public in a near BANKS ARE THE KEY!
a matter of fact, they rely in all the strategies that are available to manage uncertainty (Structural, WHAT? !
future or to start producing at home.!
Technocratic, Political and conventional management). Indeed to a complex market study IKEA looks in I DO NOT BELIEVE IT!
the better way to fit its products to the environmental conditions. If in one hand, it is of big importance to IKEA relies on banks for in-
house production! IKEA goes public!
keep the client happy and stimulated, on the other hand, it is also important to keep in mind its great
competitive strength: low prices. IKEA has also adapted its strategy to the different markets managers
38
and strategists working locally - and global concerns CSR report and sustainability goals.!
Finally, after analyzing the sources of uncertainty that surround IKEA, the strategies that they take in place
to manage uncertainty and possible scenario planning for the IKEAs future, it is time to suggest few

IKEA UNCERTAINTY MANAGEMENT!

strategies that IKEA should take in order to keep on growth and overall success. For that you may take a
look over the place below where the underline few strategies within the different strategic issues and
uncertainty management dimensions: !

UNCERTAINTY MANAGEMENT
STRATEGIC ISSUE! STRATEGY!
DIMENSION!

- Launch more prototypes and custom made - Structural Management (core

products choices! activities strength)!

- Launch multifunctional furniture as mentioned on - Structural Management (core

PRODUCT-MARKETS! this report positioning! activities strength)!

- Work on the brand image nowadays IKEA should

- Political Management (Institutional
look more conventional and functional rather than a
initiative)!
hard discounter!

- Get in the home technology goods retail (TVs, - Structural Management

sound systems, computers, etc.)! (diversification)!
DIVERSIFICATION!
- Build up strategic alliances with home technology - Political Management (Strategic
retailers! alliances)!

- Start merging slowly for more in-house production - Technocratic management (scenario
in order get more margins from scale economies! planning)!
VERTICAL INTEGRATION!
- Conventional management
- Keep on aggressive supplier decision making policy!
(statistical forecasting)!

- Start studying and creating roots on the African - Political Management (Institutional
market! initiative; acquisitions or alliances)!
INTERNATIONALIZATION! - Start looking at south America with other eyes, it is
- Political Management (Institutional
full of opportunities and they have a similar culture
initiative; acquisitions or alliances)!
to the western European countries!

40
 COUNTRYS NATIONAL CULTURE!

IKEA ORGANIZATIONAL CULTURE AND LEADERSHIP!

GOVERNOR!

IKEA! Analytical, Rigorous,

driven by processes,
logical, risk averse,
balanced, reliable!

ORGANIZATIONAL
CULTURE AND
LEADERSHIP!
MR. INGVAR KAMPRAD IKEAS FOUNDER!

SOCIAL! GOVERNOR!
ENTREPRENEUR!
Popular, driven by Analytical, Rigorous,
Competitive, driven by driven by processes,
people,
goals, risk taker, logical, risk averse,
communicative,
challenging! balanced, reliable!
creative!

S-E-G!

Mr. Kamprad was indeed a very people driven

person. He started selling small things to his
neighborhood at the age of seven. !

At the age of 17 he started to build a business from

the scratch, with an innovative concept and business
plan. !

However, he never lost the north and he always took

special attention to margins and cost efficient 42
production.!
 IKEA !

IKEA ORGANIZATIONAL CULTURE AND LEADERSHIP!

Company Values:!
SOCIAL!
- Humbleness and Willpower!
Popular, driven by
people, We respect each other, our customer and our suppliers.
communicative, Using our willpower means we get things done.!
creative! - Leadership by example!
Our managers try to set a good example, and expect
the same of IKEA co-workers.!
- Daring to be different!
We question old solutions and, if we have a better idea,
MIKAEL OHLSSON IKEAS CEO !
we are willing to change.!
GOVERNOR! - Togetherness and enthusiasm!

S-G-E!
Analytical, Rigorous, Together, we have the power to solve seemingly
SOCIAL! GOVERNOR! ENTREPRENEUR! balanced, reliable! unsolvable problems. We do it all the time!
Popular, driven by Analytical, Rigorous,
Competitive, driven by - Cost-consciousness!
people, driven by processes,
goals, risk taker,
communicative, logical, balanced, Low prices are impossible without low costs, so we
challenging!
creative! reliable! proudly achieve good results with small resources.!
- Constant desire for renewal!
S-G-E! Change is good. We know that adapting to customer
demands with innovative solutions saves money and
Mr. Ohlsson start at IKEA around 30 years ago at the carpet department in an IKEA store. According to
ENTREPRENEUR! contributes to a better everyday life at home.!
him he never planned to become CEO. His working style has always been the same, which makes him Competitive, driven by
- Accept and Delegate Responsibility !!
say that he does not see big difference between being a CEO and being a sales assistant. He defends goals, risk taker,
that people should do what makes them feel good. He seems against career planning.! challenging! We promote co-workers with potential and stimulate
them to surpass their expectations. Sure, people make
As a CEO he did not change anything behind the IKEAs culture. He recognizes that technology plays a mistakes. But they learn from them!
big role in the nowadays environments. He asks for the need of sustainability and assume that IKEA will
do everything to keep cutting on water and energy waste.!
TESTIMONIALS: !
He is a very precise person, taking great attention to numbers, logical thinking and rigor. It is a key way
he finds to keep the business moving on in the cost-cutting department.! "In the 29 years I have been
"When I showed an interest
here, the business has
Nevertheless, he looks to stand as an entrepreneur buy projecting the IKEA neighborhood concept that in doing something new, the
changed a lot. It is growing
is going to be finalized next year (2014).! company was prepared to let
year on year and getting
me do it."!
better and better."!
FURNITURE INDUSTRY !
Guy Labrecque,!
Ingeborg,!
Operational support,!
Sales,!
France!
Canada!
SOCIAL!
GOVERNOR! "I will never forget my first
Popular, driven by
people, Analytical, Rigorous, steps into the IKEA store. The "Im responsible, but not the
communicative,! balanced, reliable! manager wore the same center of the universe."!
Creative.! uniform as everyone else."!
Pr Sundqvist,!
Sara Ahlberg,! Store distribution manager,! 44
Process development,! Sweden!
S-E! Sweden!
 BIBLIOGRAPHY!
h*p://www.forbes.com/fdc/welcome_mjx.shtml
h*p://www.reportlinker.com/ci02168/Furniture-and-DecoraFon.html
h*p://www.worldfurnitureonline.com/PDF/WFR-Magazine.pdf
h*p://www.theglobeandmail.com/news/naFonal/welcome-to-ikea-land-
furniture-giant-begins-urban-planning-project/arFcle2388705/page1/
h*p://en.wikipedia.org/wiki/IKEA

BIBLIOGRAPHY! h*p://www.ikea.com/
h*p://www.researchtodayonline.com/data/FT_ConsConts.pdf
h*p://furniture.about.com/od/buyingfurniture/tp/dec_trends.htm
h*p://www.reportlinker.com/ci02313/Furniture-Manufacturing.html
h*p://shazeeye.com/value-proposiFon-and-posiFoning-ikea-case-study
h*p://franchisor.ikea.com/FF2012.pdf
h*p://www.slideshare.net/riddhimachopra/ikea-case-study
h*p://www.ikea.com/ms/en_GB/pdf/annual_report/
ikea_group_sustainability_report_2012.pdf
h*p://www.ikea.com/ms/en_US/pdf/yearly_summary/
Welcome_inside_2011.pdf
h"p://www.consumerreports.org/cro/home-garden/bed-bath/home-
decora6on/upholstered-furniture/sizing-up-the-stores/index.htm
h*p://www.metro.lu/news/ikea-ceo-mikael-ohlsson/
h*p://www.ikea.com/ms/en_CA/the_ikea_story/working_at_ikea/
our_values.html
h*p://www.palgrave.com/business/white/docs/White%20-%20PDF%20le%20-
%20blue%20chapter%202.pdf

46
 IKEA FINANCIAL DATA FY11 !

APPENDIXES!
APPENDIXES!

48
EXECUTIVE MANAGEMENT OF THE IKEA GROUP! INTERVIEW WITH MIKAEL OHLSSON BY METRO NEWSPAPPER!

APPENDIXES!
What ma*ers are your values, not your educaFon
In every corner of the earth, IKEA symbolizes cheap, trendy living. Metro travelled to IKEAs home
country to meet CEO Mikael Ohlsson in an IKEA store of course. Ohlsson, a down-to-earth Swede
who favors sweaters over business suits, started his IKEA career selling rugs. In fact, he says,
educaFon doesnt ma*er much. Instead, success comes from being honest and creaFve.
Were in the midst of a global economic downturn, and people are having to get used to lower living
standards. Does IKEA, as the worlds leading budget furniture retailer, benet from recessions?
Economic downturns are never good. I lived in Spain unFl 2009, so Ive seen how the recession aects
people. Everyone, regardless of where they live, wants to have a good life, but people are denitely
becoming more value-conscious. When that happens, IKEA becomes an even stronger opFon than
otherwise. Were responding by lowering our prices even though prices on raw materials are going
up. And right now were talking with several ciFes and governments about opening more stores in
their countries, which will obviously create new jobs. For example, well speed up our expansion in
Spain, Italy and the UK.
Were doing this interview in a sofa in an IKEA store, not in a corner oce. Is that part of your
leadership style?
Its part of the IKEA style. Of course we have oces, but theyre usually pre*y informal. We want to
meet reality, and part of that is going out and meeFng people, from our store employees to our
suppliers to people in remote villages. Of course Im totally insucient I dont have Fme to meet
everyone, but I spend most of my Fme doing it. So do our other execuFves, and then we share our
impressions. Based on that we form our strategy. Our strategy is 5-10 years, which is someFmes
frustraFng because we feel things are going to slowly, but it also gives us power and security because
we dont do things ad hoc. This philosophy seems to become more common among other companies
as well.
Whats your recipe for success? How did you become CEO of IKEA?
I never planned to become CEO. My working style has always been the same, so I dont think theres a
big dierence between being CEO and being a sales assistant. We have many people who have started
on the shop oor and risen through the ranks because they share IKEAs values. One mustnt
complicate things. Do a good job, do a li*le extra and be a good colleague. Then youll be promoted
EXECUTIVE MANAGEMENT OF THE IKEA GROUP! if you want to. But most importantly, do what you enjoy. Ive never believed in career planning, doing
something now because it will be useful in the future. If you dont have a good Fme doing your job,
the result will be crap.
Ingvar Kamprad started IKEA as a teenager. Bill Gates didnt have a college degree when he
launched MicrosoP either. Is university educa6on overrated?
What ma*ers is the type of person you are. At IKEA we try not to use the standard format for
everything. Theres always a risk with trends whether its university educaFon or corporaFons using
consulFng companies that everyone has to do the same thing. Instead we try to nd people who are
innovative. We never really look at what kind of educaFon a person has. If you learn something by
a*ending university, its obviously good, but a university educaFon thats staFc doesnt have much
value. We dont really put any value on whether people have a*ended university or not. Some of our
top execuFves have degrees, while others have learned their skills on the labor market.
Where do want to take the company?
My focus is people who lead regular lives, have regular incomes and relaFvely small homes. They have
dreams, too, and want to create a cozy home for themselves. Today technology plays a big role at
home, but how can we make our homes beauFful even though we have lots of cords oaFng about?
Sustainability another area people care strongly about. Our new water taps use 30% less water, and
now were making a big push with LED lightbulbs. LED bulbs use 85% less energy than regular bulbs
and last for 20 years. Of course, our challenge is making the LED bulbs as cheap as possible. Natural
resources are another important area. We have over 100,000 co*on farmers involved in a new pilot
project with WWF, where they use 50% less water and 30% less ferFlizer and pesFcides and they
sFll get a be*er harvest. Our goal is to soon have all our co*on grown that way. And were looking at 50
ways of mixing bers with co*on.
How will people live in 2021? How long does it take you to assemble IKEA furniture?
The basis of our work is being in touch with society and how it inuences regular people. Our task is to meet The sofa youre sijng in took me ve minutes to put together. 95% of my furniture at home comes

APPENDIXES!
peoples changing lifestyles with our products. Right now peoples wallets are gejng thinner. Climate change is from IKEA, and Ive always assembled it myself. Its a fun thing to do, and its interesFng to see what
having an impact on society. Environmental concerns are becoming more important. Technology is changing we as a company could do be*er. Its like tesFng my own company at home. I want IKEA furniture to
peoples home lives. People are gejng more concerned about health what were eaFng, and the materials be fast and easy to assemble; someFmes IKEA furniture is simply too complicated.
that exist in our homes. Were trying to let all these changes inspire us.
But in 10 years, what will my home look like?
Theres a huge dierence between dierent markets. We just opened our second store in Shanghai, and in
China theres an enormous change happening, with rapid urbanizaFon across the country and people having
their st big, modern apartments. Peoples incomes are increasing dramaFcally. Then you have Spain, where
young people are moving in with friends or their parents, since living expenses eats up such a large chunk of
their incomes. People are becoming more value-conscious, and home life is becoming more important. Were
using our Scandinavian roots to show people how they can improve their living. It has to be good for everyday
life, funcFonal, good for kids, and above all not wasteful.
You started your career at IKEA as a shop assistant and have moved up the ladder. How do you spot a
poten6al leader?
Our corporate culture is the basis of our success. Our roots are in [the Swedish region of] Smland, where
simplicity, entrepreneurship and community are very important. People who thrive here are moFvated by that
combinaFon, so its natural that IKEA execuFves spend most of their Fme out in real life, not in an oce. I visit
stores and suppliers, I talk to our employees. They know what works and what doesnt. We try to minimize
status and presFge. Back to your quesFon: we recruit based on those values. We want down-to-earth, engaged,
honest and innovaFve people. We recruit people solely on values, not experience. The person, not his or her CV,
is the most important part. Then you can learn and develop on the job. Its about being the same person at
work as youre at home simple as that.
A company as a caring environment, that sounds a bit old-fashioned
When I started we had 4,000 employees. We now have 130,000, and we keep adding more. But we like to see
ourselves as a caring employer, a company where people like to spend their enFre career. But we recruit
outsiders at many dierent levels as well. We bring in 40- and 50-year-olds. The most important thing is that
you share our values.
What about women?
The majority of our 17,000 execuFves are women, and 40% of our top 200 execuFves are women. We dont do
top-down management, and I think our environment encourages women who otherwise would not have
pursued a career as execuFves. We try to model posiFons within the company to the life stages people go
through, including oering people horizontal moves new countries, new departments if they dont want to
climb the corporate ladder. Thats a good way of retaining employees, regardless of their gender. And we
expect our employees to take individual responsibility, which is also a good moFvator for most people. We have
a new vice-president here in Sweden who used to be a store manager in Holland. When she had her children,
she split her job with a co-worker. Now that her children are older, shes able to climb the career ladder. But of
course were conFnually frustrated. There are so many things we want to do, and we always feel we have too
few resources to do them all.
So how do you address mistakes?
Only people who are asleep dont make mistakes. We try to have an environment where you can say sorry, I
made a mistake and then we x it. Of course, you shouldnt make the same mistake many Fmes, but you
shouldnt be afraid of making mistakes, or try to cover them up. Thats when the problems begin.
Have you changed other products that turned out to be failures?
Not failures, exactly, but were improved our transportaFon. We hate to transport air, but we used to transport
a lot of it. We have at packages, but countries have weight limits that you mustnt exceed, so we sFll have to
transport air. Add to that the growing concern about natural resources. What were trying to do now is to mix
the wood contents in our furniture. Were mixing low wood density with high wood density so the furniture is
both durable and a bit lighter. As a result, were using 25-30% less wood and make the furniture lighter to
transport both for our trucks and for our customers.
Whats the most important thing youve learned from your mistakes?
Dont be afraid to take the iniFaFve. If you make a mistake, own up to it and try to x it. Fear of mistakes
prevents a companies, and people, from developing. And it creates bureaucracy and insecurity. As a leader, one
should try to inspire people to use their skills. But people hold their skills back if theyre afraid of making
52
mistakes. The only area where Im very strict about mistakes is ethics.