IKEA

HOW DID IKEA CHANGE FURNITURE RETAILING FOREVER?!
Advanced Strategic Management – June 2013 – 152112130 Paulo Alves – Professor Adriano Freire!

IKEA !
AT A GLANCE !
& STRATEGIC
POSITIONING!
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!
!45 BIBLIOGRAPHY!
!47 APPENDIXES!
!!
2

IKEA AT A GLANCE 2011!
STORE VISITS !
In 2011, the IKEA Group stores had 655 million visits.!
IKEA FOOD SERVICES!
IKEA food turnover for the year was
1.2 billion.!
PRODUCTS!
The IKEA range consists of
approximately 9,500 products.!
IKEA.COM!
IKEA website had 870 million visits in
2011.!
TOTAL SALES FY11!
Sales increased by 6.9% compared to
2010. Total sales amounted to EUR 24.7
billion.!
PRINTED CATALOGUES,
LANGUAGES & EDITIONS!
The IKEA catalogue was printed in more
than 208 million copies in 30 languages
and 59 editions.!
CO-WORKERS PER FUNCTION!
Purchasing, distribution, wholesale,
range & other: 14,300!
Retail: 100,000!
Swedwood: 16,000!
Swedspan: 700!
Total in FY11: 131,000!
IKEA TIME LINE!
1920s!
1940s!
The founder of IKEA, Ingvar Kamprad, is born.!
IKEA is founded by Ingvar Kamprad aged 17 in a small farming village in Sweden.
The Name IKEA was formed from the founder’s initials (I.K.) plus the first letters of
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.!
1950s!
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 1950’s Ingvar decided to
stop selling everything except furniture items – IKEA AS WE KNOW IT TODAY WAS
BORN! The first store opened in Almhult, Sweden.!
“TO 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
VISION:!
“TO CREATE A BETTER EVERYDAY
LIFE FOR THE MANY PEOPLE”!
1960s! First IKEA stores opened outside Sweden - Norway and Denmark!
1970s!
MISSION:!
THEM.”!
IKEA keeps on going and expanding its business. Switzerland was the first store
outside Scandinavia country where IKEA opened a store. Followed subsequently by
Germany, Australia, Canada, Austria and the Netherlands.!
1980s! USA and UK opened its first stores. IKEA won the Excellent Swedish Design Prize.!
1990s!
IKEA introduces is product line for children and keeps on expansion through Hungary,
Poland, Czech Republic, United Arab Emirates, Spain and China.!
2000s!
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.!
IKEA GROUP!
The IKEA group has operations in 41 countries. 29 trading offices are located in 25 of
these countries. The remaining 16 countries are home to 26 distribution centers and
11 customer distribution centers.!
SUPPLIERS IN 2011!
IKEA had 1,018 suppliers in 53 countries!
INDUSTRIAL GROUPS!
- Swedwood, a manufacturing group within IKEA group had 16,000 co-workers and
33 production units in 10 countries!
- Swedspan, an industrial supplier within the IKEA Group, had 700 co-workers and 5
production units in 5 countries.!
- IKEA industry investment & development (IIID) is an advisory and investment
service company and has 13 co-workers.!
4

IKEA AT A GLANCE 2011!
287!
IKEA GROUP STORES
WORLDWIDE!
In 2011, the IKEA Group opened 7 new
stores in 7 countries. As of 31st August 2011,
the IKEA Group had a total of 287 stores in
26 countries.!
CO-WORKERS PER REGION!
Europe: 106,500!
North America: 16,500!
Russia, Asia & Australia: 8,000!
PURCHASING PER REGION!
Europe: 63%!
North America: 33%!
Russia, Asia & Australia: 4%!
SALE PER REGION!
Europe: 79%!
North America: 14%!
Russia, Asia & Australia: 7%!
TOP SELLING COUNTRIES!
Germany: 15%!
USA: 11%!
France: 10%!
Italy: 7%!
Sweden: 6%!
TOP PURCHASING COUNTRIES!
China: 22%!
Poland: 18%!
Italy: 8%!
Sweden: 5%!
Germany: 4%!
6

IKEA STRATEGIC POSITIONING!
LINE(S) OF BUSINESS!
Narrow View! Broad View!
TIME FRAME!
Short-medium term!
TRADITIONAL FURNITURE RETAILERS!
- Traditional furniture!
- Low range of products!
- Replacement driven!
- Sales oriented!
- Delayed delivery!
- Fairly expensive!
LUXURY FURNITURE!
RETAILERS!
- Modern furniture!
- Stylish designs!
- Truly expensive!
- High-end customers!
- Customer oriented service!
- Customized service!
Medium-long term!
LOW-COST FURNITURE RETAILERS!
- Low price furniture!
- Cost oriented production!
- Cost efficient network!
- Short-product life cycle!
!
!
!
!
“NEXT GEN” FURNITURE RETAILERS!
- Modern furniture!
- Large range of products!
- Design driven!
- Immediate delivery!
- Cost efficient production/network!
BACK IN THE LATE 1950s…!
…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
business from the scratch, a business that ended in revolutionizing the furniture retailing forever. !
But, how did he do that? Well, that is the question we will be answering through this report. Regarding the
company’s strategic positioning it is important to go some years back and look at the market opportunities
as it was back then. The following table summarizes these opportunities:!
In one hand, a fragmented market, full of local and traditional players where it was possible to find a low
innovative product and service driven by the customer’s need to replace an old furniture or furnish a new
place. On the other hand, a customized service for the high end customer. A luxury market driven by the
creativity and demand of the own customer.!
Faced with this reality, Ingvar Kampard realized the opportunity to deliver a low cost product/service.
Ingvar’s innovative idea was to offer a home furnishing product of good function and design at prices much
lower than competitors by using simple cost-cutting solutions that did not affect the quality of the product.
His concept guided the way IKEA’s product was designed, manufactured, transported, sold and
assembled.!
What looked like a model of low prices, rapidly became what I like to call the “next gen” (for that time)
furniture manufacture, a mass customer-oriented business. Through the high success of its first store in
Sweden, Ingvar’s rapidly started to internationalize, allowing him to achieve economies of scale and to
develop its business without loosing margins.!
Indeed, Mr. Kampard have shown to the market that was possible to combine a customer oriented
product/service with a low costs/price policy. In few years, IKEA stores started to offer a huge range of
products, advisory services, a catering service and suggestions for complete home sets.!
WHAT ABOUT THE FUTURE?!
The future of the IKEA’s 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
growing and becoming more and more urban; simplicity and quality are core demands;
growing individualization and rising e-commerce.!
Narrow View! Broad View!
TIME FRAME!
Short-medium term!
MASS CUSTOMER-ORIENTED
FURNITURE!
- Modern furniture!
- Large range of products!
- Design driven!
- Immediate delivery!
MASS CUSTOM-MADE!
FURNITURE!
- Modern furniture!
- Stylish designs!
- Large range of prototypes !
- Customer oriented service/product!
Medium-long term!
MASS SPACE-SAVING!
FURNITURE!
- Modern furniture!
- Large variety of product bundle!
- Technology driven!
MASS CUSTOMIZED MULTIFUNCTIONAL
FURNITURE!
- Space saving furniture!
- Stylish designs!
- Large range of prototypes !
- Customer oriented service/product!
Looking at the table above, one thing is sure about IKEA’s future. They cannot lose the
competitive advantage of massive production. It is the only way they found profitable to
combine low price with customer oriented service and supply.!
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
the mass market. IKEA already provides some freedom to its customers by selling
complementary products separately (such has drawers and handles), by providing an online
tool where the customer is allowed to design its own room, and by having already some
prototypes that can be complemented with the customer’s preference. Nevertheless, mostly
due to the lower supply, it stills very different and distant from the traditional customized
furniture retail. In the short-term a market opportunity for IKEA is to position himself as a
mass custom-made furniture retailer by keep on developing and design more and new
prototypes. This will allow to increase the customer’s freedom to assemble its own furniture
and keep on with the same costs strategy.!
In the medium-long term IKEA shall start thinking on space-saving furniture. The urbanization
rates will keep on growing, the cities are becoming overpopulated and apartments are
smaller in this regions. Entire families will get used to leave with smaller spaces, which
makes this possible positioning very attractive.!
IKEA already offers some furniture in this sense, but mostly for children. It is necessary to
design new prototypes where a simple table can be complemented with something else. The
perfect stage forecasted in this sense is too combine this two market opportunities in a mass
customized multifunctional furniture retailing.!
8

IKEA STRATEGIC POSITIONING!
In what concerns to an indirect improvement on IKEA’s core business, the options are
limitless and hard to predict. IKEA could go in very different ways and be successful in all of
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 industry’s
macro environment and some speculative news and trials that IKEA is being taking in order to
diversify its business.!
Narrow View! Broad View! TIME FRAME!
Short-medium term!
CUSTOMER-ORIENTED FURNITURE
BUSINESS!
- Differentiated product line (as previously seen)!
- Advisory Services!
- Catering Services!
- Assembly services!
- Product immediately pick-up!
- Product home delivery!
- Product catalogue!
SPECIALIZED CUSTOMER-ORIENTED
FURNITURE BUSINESS!
- Online planning!
- Online store!
- Online advisory service!
- Smartphone application!
- Kitchen Equipment (stoves and ovens)!
- Home decoration (Paintings, photo
frames, curtains,…)!
Medium-long term!
!
CUSTOMER-ORIENTED HOME
BUSINESS!
- Furniture complementary business!
- Home technology (TVs, computers,
sound systems, movie systems,…)!
- Kitchen equipment (Fridges,
Microwaves,…)!
CUSTOMER-ORIENTED HOUSE ON
HAND BUSINESS!
- Real estate industry!
- Cost efficient construction!
- Home distinctive design!
- Home furniture assembly!
- Delivery of a completely equipped
house at a low price!
SPACE SAVING FURNITURE/APARTMENT!
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
IKEA’s 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 IKEA’s 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.
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. !
10

SPACE SAVING FURNITURE/APARTMENT!
FURNITURE!
AT A GLANCE !
& STRATEGIC
GROUPS!
IKEA NEIGHBORHOOD!
12

Source: Report Linker!
MAJOR 200 FURNITURE MANUFACTURES - PLANTS LOCATIONS:!
WESTERN EUROPE!
CONSUMPTION
RATES LED BY
MIDDLE AND LOW
INCOME
COUNTRIES!
(44%)!
FURNITURE AT A GLANCE!
INDUSTRY KEY FIGURES!
$450bn!
In 2012!
$630bn!
By 2015!
VALUE:!
MARMKAERTK ESTE GSEMGEMNETNST:S! :!
HOME
FURNITURE!
62%!
OFFICE
FURNITURE!
38%!
CENTRAL, EASTERN EUROPE, RUSSIA & TURKEY!
109 PLANTS!
OTHER ASIA!
77 PLANTS!
DEVELOPING ASIA!
199 PLANTS!
243 PLANTS!
OTHER COUNTRIES!
14 PLANTS!
AMERICA!
356 PLANTS!
HOME FURNITURE SEGMENT
INCLUDES FURNITURE AND
HOME DECORATION ITEMS.!
WORLD FURNITURE PRODUCTION – US$BN:!
500!
450!
400!
350!
300!
250!
200!
150!
100!
50!
0!
ADVANCED ECONOMIES! EMERGING ECONOMIES!
2002! 2003! 2004! 2005! 2006! 2007! 2008! 2009! 2010! 2011! 2012!
INDUSTRY KEY TRENDS!
Source: CSIL!
Source: CSIL!
Source: Report Linker!
Source: CSIL!
INTERNATIONALIZATION
LARGE FURNITURE RETAILERS CONTINUE TO STRENGTHEN THEIR NETWORKS AND GEOGRAPHICAL COVERAGE
E-COMMERCE
A RISING NUMBER OF FURNITURE RETAILERS ARE OFFERING ONLINE SALES ADDITIONALLY TO THEIR STORE
STRONGER COMPETITION
THE PROFITABILITY IS FALLING AND THE MARKET POWER OF RETAIL DISTRIBUTION NETWORKS IS GROWING
10 TRENDS ON THE FURNITURE PRODUCT LINE:
GREEN FURNITURE IS BECOMING MAINSTREAM
INCREASING REQUEST FOR FURNITURE WITH A SMALLER PROFILE
INCREASING REQUEST FOR MULTIFUNCTIONAL FURNITURE
TECHNOLOGY DRIVEN FURNITURE DESIGN
INCREASING POPULARITY OF VINTAGE FURNITURE
TASTES ARE BECOMING GLOBAL
GROWING IMPORTANCE OF OUTDOOR FURNITURE
CUSTOMIZATION KEEPS EVOLVING AND BEING DEVELOPED
GROWING INTEREST FOR SPECIALTY SLEEP SURFACES
LEATHER FURNITURE KEEPS FINDING NEW LOOKS
INDUSTRY ENVIRONMENTAL TRENDS!
SUPPLY! DEMAND!
POLITICAL!
Austerity Policies will keep increasing in developed
countries!
-! -!
Improved macroeconomic policies. National Governs
more transparent.! +!
ECONOMIC!
European Recession keeps delaying the market growth
potential!
-! -!
Overall GDP per capita will increase. Forecasts tell
developed countries will keep the higher numbers.
Although merging economies are faced with an huge
expectation for middle class increasing.!
-! +!
SOCIAL!
The population keeps ageing! -! -!
Urbanization rates will keep on growing! +! +!
Increasing Individualization (higher interest on products
based on personal wishes)!
Increased Healthcare, Security and Time Management
concern. People will tend to be attracted for simplicity
and effective performance goods. !
-!
TECHNOLOGICAL!
Emergence of new Information technologies! +! +!
Overall retailers are becoming more efficient and vertical
integrated!
+! +!
Technology driven designs! +!
14

FURNITURE AT A GLANCE!
THE FUTURE OF FURNITURE!
INDUSTRY GLOBAL PLAYERS (examples excluding IKEA)!
COUNTRY OF
ORIGIN!
Italy!
COMPETENCIES!
Brand Image!
Huge product quality!
STRATEGY!
Product-Markets!
Focus on sofas and armchairs both in B2C
and B2B markets!
Vertical Integration!
Full integrated on conception, prototyping,
production and commercialization.!
Internationalization!
Present in 123 countries all over the world
mostly through organic growth!
Diversification! The business is not diversified!
NET SALES ($)! 618 million USD (2012)!
COUNTRY OF
ORIGIN!
China!
COMPETENCIES!
Cost efficient production!
Large range of Brands!
STRATEGY!
Product-Markets!
Complete product line for Home, office and
hotels!
Vertical Integration!
Full integrated business model both in mainland
China and USA.!
Internationalization! Present all over the world mostly through M&A!
Diversification! The business is not diversified!
NET SALES ($)! 423 million USD (2012)!
COUNTRY OF
ORIGIN!
Germany!
COMPETENCIES!
World class distribution and warehousing infrastructure!
Deep knowledge of the African market!
STRATEGY!
Product-Markets!
Complete line of products for all types of
customer through different brands.!
Vertical Integration! Integrated on sourcing and manufacturing!
Internationalization! Present in Brazil, Africa, Europe and Asia!
Diversification!
Business diversified into different retail
businesses (footwear, automotive) logistics
(communications, transport of passengers and
goods), industrial services, and financial
services!
NET SALES ($)! 579 million USD (2011 - just from furniture retail)! 16

STRATEGIC GROUPS!
Indeed, the furniture industry has clearly changed since Mr. Kamprad’s first store opened. However, since
we are trying to understand how he could be so successful in a so short period of time, it is important to
take a view on how the market was grouped back then, more specifically the Swedish market.!
The graph below appears as a narrow view of the market, where we may perceive the gap that Mr.
Kamprad tried to fill. !
As we already understood on the strategic
positioning analysis, Mr. Kamprad was faced with a
market composed by traditional retailers - small
stores, without a brand, with few range of products
within the same line, and very local -, and luxury
furniture retailers – most of the times without a store,
working together with the customer in exclusive and
single furniture production according to their request,
and relying mostly on the word-of-mouth marketing.!
Looking at such reality Mr. Kamprad founded its first
store where it was possible to find good quality
products with an innovative design and at
reasonable lower prices. By changing the rules of the
market, the traditional retailers - the most similar
business model to the one founded by Mr. Kamprad -
joined in a price war with IKEA.!
Traditional
Furniture
Retailers!
Quality!
QUALITY!
Traditional
Furniture retailers
were recognized
by being the most
similar to a
nowadays mass
retailer. However,
customers did not
have much
opportunity to
choose or fill its
truly needs.!
PRICE!
High!
Low!
Quality!
IKEA appeared in
the market with
more or less the
same product line
and quality as
traditional furniture
retailers. However,
IKEA distinguished
himself by
empowering new
designs, with the
same quality at a
lower price.!
Low !
Price!
Luxury Furniture
appears with a
because they were
more or less able
expensive wood
furniture according
to the customer
High!
Price!
Luxury
Furniture
Retailers!
high quality
product line
to supply
needs.!
Struggling on keeping up with the quality at the same time that competitors were doing pressure by
lowering their prices, IKEA decided to go abroad and search for scale economies (Norway, 1963). !
It was the starting point for the IKEA that we know today. By moving abroad, where markets were also
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.!
WHAT ABOUT TODAY?!
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 industry’s 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)!
MASS FURNITURE
RETAILING!
!
It offers a large range
and product line. Relies
on cost efficient
production.!
- Cost efficiency!
- Brand awareness!
- Catchment area!
- IKEA!
- Conforama!
- Home Depot!
CATALOG/ONLINE
RETAILERS!
!
Mostly offering
traditional furniture for
all tastes and prices
through a catalog or
online.!
- Marketing!
- Innovation!
- Distribution network!
- Williams-Sonoma
Home!
- Ebay!
- Restoration
Hardware!
OWN BRAND
MANUFACTURERS!
!
Stores that offer an
entire line of products
made by themselves
and their own brand. !
- Local recognition!
- Customer service!
- Vertical integration!
- Natuzzi!
- Chateau d’ax!
- Drextel Heritage!
PRIVATE-LABEL!
STORES !
!
Stores that buy furniture
from a broad range of
manufacturers and sell
it under their brand.!
- Bargaining power!
- Brand image!
- Margins!
- Pottery Barn!
- Moviflor!
- DFS!
TRADITIONAL
FURNITURE
RETAILERS !
!
Includes local stores
with a selection of
brands at various
prices. !
- Local recognition!
- Distribution network!
- Margins!
- Duresta!
- Andante!
- Kincaid Furniture!
HYPERMARKETS!
It offers a large variety
of products at appealing
prices under the same
roof, including furniture.!
- Product range!
- Convenience!
- Bargaining power!
!
- Wal-Mart Stores,
Inc.!
- Carrefour S.A.!
- Tesco PLC!
!
DEPARTMENT
STORES!
!
It carries a variety of
categories and it has
broad assortment for
the high-end customer,
including furniture!
- Brand recognition!
- Customization!
- Availability!
- Sears Holdings
Corp.!
- Macy’s, Inc.!
- Kohl’s Corporation!
!
18

STRATEGIC GROUPS!
It is a fact. The industry has completely change its behavior since the creation of IKEA’s concept.
However, it is also a fact that IKEA has become the global furniture market leader with at least twice the
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:!
STORE SIZE!
Private-Label!
Stores!
Local! Regional! Global!
GEOGRAPHICAL REACH!
Small! Medium! Large!
Mass Furniture Retailing!
Own Brand Manufacturers!
Traditional Furniture
Retailers!
Department Stores!
Hypermarkets!
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
its size). !
The interesting precision to take from the graph above is that nobody is able to achieve the strategy
preformed by IKEA. Even other mass furniture retailers are way far from IKEA. Most certainly due to brand
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.!
Nowadays, Hypermarkets have also become a threat for IKEA. With the same low-end customers, more
or else the same reach and catchment area, this stores might still some market share from IKEA mostly
due to the convenience that these stores offer to their customers. !
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
recognized for their high quality and luxury design, which make them pursue both regional and global
players.!
DID YOU KNOW AN
IKEA CUSTOMER
SPENDS IN AVERAGE
3 HOURS TO VISIT
THE WHOLE STORE?!
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:!
PRODUCT LINE!
Catalog/Online!
retailers!
Little Choice! High Depth!
LINE DEPTH!
Complete!
Line!
Narrow!
Line!
Own Brand!
Manufacturers!
Private-Label!
Stores and Traditional
Furniture Retailers!
Hypermarkets! Department Stores!
Here we perceive one of the greatest IKEA’s advantages. In fact, IKEA offers to its
customers a large depth in most of the product’s line, killing the previously stated
competition from hypermarkets.!
It is a huge product differentiation from the other strategic groups, where despite having
most of the times a more or less complete product’s line, the range of different designs and
sizes within the same line of product become really smaller than when compared with
IKEA. !
20

But, let us go deeper in this issue and look on how the IKEA’s product life cycle (in the store) behaves
according to the value for the customer:!
PRODUCT LIFE CYCLE (IN THE STORE)!
Catalog/Online!
retailers!
Traditional Furniture
Retailers!
VALUE TO THE CUSTOMER!
Unique !
features!
Price/Quality!
ratio!
Low !
Price!
Short! Long!
Own Brand !
Manufacturers!
Private-Label!
Stores!
Department Stores!
Hypermarkets!
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 variable’s 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. !
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.!
IKEA CHRISTMAS ROOM SET!
22

IKEA!
INNOVATION!
MANAGEMENT!
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
real proof of his entrepreneurial behavior and project innovation.!
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. Kamprad’s innovative idea was the starting point for the furniture industry
revolution that we are answering with this report.!
COMPETITIVE STRENGTH!
WEAK! AVERAGE! HIGH!
MARKET ATTRACTIVENESS!
HIGH!
SERVICE INNOVATION!
Immediate pick up!
CONTINUOUS
IMPROVEMENT!
CONCEPT INNOVATION!
Low cost furniture!
AVERAGE!
DESIGN INNOVATION!
Simple, Fashionable, and
effective furniture!
TECHNOLOGICAL
REORGANIZATION!
PROCESS INNOVATION!
Simple cost cutting
solution!
LOW!
PACKAGING
INNOVATION!
REFORMULATION! BRAND CREATION!
IKEA brand creation!
EXISTING! NEW!
TECHNOLOGIES!
EXISTING!
INCREMENTAL INNOVATION! ARCHITECTURAL INNOVATION!
IKEA was idealized from existing materials,
components, technologies. However the business
model was completely designed to target a new
market that was being underserved by the furniture
retailers of that time.!
NEW!
DISRUPTIVE INNOVATION! RADICAL INNOVATION!
24

The first IKEA catalog is
published!
AFTER 50 YEARS, DOES IKEA STILL INNOVATIVE?!
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:!
IKEA INNOVATIVE MARKETING IDEA!
1943!
1948!
1951!
1953!
1958!
1960!
1961!
1962!
1963!
1968!
1973!
1974!
1976!
1978!
1980!
1982!
IKEA is founded by Ingvar
Kamprad!
Furniture is introduced into
the IKEA range!
Service
Innovation!
Furniture showroom open in
Almhult, Sweden!
The first IKEA store opens in Sweden. !
Gillis Lundgren designs the TORE drawer unit!
(simple, practical storage unit for home furniture)!
The 1st IKEA restaurant
opens in Almhult store!
OGLA chair design
comes out for sale!
Marian Grabinski
designs the MTP
bookcase!
IKEA goes abroad with a
store opening in Norway!
Practical Board makes its mark
(inexpensive, hard-wearing and easy-to-process
material is a natural fit for IKEA’s
production)!
Denim is used for the first
time for furniture.!
Introduction on SKOPA chairs.
(Developed by a supplier that
usually makes plastic buckets
POEM is launched – and bowls)!
classic chair made from
laminated wood.!
Billy bookcase is born!
Brand new KLIPPAN and LACK product line arrives at IKEA
(resistant, simple, low-priced and functional)!
IKEA Group is formed.
Owned by a
foundation with
headquarters in
Netherlands!
Concept
Innovation!
Brand !
Creation!
Service
Innovation!
Service
Innovation!
Service
Innovation! Design
Innovation! Design
Innovation!
Process!
Innovation!
Concept
Innovation!
Concept
Innovation!
Design
Innovation!
Design
Innovation!
Design
Innovation!
Process!
Innovation!
26

1984!
1985!
1990!
1991!
1994!
1995!
1997!
1998!
2000!
2001!
2002!
2004!
2005!
2006!
2012!
IKEA family is launched
(customer club that has
nowadays about 15 million
members)!
MOMENT sofa is designed
by Niels Gammelgaard!
The first environmental policy
at IKEA!
Swedwood – the industrial group IKEA!
(IKEA acquires its own sawmills and
production plants)!
MAMMUT comes out and
IKEA gives the 1st evidence
of getting in the Children’s
Design
Innovation!
The first IKEA PS furniture segment!
collection is launched!
IKEA goes officially on the
children’s furniture with the
launch of Children’s IKEA.!
IKEA also launches the 365+
product line composed by
preparing, cooking, serving
and eating goods.!
The first forestry manager
is employed at the IKEA
IKEA customers can shop group.!
online for the 1st time.!
IKEA Group trials running
its own rail operations
through IKEA Rail AB.!
IKEA recovery is launched!
(product-recovery concept is
implemented in more than
100 stores)!
1st environmental report!
Everything for the bedroom under one roof!
(A complete and coordinated collection of bedroom furnishings is
launched)!
IKEA food is launched!
IKEA starts idealizing IKEA’s neighborhood.!
Service
Innovation!
Design
Innovation!
Continuous
Improvement!
Process!
Innovation!
Concept
Innovation!
Concept
Innovation!
Process!
Innovation!
Design
Innovation!
Process!
Innovation!
Service
Innovation!
Concept
Innovation!
Continuous
Improvement!
Concept
Innovation!
Continuous
Improvement!
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.!
In one hand, continuous improvements on its product line and continuous innovation on its
production process were core competencies for its success within a more competitive
environment. On the other hand, by promoting innovation within the store – meaning service
innovation – and exploring the powerful tool of marketing, IKEA was able to keep the
customers’ attention and to increase its power and catchment in the furniture retail industry.!
More than staying above competitors, in a matter of fact, IKEA’s main goal is to be sure that
customers will keep visiting its store regularly. Indeed such strategy was only possible due to
the its astonishing size.!
Still there are other important innovations within the company that were not underlined in the
innovation timeline and that we try now to show you through the GE/Mckinsey innovation
matrix where it is possible to meet a summary of all the innovations undertaken by IKEA with
special attention to the ones that were not mentioned on the timeline:!
WEAK! AVERAGE! HIGH!
MARKET ATTRACTIVENESS!
HIGH!
SERVICE INNOVATION!
- Maze store layout.!
- Outstanding marketing in-store
and outside the store.!
- Catering services!
- Advisory services!
!
CONTINUOUS
IMPROVEMENT!
- Always looking for the next
customer need.!
- Always re designing new room
sets.!
- Always working to improve their
product line.!
CONCEPT INNOVATION!
- Continuous seek for a new
concept. Ultimately they have
launched the IKEA
neighborhood project and the
2013 catalog with augmented
reality that is revolutionizing the
way customers interact with a
catalog.!
AVERAGE!
DESIGN INNOVATION!
- Seek for new and functional
designs (12 internal designers
and about 80 freelancer always
working for the next functional
and appealing design).!
!
TECHNOLOGICAL
REORGANIZATION!
PROCESS INNOVATION!
- Unconventional producers!
- Utilization of leftover materials
from the production of one
product to create an entirely
new one!
- Immediate pick up!
- By the end of 2015 all the
product materials shall be
renewable!
LOW!
PACKAGING INNOVATION!
- Flat, easy to transport
packaging never seen before.!
REFORMULATION! BRAND CREATION!
- IKEA do not rely anymore in
brand creation. They keep
everything with the IKEA name.!
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 ikea’s product line before acquiring the product they were looking for.!
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 IKEA’s furniture is produced by themselves. Indeed, they have
some unconventional producers – for example like having a shirt factory produce their
upholstery.!
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
the most efficient company in the furniture business but because as their mission statement
says: they want to deliver a good product at the lower price possible.!
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. !
PRODUCT/SERVICE!
PRESENT! NEW!
MARKET!
PRESENT!
MARKET PENETRATION!
(Process, service, design and
packaging innovations)!
PRODUCT/SERVICE
EXTENSION!
NEW!
MARKET EXTENSION!
Service Innovation!
DIVERSIFICATION!
28

By taking a look over the matrix: Phases of the industry lifecycle vs. IKEA’s 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
life cycle (in store).!
IKEA INNOVATIONS!
PHASES OF INDUSTRY LIFECYCLE!
ESTABLISHMENTS! INTRODUCTION! GROWTH! MATURITY! DECLINE!
HIGH!
CONCEPT
INNOVATION!
PROCESS
INNOVATION!
PROCESS
INNOVATION!
BRAND CREATION!
BRAND CREATION!
PROCESS
INNOVATION!
BRAND CREATION!
AVERAGE!
CONTINUOUS
IMPROVEMENT!
CONTINUOUS
IMPROVEMENT!
TECHNOLOGICAL
REORGANIZATION!
TECHNOLOGICAL
REORGANIZATION!
REFORMULATION!
REFORMULATION!
LOW!
SERVICE
INNOVATION!
SERVICE
INNOVATION!
DESIGN
INNOVATION!
DESIGN
INNOVATION!
PACKAGING
INNOVATION!
IKEA!
UNCERTAINTY!
MANAGEMENT!
30

IKEA UNCERTAINTY MANAGEMENT!
HOW DID THEY MANAGE UNCERTAINTY AS THE WORLD AND THE BUSINESS
BECAME MORE GLOBALIZED?!
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:!
!
…the world was much more closed to what is today the trade market. Looking at an Europe totally
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
were difficult to enforce both with financial and non-financial institutions because of an unpredictable and
corruptive legal system. It was impossible to find any kind of insurance system or protection for
entrepreneurs and new managers. Even Mr. Kamprad was involved with the Swedish Nazi group and
stayed close to sympathizers well after the war, which may have resulted in a not so good starting point.!
Facing such reality, Mr. Kamprad clung to what he had in his reach and started to build up a business. He
started by selling pens, jewelry, and nylon stockings with some money that his father has given to him as a
reward for succeeding in his studies. Goods that were most in need by his neighborhood, which already
shows some technique to manage the risk/uncertainty that he was taking on not selling the goods. !
Furthermore, he expands and starts advertising his business. By being unable to leverage its business or
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
also perceives that he was able to buy some furniture, lower the prices and still make good profit.!
The business started to exponentially grow and few years after, already with the brand IKEA becoming
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.!
LEVEL OF UNCERTAINTY!
HIGH! LOW!
HOW SHOULD IT BE MANAGED?!
STRUCTURAL MANAGEMENT!
- POLITICAL!
- ECONOMICAL!
- SOCIAL!
- TECHNOLOGICAL!
TECHNOCRATIC MANAGEMENT!
CONVENTIONAL MANAGEMENT!
POLITICAL MANAGEMENT!
POTENTIAL CONTROL OVER SOURCES OF UNCERTAINTY!
LOW!
TRUE AMBIGUITY!
- Overall GDP per capita will increase
with special attention for the increase
of the middle class in emerging
economies - Economy.!
- Increasing healthcare, security and
time management - Society.!
- Emergence of new information
technologies - Technology.!
- Technology driven designs –
Technology.!
- Increasing single households –
Society.!
ALTERNATE FUTURES!
- European recession keeps delaying
the potential market growth –
Economy.!
- Increasing individualization – Society.!
- Increasing mobility – Society &
Economy.!
- Stagnation of the real estate market -
Economy!
HIGH!
A RANGE OF FUTURES!
- Austerity policies will keep on rising –
Politics.!
- National governs are becoming more
transparent – Politics.!
- Tastes are becoming standard –
Society.!
- Society tends to be attracted by
simplicity and effective performance
goods – Society.!
- Tighter trade policies in emerging
economies – Politics.!
A CLEAR-ENOUGH FUTURE!
- Population keeps ageing – Society.!
- Urbanization rates will keep on
growth – Society.!
- Increasing in labor, energy and raw
material costs – Economy.!
- Increasing environmental concern –
Society.!
!
32

HIGH! LOW!
LOW!
TRUE AMBIGUITY!
- Increasing single households –
Clients.!
- Demand high volatility – Clients!
- The furniture industry is highly
fragmented - Competitors!
- Different tastes, cultures and values
according to different countries -
community!
ALTERNATE FUTURES!
- Low end customer are getting
struggle with the European crisis –
clients.!
- Increasing overall production costs –
Suppliers.!
- Strong dependence on suppliers
performance - suppliers!
- Increasing safety concerns –
community!
HIGH!
A RANGE OF FUTURES!
- Increasing complaints on the store
maze layout– Clients.!
- Furniture retailers have to compete
today with mass retailers –
Competitors!
- Increasing price competition -
Competitors!
- Seek for better performance goods–
Clients.!
- Increasing environmental concern –
Community.!
- Increasing elderly in Europe –
Clients!
- Increasing need for CSR -
community!
!
- CLIENTS!
- COMPETITORS!
- SUPPLIERS!
- COMMUNITY!
HIGH! LOW!
LOW!
TRUE AMBIGUITY!
- Increasing vulnerability to disruption
as IKEA becomes more global –
Human Resources.!
- Narrow information disclosure –
Organizational Resources!
- Highly volatile customer– Financial
Resources!
ALTERNATE FUTURES!
- High dependence on internal
investment– Financial Resources.!
- Vertical Integration planning is very
time consuming- Organizational
Resources!
- Almost 90% of the production is
outsourced – Organizational
Resources!
HIGH!
A RANGE OF FUTURES!
- Difficult store monitoring– Human
Resources.!
- Tighter financing capacity – Financial
Resources!
- Power Centralization –
- Keep on reducing CO2 emissions –
- Increasing concern on creating a
sustainable product line –
- HUMAN RESOURCES!
- FINANCIAL RESOURCES!
- ORGANIZATIONAL RESOURCES!
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 company’s revenue.!
In one hand, this region is living a strong financial crisis that is struggling the low end customer (IKEA’s
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 IKEA’s micro
environment were we will meet the sources of uncertainty from suppliers, clients, competitors and
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
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:!
34

PRODUCT-MARKETS! MANAGEMENT DIMENSION!
INTERNAL DEVELOPMENT!
- IKEA defined a formula for product presentation and sale!
- Structural Management (core
activities’ strength)!
- Conventional management
(statistical forecasting)!
- Particular attention to style (light and modern)!
- Products are redesigned at regular intervals!
- Store location in relatively cheap suburban areas, and do-it-yourself
approach to marketing and distribution!
- Political Management (Institutional
initiative)!
- IKEA does not deliver, although it will organize delivery at the
purchaser’s cost, if it needed. At a cost it will even organize
assembly to the customer !
- They provide crèches and playgrounds or video room for older
children, both available in order to free the parents from outside
distraction in their shopping.!
initiative)!
- There are also free buggies, reasonably price restaurants and
cafes!
- Promotion is centered on their catalog!
- Colorful and attractive nature of the retail!
- By 2015, IKEA want to introduce a totally sustainable (renewable)
product line!
- Easy communication of sales information!
EXTERNAL DEVELOPMENT!
M&A!
- X! - X!
STRATEGIC
ALLIANCES!
- T-Mobile, marketing partnership! - Political Management (alliance)!
MARKET
TRANSACTIONS!
- X! - X!
VERTICAL INTEGRATION! MANAGEMENT DIMENSION!
- Strong adherence to low-price strategies, with OEMs
who fail being simply tossed aside!
activities’ strength; sequential
decision)!
- Conventional Management
- IKEA designs does not manufacture!
- Increasing emphasis on cheap manufacturing sources
such as china!
- Technocratic Management
(contingency planning) !
- Most of the production is done in Poland as well as
Sweden!
- Political Management
(Alliances)!
- The company delivers CSR and sustainability report
every year!
(Institutional initiative)!
- IKEA has internally management over design,
marketing, logistics, and distribution/retailing!
- Maintaining low costs and high volume production
requests!
activities’ strength; sequential
decision)!
- Inventories are kept down to a minimum!
(contingency planning) !
- The cash registers of the retail stores are directly
connected to the distribution centers, providing
monitoring and immediate information on changes in
demand patterns!
(early warning systems) !
(business modeling)!
- The warehouses are at the same time storage facilities,
logistical control points, consolidation centers and
transport nodes!
(business modeling)!
- 70% of the total product line is handled by centers, the
other 30% go directly to the store!
- Before designing a new product, the first step is to set
the price, which is suggested by the location of the
product in a matrix of price range and product style
created by the strategists. The second step is to choose
a manufacture. Only at the third stage does the
company design the product!
M&A!
- X! - X!
STRATEGIC
ALLIANCES!
- More than 1,800 suppliers within 55 countries!
- Strong long-term relationship with its suppliers!
- Suppliers mainly in Europe!
- WWF for CSR partnership!
- Whirlpool, a microwaves manufacturer!
(Alliances)!
!
MARKET
TRANSACTIONS!
- IKEA, through its engineers, provide technical
assistance to reduce costs and improve quality. IKEA
does everything, from leasing equipment to suppliers to
offering frequent advice, in order to bring production up
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
risk!
Political Management (Alliances;
institutional Initiatives)!
!
Bottom line, the environment is getting tighter, competitive and demanding from all sources of uncertainty.!
It is know time to see how IKEA answers to this environmental reality and for that we rely on an analysis
over the most important IKEA’s strategic issues (Product-Markets, Vertical Integration, Internationalization,
Diversification), where we will underline the type of management within the uncertainty level that this
specific strategy suggests:!
36

INTERNATIONALIZATION! MANAGEMENT DIMENSION!
- Close attention to the cultures of the countries!
(scenario planning)!
- Local HR manager to better understand what was expected!
- Product is homogeneous worldwide!
- The company relies mostly in organic growth!
- Conventional management (Long-term
investments)!
M&A!
- X! - X!
STRATEGIC
ALLIANCES!
- X! - X!
MARKET
TRANSACTIONS!
- X! - X!
DIVERSIFICATION! MANAGEMENT DIMENSION!
INTERNAL
DEVELOPMENT!
- Real estate through “IKEA neighborhood”!
- Structural Management
(diversification)!
M&A!
- X! - X!
STRATEGIC
ALLIANCES!
- Real state through Skanska!
- Mobile industry – IKEA family mobile!
- Political Management (Alliances)!
MARKET
TRANSACTIONS!
- X! - X!
As it was possible to conclude, IKEA as innumerous strategies to fade the strength of such uncertainty. In
a matter of fact, they rely in all the strategies that are available to manage uncertainty (Structural,
Technocratic, Political and conventional management). Indeed to a complex market study IKEA looks in
the better way to fit its products to the environmental conditions. If in one hand, it is of big importance to
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
and strategists working locally - and global concerns – CSR report and sustainability goals.!
In order to have a narrow vision on what can be the future of IKEA’s strategy we have
forecasted some scenarios and suggested some strategies according to each dimension of
uncertainty. For that we have chosen two key issues in each dimension that should be
managed through technocratic management and we have developed a personal judgment
analysis, which you can meet below:!
THEY ARE BACK
Europe prevails and they
are indeed a market
opportunity again!!
European Recession!
People !
and goods mobility!
Supplier
Dependence!
IKEA needs to make sure
his suppliers are reliable!
Safety!
concerns!
Internal
Investment!
IKEA keeps on expansion!
Outsourced!
Production!
High!
High!
High!
Fades !
away!
High!
High!
AGAIN!!
GET OUT !
OF EUROPE!!
WHAT IS GOING ON?!
INSTABILITY!
The crisis seem to never
end and the emigration rate
keep on growing and
growing!
More austerity, more crisis.
Someone is doing
something terribly wrong.!
Europe is afraid of a new
relapse and mobility
policies got tighter because
of that.!
HEY! THINK
CAREFULLY!
WHAT?!
HOME PRODUCTION IS
THE ANSWER?! BETTER WORK
ENVIRONMENT = BETTER
PRODUCT!
Massive production seems
to have no rules.!
IKEA changes politics and
looks for better solutions
through home production! IKEA decides to produce in
home to ensure safety
policies!
IN-HOUSE IS BETTER! KEEP ON MOVING!!
BANKS ARE THE KEY!
WHAT? !
I DO NOT BELIEVE IT!
IKEA invests on in-house
production!
IKEA relies on banks for in-house
production! IKEA goes public!
Most probably Europe will reborn
stronger than ever and IKEA will be
able to get most of the its revenues
from this market. However, they shall
take some few more years of crisis
with more and more people moving
abroad constantly. On the other hand,
a region that already does not seem
to have any crisis but that lives with
the instability of falling back and
relapse again. One way or the other it
does not look like the European crisis
will stay longer and indeed IKEA does
not have to be afraid of watching its
business fall down in this region.!
Looking at the micro environmental
scenario, IKEA needs to be aware of
what politics their suppliers are
implementing in the work environment.
The communities and ONG’s are aware
of what is going on and they are ready
to collapse a brand name like IKEA’s.
The same history lived by Mr. Kamprad
with the information disclosure about the
Nazi Swedish group may come back
again without a so lucky solution.!
Regarding the firm environment, IKEA
might focus on keep on growing with the
same policies. However by getting more
confidence from banks, is most likely to
rely more in the financial institutions to
make investments.!
One way or the other, it does not seem
likely to see IKEA going public in a near
future or to start producing at home.!
38

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 IKEA’s future, it is time to suggest few
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: !
STRATEGIC ISSUE! STRATEGY!
UNCERTAINTY MANAGEMENT
DIMENSION!
PRODUCT-MARKETS!
- Launch more prototypes and custom made
products choices!
- Launch multifunctional furniture as mentioned on
this report positioning!
- Work on the brand image – nowadays IKEA should
look more conventional and functional rather than a
hard discounter!
initiative)!
DIVERSIFICATION!
- Get in the home technology goods retail (TVs,
sound systems, computers, etc.)!
- Structural Management
(diversification)!
- Build up strategic alliances with home technology
retailers!
- Political Management (Strategic
alliances)!
VERTICAL INTEGRATION!
- Start merging slowly for more in-house production
in order get more margins from scale economies!
- Technocratic management (scenario
planning)!
- Keep on aggressive supplier decision making policy!
- Conventional management
INTERNATIONALIZATION!
- Start studying and creating roots on the African
market!
initiative; acquisitions or alliances)!
- Start looking at south America with other eyes, it is
full of opportunities and they have a similar culture
to the western European countries!
initiative; acquisitions or alliances)!
40

IKEA ORGANIZATIONAL CULTURE AND LEADERSHIP!
IKEA!
ORGANIZATIONAL
CULTURE AND
LEADERSHIP!
COUNTRY’S NATIONAL CULTURE!
GOVERNOR!
Analytical, Rigorous,
driven by processes,
logical, risk averse,
balanced, reliable!
MR. INGVAR KAMPRAD – IKEA’S FOUNDER!
SOCIAL!
Popular, driven by
people,
communicative,
creative!
ENTREPRENEUR!
Competitive, driven by
goals, risk taker,
challenging!
GOVERNOR!
logical, risk averse,
balanced, reliable!
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
production.!
42

IKEA ORGANIZATIONAL CULTURE AND LEADERSHIP!
MIKAEL OHLSSON – IKEA’S CEO !
SOCIAL!
Popular, driven by
people,
communicative,
creative!
GOVERNOR!
logical, balanced,
reliable!
ENTREPRENEUR!
goals, risk taker,
challenging!
S-G-E!
IKEA !
SOCIAL!
Popular, driven by
people,
communicative,
creative!
GOVERNOR!
balanced, reliable!
ENTREPRENEUR!
goals, risk taker,
challenging!
FURNITURE INDUSTRY !
GOVERNOR!
balanced, reliable!
SOCIAL!
Popular, driven by
people,
communicative,!
Creative.!
Company Values:!
- Humbleness and Willpower!
“We respect each other, our customer and our suppliers.
Using our willpower means we get things done”.!
- 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,
we are willing to change”.!
- Togetherness and enthusiasm!
“Together, we have the power to solve seemingly
unsolvable problems. We do it all the time”!
- Cost-consciousness!
“Low prices are impossible without low costs, so we
proudly achieve good results with small resources”.!
- Constant desire for renewal!
“Change is good. We know that adapting to customer
demands with innovative solutions saves money and
contributes to a better everyday life at home”.!
- Accept and Delegate Responsibility !!
“We promote co-workers with potential and stimulate
them to surpass their expectations. Sure, people make
mistakes. But they learn from them”!
"When I showed an interest
in doing something new, the
company was prepared to let
me do it."!
Guy Labrecque,!
Operational support,!
France!
"In the 29 years I have been
here, the business has
changed a lot. It is growing
year on year and getting
better and better."!
Ingeborg,!
Sales,!
Canada!
"I will never forget my first
steps into the IKEA store. The
manager wore the same
uniform as everyone else."!
Sara Ahlberg,!
Process development,!
Sweden!
"I’m responsible, but not the
center of the universe."!
Pär Sundqvist,!
Store distribution manager,!
Sweden!
S-G-E!
TESTIMONIALS: !
Mr. Ohlsson start at IKEA around 30 years ago at the carpet department in an IKEA store. According to
him he never planned to become CEO. His working style has always been the same, which makes him
say that he does not see big difference between being a CEO and being a sales assistant. He defends
that people should do what makes them feel good. He seems against career planning.!
As a CEO he did not change anything behind the IKEA’s culture. He recognizes that technology plays a
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.!
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.!
Nevertheless, he looks to stand as an entrepreneur buy projecting the “IKEA neighborhood” concept that
is going to be finalized next year (2014).!
S-E!
44

BIBLIOGRAPHY!
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
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%20file%20-‐
%20blue%20chapter%202.pdf
46

APPENDIXES!
APPENDIXES!
48
IKEA FINANCIAL DATA FY11 !

APPENDIXES!
50
EXECUTIVE MANAGEMENT OF THE IKEA GROUP!
EXECUTIVE MANAGEMENT OF THE IKEA GROUP!
INTERVIEW WITH MIKAEL OHLSSON BY METRO NEWSPAPPER!
“What
ma*ers
are
your
values,
not
your
educaFon”
In
every
corner
of
the
earth,
IKEA
symbolizes
cheap,
trendy
living.
Metro
travelled
to
IKEA’s
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
doesn’t
ma*er
much.
Instead,
success
comes
from
being
honest
and
creaFve.
We’re
in
the
midst
of
a
global
economic
downturn,
and
people
are
having
to
get
used
to
lower
living
standards.
Does
IKEA,
as
the
world’s
leading
budget
furniture
retailer,
benefit
from
recessions?
Economic
downturns
are
never
good.
I
lived
in
Spain
unFl
2009,
so
I’ve
seen
how
the
recession
affects
people.
Everyone,
regardless
of
where
they
live,
wants
to
have
a
good
life,
but
people
are
definitely
becoming
more
value-‐conscious.
When
that
happens,
IKEA
becomes
an
even
stronger
opFon
than
otherwise.
We’re
responding
by
lowering
our
prices
even
though
prices
on
raw
materials
are
going
up.
And
right
now
we’re
talking
with
several
ciFes
and
governments
about
opening
more
stores
in
their
countries,
which
will
obviously
create
new
jobs.
For
example,
we’ll
speed
up
our
expansion
in
Spain,
Italy
and
the
UK.
We’re
doing
this
interview
in
a
sofa
in
an
IKEA
store,
not
in
a
corner
office.
Is
that
part
of
your
leadership
style?
It’s
part
of
the
IKEA
style.
Of
course
we
have
offices,
but
they’re
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
I’m
totally
insufficient
–
I
don’t
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
don’t
do
things
ad
hoc.
This
philosophy
seems
to
become
more
common
among
other
companies
as
well.
What’s
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
don’t
think
there’s
a
big
difference
between
being
CEO
and
being
a
sales
assistant.
We
have
many
people
who
have
started
on
the
shop
floor
and
risen
through
the
ranks
because
they
share
IKEA’s
values.
One
mustn’t
complicate
things.
Do
a
good
job,
do
a
li*le
extra
and
be
a
good
colleague.
Then
you’ll
be
promoted
–
if
you
want
to.
But
most
importantly,
do
what
you
enjoy.
I’ve
never
believed
in
career
planning,
doing
something
now
because
it
will
be
useful
in
the
future.
If
you
don’t
have
a
good
Fme
doing
your
job,
the
result
will
be
crap.
Ingvar
Kamprad
started
IKEA
as
a
teenager.
Bill
Gates
didn’t
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.
There’s
always
a
risk
with
trends
–
whether
it’s
university
educaFon
or
corporaFons
using
consulFng
companies
–
that
everyone
has
to
do
the
same
thing.
Instead
we
try
to
find
people
who
are
innovative.
We
never
really
look
at
what
kind
of
educaFon
a
person
has.
If
you
learn
something
by
a*ending
university,
it’s
obviously
good,
but
a
university
educaFon
that’s
staFc
doesn’t
have
much
value.
We
don’t
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
floaFng
about?
Sustainability
another
area
people
care
strongly
about.
Our
new
water
taps
use
30%
less
water,
and
now
we’re
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
we’re
looking
at
ways
of
mixing
fibers
with
co*on.

APPENDIXES!
52
How
long
does
it
take
you
to
assemble
IKEA
furniture?
The
sofa
you’re
sijng
in
took
me
five
minutes
to
put
together.
95%
of
my
furniture
at
home
comes
from
IKEA,
and
I’ve
always
assembled
it
myself.
It’s
a
fun
thing
to
do,
and
it’s
interesFng
to
see
what
we
as
a
company
could
do
be*er.
It’s
like
tesFng
my
own
company
at
home.
I
want
IKEA
furniture
to
be
fast
and
easy
to
assemble;
someFmes
IKEA
furniture
is
simply
too
complicated.
How
will
people
live
in
2021?
The
basis
of
our
work
is
being
in
touch
with
society
and
how
it
influences
regular
people.
Our
task
is
to
meet
people’s
changing
lifestyles
with
our
products.
Right
now
people’s
wallets
are
gejng
thinner.
Climate
change
is
having
an
impact
on
society.
Environmental
concerns
are
becoming
more
important.
Technology
is
changing
people’s
home
lives.
People
are
gejng
more
concerned
about
health
–
what
we’re
eaFng,
and
the
materials
that
exist
in
our
homes.
We’re
trying
to
let
all
these
changes
inspire
us.
But
in
10
years,
what
will
my
home
look
like?
There’s
a
huge
difference
between
different
markets.
We
just
opened
our
second
store
in
Shanghai,
and
in
China
there’s
an
enormous
change
happening,
with
rapid
urbanizaFon
across
the
country
and
people
having
their
fist
big,
modern
apartments.
People’s
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.
We’re
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]
Småland,
where
simplicity,
entrepreneurship
and
community
are
very
important.
People
who
thrive
here
are
moFvated
by
that
combinaFon,
so
it’s
natural
that
IKEA
execuFves
spend
most
of
their
Fme
out
in
real
life,
not
in
an
office.
I
visit
stores
and
suppliers,
I
talk
to
our
employees.
They
know
what
works
and
what
doesn’t.
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.
It’s
about
being
the
same
person
at
work
as
you’re
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
different
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
don’t
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
offering
people
horizontal
moves
–
new
countries,
new
departments
—
if
they
don’t
want
to
climb
the
corporate
ladder.
That’s
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,
she’s
able
to
climb
the
career
ladder.
But
of
course
we’re
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
don’t
make
mistakes.
We
try
to
have
an
environment
where
you
can
say
“sorry,
I
made
a
mistake”
and
then
we
fix
it.
Of
course,
you
shouldn’t
make
the
same
mistake
many
Fmes,
but
you
shouldn’t
be
afraid
of
making
mistakes,
or
try
to
cover
them
up.
That’s
when
the
problems
begin.
Have
you
changed
other
products
that
turned
out
to
be
failures?
Not
failures,
exactly,
but
we’re
improved
our
transportaFon.
We
hate
to
transport
air,
but
we
used
to
transport
a
lot
of
it.
We
have
flat
packages,
but
countries
have
weight
limits
that
you
mustn’t
exceed,
so
we
sFll
have
to
transport
air.
Add
to
that
the
growing
concern
about
natural
resources.
What
we’re
trying
to
do
now
is
to
mix
the
wood
contents
in
our
furniture.
We’re
mixing
low
wood
density
with
high
wood
density
so
the
furniture
is
both
durable
and
a
bit
lighter.
As
a
result,
we’re
using
25-‐30%
less
wood
and
make
the
furniture
lighter
to
transport
both
for
our
trucks
and
for
our
customers.
What’s
the
most
important
thing
you’ve
learned
from
your
mistakes?
Don’t
be
afraid
to
take
the
iniFaFve.
If
you
make
a
mistake,
own
up
to
it
and
try
to
fix
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
they’re
afraid
of
making
mistakes.
The
only
area
where
I’m
very
strict
about
mistakes
is
ethics.

IKEA

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