Export Planning
Institute _II_ BPM
Business Process Management
IKEA: “The world’s largest furniture and home furnishing retailer”
Inter IKEA Systems BV is the owner and franchiser of the IKEA concept. IKEA retailers worldwide operate on
a franchise basis. Most, but not all, IKEA retailers belong to the IKEA Group, which includes IKEA retailers, the
product development center IKEA of Sweden AB and IKEA trading and wholesale companies. IKEA group
activities are coordinated by INGKA Holding BV, which is the parent company for all IKEA Group companies
and is owned by a charitable foundation in The Netherlands. IKEA of Sweden AB is responsible for the entire
product range on behalf of Inter IKEA Systems BV. In 2008 the company realized a turnover of € 22.5 billion.
IKEA is the world’s largest furniture and home furnishing retailer with 285 stores.
The IKEA Concept
The IKEA Concept began when Ingvar Kamprad, an entrepreneur from the Småland province in southern
Sweden, had an innovative idea. In Småland, although the soil is thin and poor, the people have a reputation for
working hard, living frugally and making the most out of limited resources. So when Ingvar started his furniture
business in the late 1940s, he applied the lessons he learned in Småland to the home furnishings market. Ingvar'
s
innovative idea was to offer home furnishing products of good function and design at prices much lower than
competitors by using simple cost-cutting solutions that did not affect the quality of products. Ingvar used every
opportunity to reduce costs, and he scraped and saved in every way possible - except on ideas and quality. This
is how the IKEA Concept began. The name IKEA comes from the initials of Ingvar Kamprad, I and K, plus the
first letters of Elmtaryd and Agunnaryd, which are the names of the farm and village where he grew up. Today,
the IKEA trademark represents the leading home furnishings brand in the world with more than 285 stores in
more than 30 countries and more than 110,000 co-workers. The IKEA Concept is based on offering a wide range
of well designed, functional home furnishing products at prices so low that as many people as possible will be
able to afford them. Rather than selling expensive home furnishings that only a few can buy, the IKEA Concept
makes it possible to serve the many by providing low-priced products that contribute to helping more people live
a better life at home. The IKEA Concept guides the way IKEA products are designed, manufactured,
transported, sold and assembled. All of these factors contribute to transforming the IKEA Concept into a reality.
International expansion
International expansion started in the 1960s when the company was forced to source products outside Sweden.
Local Swedish furniture retailers felt that IKEA’s low-price policy was unfair competition and they tried to
prevent local manufacturers from supplying them with goods. Rather than raise prices, IKEA sourced their own
designed goods outside Sweden.
Today the company sources its products from 1800 suppliers in more than 50 countries and contracts for
capacity rather than a set number of items from its manufacturers. In some instances IKEA has taken ownership
positions in factories that supply it with furniture and household goods. In other cases, it acts as a financier,
especially in Eastern Europe. IKEA also operates 28 distribution centers worldwide.
It took IKEA 30 years to grow beyond its boundaries as a local, seven-store chain and penetrate foreing markets.
When it was time to expand, explains Kjellman, President of IKEA North America,’We decided to go to the
most conservative market we could find and that was Switzerland.’ With success there, IKEA began a slow,
steady expansion that gradually taken it into northern Europe, especially Germany, central Europe, Australia and
Canada. The market expansion history indicating when the first store was opened in a foreign country and the
number of stores in operation as of May, 2007 are shown in Table 1.
In addition to stores owned by the IKEA Group, there are stores owned by franchisees in 16 countries/territories
as shown in Table 2. During the 1980s IKEA was opening between 5 and 10 stores as year. But expansion
©Joris Leeman, 2010.
1
Export Planning
Institute _II_ BPM
Business Process Management
slowed considerably by the 1990s as the company consolidated its holdings and worked on increasing per-store
sales and raising overall profitability. During fiscal year 2007 the IKEA Group planned to open more than 20
additional stores. Worldwide expansion has brought new challenges, among them the need to gauge demand and
then stock accordingly. ‘We have had a lot of shortages,’ acknowledged Kjellman. ‘One of the biggest problems
we have faced as we have moved out to Sweden was having enough of the right product in the stores. We
underestimated how much we would sell when we first entered the North American market.’
Country
Year
Number of
Stores
Sweden
1958
16
Norway
Denmark
Switzerland
Germany
Australia
Canada
Austria
The Netherlands
France
Belgium
USA
UK
Italy
Hungary
Poland
Czech Republic
Slovakia
Finland
Spain (mainland)
China (PRC)
Russia
Portugal
Japan
1963
1969
1973
1974
1981
1976
1977
1978
1983
1984
1985
1987
1989
1990
1991
1991
1995
1996
1996
1998
2000
2004
2006
5
4
6
40
3
11
6
11
18
6
29
13
13
2
7
4
1
2
9
4
8
1
2
Country
Number of
Stores
Australia
2
Greece
2
Hong Kong
Iceland
1
Israel
1
Kuwait
1
Malaysia
1
The Netherlands
1
Romania
1
Saudi Arabia
Singapore
2
Spain
4
Taiwan
4
Turkey
1
United Arab Emirates 2
USA
1
3
2
Table 2: IKEA franchisees
Table 1: International expansion of IKEA group
stores
IKEA’s future plans
Anders Dahlvig recently hit the 10-year mark as CEO of Ikea. Under his leadership, the Swedish furniture giant
has nearly tripled its number of stores and employees, and committed to a broad new slate of policies on the
environment. The company maintains a mixed reputation on quality, though, in the midst of an increasingly
tough economic climate. In a series of recent conversations, Dahlvig spoke with TIME'
s Jeremy Caplan about
where the company plans to expand..
What are your goals for Ikea over the next five to ten years?
We will probably increase our presence in developing countries. For these past 10 years our focus has been on
existing markets. We'
ve entered only two new markets in 10 years time: Portugal and Japan. That'
s very little
compared to our earlier history. That will change quite a lot over the next 10 years. We'
ll see seven or eight new
markets being opened up in that time frame, 90% in developing countries. I hope India will be on the map, and
on this continent maybe Mexico. We also have a goal to have 100% renewable energy sourcing for our stores.
You mentioned entering seven or eight new markets: what are the others?
In addition to India and Mexico, the possibilities include countries like Ukraine, Slovakia, Croatia and Serbia.
These are not huge markets but they'
re new markets for us. We'
re also discussing some of the former Soviet
Republics, like Kazakhstan. Also South Korea, which is not a developing country, but it'
s a huge market.
How else is Ikea's strategy changing?
We decided to reduce the pace of our expansion from 25 stores a year down to 15. We realized that expansion
had gone a little too fast, and we needed to slow down for a while, for two or three years. And we are
experimenting with bigger formats. We are now putting up our stores next to shopping centers, which we want to
build ourselves.
Source: case study composed by Joris Leeman based upon case material from Albaum and Duerr in International
marketing and export management, 6th edition, page 213-215, CEO Anders Dahlvig on surviving a bad economy,
Time-magazine, J.Caplan, November 18, 2008 and from the website: www.IKEA.com.
©Joris Leeman, 2010.
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