Strategic Management Project
History of IKEA
Ingvar Kamprad founded IKEA in 1943. The name IKEA is formed from Kamprad’s initials (I.K.) plus the first letters of Elmtaryd (E) and Agunnaryd (A), the farm and village where he grew up (1). IKEA originally sold pens, wallets, picture frames, table runners, watches, and jewelry and nylon stockings. Known today for its furniture, IKEA did not start furniture sales until 1948. Kamprad saw opportunities for selling furniture on a large scale, distributing the first catalogue in 1951. In 1955, in the midst of a fierce price war with a competitor, Kamprad took his company a step further by opening the first store showroom. The concept behind this was that customers could now touch and look at IKEA home furnishings before they purchased, showing that quality did not have to be sacrificed for lower prices. With this being a success, Kamprad opened the first store in Almhult, Sweden in 1958. At its opening, the 6,700-meter store was the largest home furnishings store in Scandinavia (1). Kamprad retired as IKEA Group’s president in 1986, with Anders Moberg becoming his successor. This brought about many other changes for IKEA. Starting in 1990, IKEA took interest in corporate social responsibility (1). The IKEA Group developed an environmental policy that would ensure the company and its co-workers take environmental responsibility for all activities conducted within its business. Since then, they have become more energy efficient by generating their own renewable energy. They also work with their suppliers to inspire them to do the same. One example of this is each of their facilities is fully equipped with solar panels on the roof. They also take into consideration where and how they get their raw materials. Raw materials most important to the business and those that have the highest potential environmental or social impact are wood, cotton, palm oil, leather and food (3). Taking wood, they are continually looking for ways to get the most out of the wood they use by designing their products to minimize the amount of material needed and increasing the efficiency of manufacturing. They also only use wood that comes from responsibly managed forests in an effort to safeguard wood supplies to protect the future of their business, prevent deforestation, and to support the livelihoods of those communities. In order to make sure these efforts continue IKEA hired a fulltime forestry manager to secure sustainable use of forest resources (3). Upon Anders Moberg leaving IKEA in 1999, Anders Dahlvig became the President and CEO of the IKEA Group. This brought about more changes for the company by writing out a Code of Conduct. This code of conduct called “The IKEA Way on Purchasing Home Furnishing Products (IWAY)” defines what suppliers can expect from IKEA and specifies what IKEA expects from its suppliers in terms of legal requirements, working conditions, active prevention of child labor, external environment and forestry management (1). In addition, IKEA also introduced “The IKEA Way on Preventing Child Labor” in order to ensure that their suppliers and their sub-contractors use no child labor (1). IKEA has grown rapidly since its founding. As of August 31, 2012, the IKEA Group has operations in 44 countries, including 30 service-trading offices in 25 countries. They also have 33 distribution centers and 11 customer distribution centers. The IKEA Group had 298 stores in 26 countries. They employ 139,000 co-workers, 99,000 in Europe, 18,000 in North America, 11,000 in Asia and Australia, and 11,000 in Russia. They send out over 212 million catalogues, which has increased their foot traffic into the retail setting to 776 million visits. As technology use increases, so has their internet and app traffic with 1.1 billion visits to their website and over 5.7 million app downloads. With these increasing numbers, they have been able to open another 18 stores around the world in 2012 (5)....
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