Rev. July 22, 1996
Ingvar Kamprad and IKEA
With a 1988 turnover of 142 billion Swedish Kronor (US $1 ` SKr 6 in 1988) and 75 outlets in 19 countries, IKEA had become the world's largest home furnishings retailer. As the company approached the 1990s, however, its managers faced a number of major challenges. Changes in demographics were causing some to question IKEA's historical product line policy. Others wondered if the company had not bitten off too much by attempting major new market entries simultaneously in two European countries (U.K. and Italy), the United States, and several Eastern Bloc countries. Finally, there was widespread concern about the future of the company without its founder, strategic architect, and cultural guru, Ingvar Kamprad.
IKEA Background and History
In 1989, furniture retailing worldwide was still largely a fragmented national industry in which small manufacturers and distributors catered to the demands of their local markets. Consumer preferences varied by region, and there were few retailers whose operations extended beyond a single country. IKEA, however, had repeatedly bucked market trends and industry norms. Over three and a half decades it had built a highly profitable worldwide network of furniture stores. (See Exhibit 1.)
IKEA is an acronym for the initials of the founder, Ingvar Kamprad, his farm Elmtaryd, and his county, Agunnaryd, in SmDland, South Sweden. In 1943, at the age of 17, Kamprad began his entrepreneurial career by selling fish, Christmas magazines, and seeds. Within a few years he had established a mail-order business featuring products as diverse as ballpoint pens and furniture. It was in furniture, however, that he saw the greatest opportunity. Even as the pent-up wartime demand found expression in the post-war boom, the traditional Swedish practice of handing down custom-made furniture through generations was giving way to young householders looking for new, yet inexpensive, furniture. But while demand was growing, inter-association supply contracts and agreements between Swedish manufacturers and retailers kept prices high while foreclosing entry. As a result, between 1935 and 1946 furniture prices rose 41% faster than prices of other household goods. Kamprad felt that this situation represented both a social problem and a business opportunity. He commented: Professor Christopher A. Bartlett and Research Associate Ashish Nanda prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1990 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
Ingvar Kamprad and IKEA
A disproportionately large part of all resources is used to satisfy a small part of the population. . . . IKEA's aim is to change this situation. We shall offer a wide range of home furnishing items of good design and function at prices so low that the majority of people can afford to buy them. . . . We have great ambitions. When Kamprad's upstart company started participating in the annual furniture trade fair in Stockholm, traditional retailers complained that IKEA was selling imitations. In 1951, when the company was explicitly forbidden from selling directly to customers at the fairs, it responded by only taking orders. In 1952, such order taking was banned at the fair, so Kamprad told employees to take down the names of potential customers and contact them after the fair. Subsequently, IKEA was forbidden from showing prices...