This case analysis will examine IKEA Group’s current global operations and strategies. We will assess the synthesis between their current operations and their environment. We will then recommend a detailed action plan for IKEA to move forward. Background in Brief
IKEA was founded in Sweden in 1943 by Ingvar Kamprand as a “makeshift mail order service”which sold pens, nylons, watches, and jewellery. In 1948, the business introduced what IKEA is known for today: a range of furniture, initially supplied by local manufacturers, with the objective of providing quality products at low prices. Due to intense competitive pressure for suppliers to boycott IKEA in the furniture industry IKEA introduced flat packs and ready to assemble furniture in 1956. The sale of their furnishings in flat packs and self assembly furniture has persisted to this day and are one of the main reasons IKEA can keep costs low and pass their cost savings onto their consumers. Prior to the first IKEA retail store opening in Almhult, Sweden in 1958 IKEA products were marketed through the IKEA catalog which was launched in 1951. IKEA then utilized showrooms, the first opening in 1953, allowing the customers to feel and look at the quality of the furniture prior to making a purchase. In order to create a welcoming atmosphere and due to the large size of IKEA retail stores, they began incorporating in-store restaurants: the first opening in the Almhult store in 1960. Today, child care services are also offered to parents while they shop in the expansive IKEA stores. The 1980’s saw dramatic expansion for IKEA and their retail store concept with store openings in new markets in Europe, the United States, and Australia as well as the launch of their website www.IKEA.com. Along with continued geographic expansion and penetration into new markets IKEA has continuously expanded and introduced new innovations into its product lines, most notably launching Children’s IKEA in the 1990’s. The 1990’s also saw a change in IKEA’s organizational structure and objectives with the formation of the IKEA Group and a focus on social and environmental responsibility providing the backbone for a successful business. The 2000’s, saw IKEA’s continued expansion as a global home furnishing retailer with further penetration into existing markets as well as entry into new markets such as Russia and Japan. Online shopping was introduced through their country specific IKEA websites and their own food label to be sold in IKEA stores and restaurants was launched. Most importantly, IKEA introduced the IKEA Way (IWAY) Standard: a detailed code of compliance for their suppliers listing the minimum requirements of environmental, social, and working conditions. The Organization Today
Today, IKEA still sticks to the IKEA concept to offer low-cost, high quality, pleasantly designed, and functional home furnishings. This concept guides the design, manufacturing, transportation, sale, and assembly process of all IKEA products. The IKEA trademark represents the leading home furnishings brand in the world with more than 330 stores in 40 countries and close to 154,000 workers, as well as over 500 million store visits. IKEA offers a large portion of their entire range of product offerings online for consumers to purchase. IKEA Group operates the retail section of the business through franchise agreements with Inter IKEA Systems B.V., which is part of the Inter IKEA Group that holds the rights to and protects the IKEA concept. The IKEA Group itself is privately owned by the Stichting INGKA Foundation. IKEA has continued the expansion of their high capital investment brick and mortar stores, even though each store requires an investment of 60 million to 100million Euros. Each IKEA store is uniquely created in order to facilitate purchasing. Performance
According to the 2011 IKEA Yearly Summary, IKEA’s business strategy with clear focus on sustainability turned into significant financial...