Ikea Case Study
Case Study
IKEA: FURNITURE RETAILER TO THE WORLD
INTRODUCTION
IKEA is one of the world 's most successful global retailers. In 2007, IKEA had 300 home furnishing superstores in 35 and was visited by some 583 million shoppers. IKEA 's low-priced, elegantly designed merchandise, displayed in large warehouse stores, generated sales of €21.2 billion in 2008, up from €4.4 billion in 1994. Although the privately held company refuses to publish figures on profitability, its net profit margins were rumoured to be approximately 10%, high for a retailer. The founder, Ingvar Kamprad, now in his 80s but still an active "advisor" to the company, is rumoured to be one of the world 's richest men.
COMPANY BACKGROUND
IKEA was established by Ingvar Kamprad in Sweden in 1943 when he was just 17 years old. The fledgling company sold fish, Christmas magazines, and seeds from his family farm. His first business had been selling matches; the enterprising Kamprad purchased them wholesale in 100-box lots (with help from his grandmother who financed the enterprise) and then resold individually at a higher markup. The name IKEA was an acronym: I and K his initials; E stood for Elmtaryd, the name of the family farm; and A stood for Agunnaryd, the name of the village in southern Sweden where the farm was located. Before long, Kamprad had added ballpoint pens to his list and was selling his products via mail order. His warehouse was a shed on the family farm. The customer fulfilment system used the local milk truck, which picked up goods daily and took them to the train station.
In 1948, Kamprad added furniture to his product line; in 1949, he published his first catalogue, distributed then as now, for free. In 1953, Kamprad was struggling with a problem: the milk truck had changed its route, and he could no longer use it to take goods to the train station. His solution was to buy an idle factory in nearby Almhult and convert it into a warehouse. With business now growing rapidly,
IKEA: FURNITURE RETAILER TO THE WORLD
INTRODUCTION
IKEA is one of the world 's most successful global retailers. In 2007, IKEA had 300 home furnishing superstores in 35 and was visited by some 583 million shoppers. IKEA 's low-priced, elegantly designed merchandise, displayed in large warehouse stores, generated sales of €21.2 billion in 2008, up from €4.4 billion in 1994. Although the privately held company refuses to publish figures on profitability, its net profit margins were rumoured to be approximately 10%, high for a retailer. The founder, Ingvar Kamprad, now in his 80s but still an active "advisor" to the company, is rumoured to be one of the world 's richest men.
COMPANY BACKGROUND
IKEA was established by Ingvar Kamprad in Sweden in 1943 when he was just 17 years old. The fledgling company sold fish, Christmas magazines, and seeds from his family farm. His first business had been selling matches; the enterprising Kamprad purchased them wholesale in 100-box lots (with help from his grandmother who financed the enterprise) and then resold individually at a higher markup. The name IKEA was an acronym: I and K his initials; E stood for Elmtaryd, the name of the family farm; and A stood for Agunnaryd, the name of the village in southern Sweden where the farm was located. Before long, Kamprad had added ballpoint pens to his list and was selling his products via mail order. His warehouse was a shed on the family farm. The customer fulfilment system used the local milk truck, which picked up goods daily and took them to the train station.
In 1948, Kamprad added furniture to his product line; in 1949, he published his first catalogue, distributed then as now, for free. In 1953, Kamprad was struggling with a problem: the milk truck had changed its route, and he could no longer use it to take goods to the train station. His solution was to buy an idle factory in nearby Almhult and convert it into a warehouse. With business now growing rapidly,
References: 2. Anonymous. “Flat pack accounting,” The Economist, May 13, 2006, 69-70. 3. K. Capell, A. Sains, C. Lindblad, and A. T. Palmer, “IKEA,” BusinessWeek, November 14, 2005, 96-101. 4. K. Capell et aI., “What a Sweetheart of a Love Seat,” BusinessWeek, November 14, 2005, 101. 5. C. Daniels, “Create IKEA, Make Billions, Take Bus,” Fortune, May 3, 2004, 44. 6. J. Flynn and L. Bongiorno, “IKEA 's New Game Plan,” BusinessWeek, October 6, 1997, 99-102. 7. R. Heller, “Folk Fortune,” Forbes, September 4, 2000, 67. 9. J. Leland, “How the Disposable Sofa Conquered America,” New York Times Magazine, October 5, 2005, 40-50. 11. B. Torekull, Leading by Design: The IKEA Story (New York: Harper Collins, 1998).