IKEA - Case Study
IKEA Case Study 2
Synopsis of the situation
IKEA (Ingvar Kamprad Elmtaryd Agunnaryd) is a privately held, international home products company that designs and sells ready-to-assemble furniture, appliances and home accessories. The company is now the world's largest furniture retailer. IKEA was founded in 1943 by 17-year-old Ingvar Kamprad in Sweden, named as an acronym comprising the initials of the founder's name (Ingvar Kamprad), the farm where he grew up (Elmtaryd), and his home parish. Kamprad started the company at his home as a mail order company. He sold goods which he purchased from low priced sources and then advertized in a newsletter to local shopkeepers. In 1948 he added in his catalogue furniture. Furniture was a success so he gave up the small items and focused only on furniture. In 1951 he opened the first display store in nearby Almhult where the customers could preview and inspect products and then order from the catalogue. This was also an immediate success as people travelled even from Stockholm to visit the store. This led IKEA to stop accepting mail orders. Now, the IKEA strategy is to publish a yearly catalogue, distribute it to the clients and encourage them to visit the store name (Barlett, Ghoshal, & Beamish, 2008). The sales take off in the late 50s led IKEA to look abroad for new sources of supply as the local industry could not respond to the demand. In 1961, IKEA outsourced production to furniture factories in Poland. Poland became IKEAs largest source and lowered significantly the production costs. This allowed IKEA to reduce its prices even more. The success in Poland led IKEA to adopt a general principle that it should mot own its means of production but should look for suppliers with whom it should develop close long term relationships.
Building on the first store's success, the first store in Stockholm opened in 1965. Even before that,...