Ikea Porter's 5 Forces

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Company History:
Based in Denmark, IKEA International A/S is one of the world's top retailers of furniture, home furnishings, and housewares. The company designs its own items, and sells them in the more than 140 IKEA stores that are spread throughout approximately 30 different countries worldwide. The company also peddles its merchandise through mail-order, distributing its thick catalogs once a year in the areas surrounding its store locations. IKEA is characterized by its efforts to offer high-quality items at low prices. To save money for itself and its customers, the company buys items in bulk, ships and stores items unassembled using flat packaging, and has customers assemble many items on their own at home. The company is owned by founder Ingvar Kamprad's Netherlands-based charitable foundation, Ingka Holding B.V.

The Early Years
IKEA was founded in 1943 in Sweden by Ingvar Kamprad. Kamprad was born in 1926 as the son of a farmer in Småland, a region in southern Sweden. Småland was historically one of the country's poorest regions, and its inhabitants were known for their hard work, thriftiness, and inventiveness. In 1943, at the age of 17, Kamprad upheld this characterization when he decided to become an entrepreneur and created a commercial company called "IKEA, Ingvar Kamprad." The word IKEA was an acronym of his name and address: Ingvar Kamprad and Elmtaryd, Agunnaryd--the name of his farm and the name of the village it was located within. Kamprad's new company was essentially a one-man effort, and sold fish, vegetable seeds, and magazines to customers in his region. He delivered the items to customers using first a bicycle and later the milk round.

In 1947, IKEA issued its first primitive mail-order catalog, within which the newly invented ballpoint pen was added to the assortment of products Kamprad was offering. Then in 1950, Kamprad set the foundation for the future direction of IKEA by adding furniture and home furnishings to the mail-order line. A year later, an expanded version of the IKEA catalog became available. In 1952, the stability of home furnishings in the IKEA product line was solidified when Kamprad took his items to the St. Eric's Fair in Stockholm and won over customers with the high-quality, low-priced furniture items in his line.

Up to that point, IKEA items had been obtained from other sources and sold by Kamprad, making his enterprise solely a retail operation. In 1953, however, Kamprad made the decision to buy a small furniture factory and open a small furniture and home-furnishing showroom in Älmhult. The IKEA headquarters were moved from the village of Agunnaryd to Älmhult. IKEA began designing its own furniture items in 1955, and soon began taking advantage of the benefits of flat packaging and self-assembly by customers. Success followed quickly, and in 1958 the tiny showroom was replaced by a then giant store of 13,000 square meters. One year later, a restaurant was added to the store, to accommodate the needs of an ever-increasing number of customers who were traveling long distances to IKEA.

The mail-order business continued to flourish as well, helping to further expand IKEA's customer range. This prompted the opening of the first IKEA store outside Sweden, near Oslo in Norway, in 1963. Business continued to increase, boosted in part by a 1964 article in the Swedish magazine Allt i Hemmet (All for Your Home), which listed the results of quality tests that had been run on furniture; IKEA received the highest ratings available.

Innovations and Expansion Throughout the 1960s and 1970s
The event that marked the true turning point of the business, however, came in 1965 when Kamprad opened a store just outside the major city of Stockholm, to show what could be done in the way of designing and selling modern low-priced furniture in a large market. The store, located on a greenfield site at Kungens Kurva just ten kilometers southwest of Stockholm, was extraordinary for...
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