Ikea Strategy Draft

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IKEA US
Case introduction(1-1.5p)/3p
IKEA Group
History
The IKEA group is a private Dutch-registered company with an origin from Sweden. It is the world’s largest furniture retailer, selling a wide range of Scandinavian-style well-designed, functional home furnishing products at low prices. Founded in Sweden in 1943 by Ingvar Kampard, IKEA initially sold basic household goods at discount prices; four years later, the company began selling furniture. In 1955, IKEA started designing its own low-priced furniture and in 1958, IKEA’s flagship store opened in Sweden. In 1960s – 1970s, the IKEA concept started to take shape. IKEA stores arrived outside Sweden and spread to other parts in the world. From 1980s, IKEA expanded dramatically into new markets such as France, UK, USA, etc. The company began to take the form of today’s modern IKEA. By the end of 2012, there were 338 IKEA stores operating in 40 countries around the world. organisation structure

It is believed that the complex structure of IKEA is designed to protect the Kamprad Family from taxes and to the possibilities of a takeover of IKEA. In fact, the IKEA group is owned and operated by a complicated array of non-profit and for-profit corporations. Kamprad does not technically own IKEA; instead, he controls the company through a holding company. The company’s structure can be divided into two parts: operations and franchising. Most of IKEA’s operations are owned by the Stichting INGKA Foundation, which is established by the Kamprad family in the Netherlands as a tax-exempted, not-for-profit organization, while the INGKA Holding B.V. is the parent company of the IKEA Group. Of all IKEA stores, more than 230 are run by the INGKA Holding, while the rest are managed by franchisees outside of this company. Inter IKEA Systems B.V., separate from the IKEA Group, which is also registered in the Netherlands, is the owner and the franchisor of the IKEA concept and trademark worldwide. The ownership of Inter IKEA Systems B.V. is quite complicated and uncertain. It’s owned by Inter IKEA Holding, which is registered in Luxemburg and is part of Inter Holding which is registered in the Netherlands. In 2009, Inter Holding was liquidated to the Interogo Foundation in Liechtenstein, which is controlled by the Kamprad family.

IKEA US

The huge success in Europe encourages IKEA to conquer the US market. In 1985, the first IKEA store is opened in Philadelphia, Pennsylvania. However, Ikea suprisingly found that it didn’t make a great coup during its first years in USA as expected, due to a lack of thorough understanding of customers’ need. Previously, IKEA had been long-time benefit from its standarized products assortment approach, and it had decided that the US affiliate should be in line with this approach, too. Nontheless, the American customers didn’t buy this idea because their lifstyle is different from the European customers. This is a fundamental obstacle for IKEA. For example, the company has no means to force the American customers to accept a smaller, European size of beds; neither can it force their American custemers to measure the product dimentions in centimeters rather than in inches. In order to get out of the tough situation in US market, the company paid close attention to the customers’ feedback and conducted a serious market reasearch, then adapted its products to the American customers’ appetite. At the mean time, IKEA didn’t abandon its efforts in changing the purchasing habits. They launched an advertising compain aiming at “guiding” the customers to set themselves free from a long-term commitment to their furniture. As explained by a maniging director of IKEA: It’s just furniture. Change it. The combined efforts took effect. By the mid-1990s the situation in US starts to ameliorate, and IKEA’s revenue in US explodes: from $600 million in 1997, to 1.27 billion in 2001, then to 3.2 billion in 2012. These features indicate that IKEA US supplies goods...
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