IKEA: Managing Cultural Diversity
P. Grol, C. Schoch, and CPA
After firmly attaining leadership within Sweden, where it holds more than 20 percent of the overall market, IKEA has succeeded over the last 25 years in doing what 110 furniture distributor has ever attempted: to become a global player in an industry formerly considered by na¬ture to be local. Today IKEA delivers low-priced quality furniture to key markets throughout the world. It is the only distributor in its field to have successfully established itself in all parts of Europe, including south¬ern and eastern Europe, and more notably in North America, includ¬ing the USA. It has stores today in the Middle East, Singapore, and Hong Kong and is preparing to enter the Chinese market some time in the early part of the next century. Recently Ingvar Kamprad, the company’s founder, secured his position in Europe with the acquisi¬tion of British-based Habitat, IKEA’S chief rival in the UK and France. To provide some idea of its worldwide presence, IKEA receives annually over 120 million visitors in its 125 stores, and distributes 35 million catalogs. Its sales revenues increased steadily over the last 10 years by an average of 12 percent annually, in spite of the flattening out of its business in Western Europe which still represents nearly 80 percent of its annual volume (see exhibit 7.1). Ingvar Kamprad’s stubborn insistence that people would buy more furniture if the price was low enough and the furniture was of decent quality, with no delays in delivery has gradually revolutionized the conservative national furniture markets in Europe and beyond.
The IKEA Case was written by P. Grol and C. Schoch under the supervision of the CPA (Centre de Perfectionnement aux Affaires), Paris, France (Paris Chamber of Commerce and Industry). Not to be used or reproduced without written permission from the CPA. Copyright (R) 1997 CPA. Reprinted by permission.
Kamprad intuitively anticipated the rise of consumerism in the 1950s and 1960s, and virtually invented the practices of cash and carry, self- service, and volume buying in Europe. IKEA was to invent many other concepts and new ways of dealing with logistics, sourcing, and retailing. Many of these innovations have become industry standards: knock-down furniture that can be stored and shipped in flat boxes, the involvement of customers in the value-adding process of handling the transportation and doing home assembly themselves; and turning shopping into a family event by creating attractive open store environments that contain IKEA trademarks like the children’s areas with brightly colored plastic balls and the buffet style restaurants where you can eat Swedish meatballs. IKEA has affected the way furniture is sold and distributed in every country where it is doing business, inspiring imitation and drawing respect, sometimes begrudgingly, from traditional furniture dealers. One aspect of IKEA’S success has been the development of unique product design capabilities, based on an almost religious dedication to the simple yet graceful design of contemporary Swedish furniture. In so doing, it has introduced millions of households around the world to the Swedish style that it, more than others, has come to typify. IKEA’s strength today comes from its mastery of three key aspects of the value chain: unique design capabilities, unique sourcing, and tightly controlled logistics. This means the company is able to produce products that are distinctive enough to provide market recognition, secure sourcing for long runs at profitable levels, and reduce inventory costs through regional warehouses which work very closely with stores. In this way it has been able to buck industry trends and steadily increase its share of slow growth, sometimes shrinking, markets. IKEA has become a household name as much in Warsaw as in Los Angeles, attracting customers who just want to come to a store, look around, and have some fun....
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