Sweden's Ikea

Topics: North America, Sweden, United States Pages: 3 (1019 words) Published: September 6, 2009

Established in the 1940s in Sweden by Ingvar Kamprad, IKEA has grown rapidly in recent years to become one of the world's largest retailers of home fur¬nishings. In its initial push to expand globally, IKEA largely ignored the retailing rule that international suc¬cess involves tailoring product lines closely to national tastes and preferences. Instead, IKEA stuck with the vision, articulated by founder Kamprad, that the com¬pany should sell a basic product range that is "typically Swedish" wherever it ventures in the world. The com¬pany also remained primarily production oriented; that is, the Swedish management and design group decided what it was going to sell and then presented it to the worldwide public—often with little research as to what the public wanted. The company also emphasized its Swedish roots in its international advertising, even insisting on a "Swedish" blue and gold color scheme for its stores.

Despite breaking some key rules of international retailing, the formula of selling Swedish-designed prod¬ucts in the same manner everywhere seemed to work. Between 1974 and 1997, IKEA expanded from a com¬pany with 10 stores, only 1 of which was outside Scandi¬navia, and annual revenues of $210 million to a group with 138 stores in 28 countries and sales of close to $6 billion. Only 11 percent of its sales were generated in Sweden in 1997. Of the balance, 29.6 percent of sales came from Germany, 42.5 percent from the rest of West¬ern Europe, and 14.4 percent from North America. IKEA is now expanding into Asia, with the opening of stores in mainland China.

The foundation of IKEA's success has been to offer consumers good value for their money. IKEA's approach starts with a global network of suppliers, which now numbers 2,400 firms in 65 countries. An IKEA supplier gains long-term contracts, technical advice, and leased equipment from the company. In return, IKEA demands an exclusive contract and low prices. IKEA's designers work...
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