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Ikea Case
The tradition in Sweden’s past was to hand down custom-made furniture from one generation to the next. Customers in Sweden were interested in buying reasonably priced items, but this was made impossible by the cartels of furniture makers running the markets. Inter association supply contracts and agreements raised barriers to new entrants. Between 15-146 furniture prices rose 41% faster than other household goods. Kamprad who was an idealist felt that this would be social problem and perhaps a good business opportunity. He was going to revolutionize furniture by “We shall offer a wide range of home furnishing items of good design and function at prices so low that the majority of the people can afford to buy them.” The fact that he offered products of good quality is what allowed him to penetrate the market.
The company expanded internationally because Kamprad said and believed, “It is our duty to expand.” He felt that the world should experience his low prices, good quality and plus it would expand business immensely. By entering Germany IKEA sparked the wrath of the German retailers. The German Trade Assoc. it called IKEAS furniture under quality and said that IKEA used their symbol with out having the quality. IKEA would go to court often and would loose often. Still IKEA had gained a 50% market share in cash and carry furniture. This sparked a great number of copycats. This expansion was very necessary to achieve maximum potential and gain market share.
Kamprad not only thought outside the box in regards to furniture, he did so regarding his employees and management as well. He encouraged an environment where jeans and a sweater were the norm. Simplicity was a priority to make people feel better and less stressed. Free and at ease were the feelings that Kamprad wanted to expose by the atmosphere in his company because he felt it gives human beings strength. IKEA is also a very detail oriented company. Kamprad says, “Retail is detail,” employees were expected to know the business. Weeks were initiated for management to work the floors and showrooms. Cost consciousness was also part of Ikea’s culture; wasting money is like a mortal sin at Ikea. For Example, A manager wanted to fly first class Kamprad told him to take a taxi 50 miles to save money. The characteristics of a new applicant are “They tend to be straight forward rather than flashey, and not too status conscious. They must be hard Working and comfortable dealing with everyone from the customer to the owner to the cashier.” Kamprad was seen as a visionary someone who saw a problem and fixed it. He constantly turned problems into opportunities. He also showed everyone that it is not dangerous to be different. Kamprad was also very detail oriented and that proved to be a strong point for him and the business. Kamprad also didn’t believe in delegation, which gave his company a relaxed atmosphere. He also made personal appearances and cared about each store. I believe he is an asset to Ikea. The personality and culture like he developed for Ikea is a necessity. I believe the corporate culture is built and they just need to find people in the countries in which they are in to follow the model as Kamprad built it.
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Ikeas target market would be affected by the rise in income in most countries. The segment of young low-middle income level families would be shrinking. They need to expand to office furniture and other venues to make up for this. This should prove difficult because it might distort Ikeas image. Another problem is if Ikea spreads out and the corporate culture doesn’t retain an uniform level. Also most of the management came from the retail side of the business, this was not considered beneficial because you need impute and experience from all parts of the business. I suggest promoting people from other parts of the business.
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