Ikea Case Study

IKEA

The name IKEA is made up of the initials of the founder Ingvar Kamprad; Elmtaryd, which was the name of the farm where Kamprad was born; and the nearby town of Agunnaryd, Sweden. IKEA was founded in 1943 by Ingvar Kamprad, who was as a young man of 17 years at the time, with a cash reward from his father for success in his studies. He founded IKEA at his uncle Ernst's kitchen table in Sweden and began developing IKEA by selling matches to neighbors on his bicycle. He discovered the age-old concept of buying in bulk and selling at a cheap price. He would buy matches in bulk in Stockholm, Sweden and sell them individually at a low price and still make a good profit from the sales. He later expanded the business into selling fish, Christmas tree decorations, ballpoint pens, pencils, and in 1948: furniture sales. In the early years his business was mostly mail order. Ingvar Kamprad remained a part of IKEA in some way until he resigned from the board in 2013 at the age of 87. He obviously did allot of things right! (sweden.se, 2014)

IKEA today enjoys economies of scale and has a very global strategy that other companies try to imitate whenever possible. IKEA’s brand is focused on the low cost, efficient, and economical use of raw materials. IKEA continues to utilize flat packaging to reduce costs and maximize the ease of transportation. They drive cost reduction, minimalist designs, and a great store experience; which like the local store here in Houston, even includes low cost hot food in the store and weekly family dinner specials. Even though they have largely moved away from their "Scandinavian made" position, Scandinavian styling of IKEA’s furniture is still a large percent of it's designs. Even when IKEA’s furniture is designed to suit local markets (Hill & Jones, 2008), like selling furniture with deeper drawers in the United States (Kotler & Keller, 2009), IKEA still tries to market the furniture in other countries to achieve economies of scale when possible and maintain a global strategy. (Hill & Jones, 2008)

Today even though IKEA likes to address its current segment as 'young people of all ages', IKEA customers are mostly young fashionable and or budget conscious consumers. IKEA tries to locate its stores close to target markets making it relatively convenient for its customers, though the average trip to an IKEA location involves a 50-mile round trip. (Theglobeandmail.com, 2010) I think this in in part because they only locate 1 store per market in very large markets like Houston, Seattle, and Atlanta.

A con that has been mostly overcome is the United States market. IKEA faced several problems