Ikea Case

IKEA was established by Ingvar Kamprad in 1943, when he was only 17 years old. At the time, IKEA was a low priced merchandise store. The products consisted of fish, Christmas magazines and seeds from his family's farm. Later on he had added ball-point pens as a part of IKEA's merchandise and then sold products via mail order. In 1948, Ingvar added furniture to his product line. He then published his first catalog in 1949 to sell his merchandise.

Ingvar had hired Gillis Lundgren to design around 400 pieces of furniture. In 1957, he was then able to sell items, which Gillis designed, at home furnishing fairs in Sweden. At the time, outlets felt IKEA was imitating their designs. So, retailers were then pressuring furniture manufacturers to not sell anything to IKEA.

It was then that Kamprad found a manufacturer in Poland. They were 50% cheaper than Sweden. So, IKEA was able to cut prices. By early ‘60s Polish-made goods were to be found on more than half of the pages in an IKEA catalog.

In 1958, the first IKEA store was constructed in Almhult, Sweden. Almhult did not have a large population, so people often drove in from long distances. In that store a restaurant was added so the customers could relax and refresh themselves. IKEA now has restaurants in all of its 274 stores worldwide, including its 34 U.S. branches, said Daniel Tona, manager of IKEA's Schaumburg, Ill., store, the largest in this country (Walkup, 2008).

As of 1965, Kamprad had opened IKEA's first store in Stockholm, and then in Norway. In 1973, IKEA had 15% of all retail service in Sweden. Yet, that was not the end of them expanding out all over the world. In the late 80's, they had 15 stores in West Germany. During that time between 1976 & 1982 they had opened 7 stores in Canada. Then IKEA made its way to the United States and opened their first store in Philadelphia during 1985.

In the 1990s things were not going well for IKEA in America. It was noted that American sheets did not fit their beds and IKEA's sofas were not big enough. Even when there was a change in culture here in the states, people became more concerned with the designs. Many products were redesigned to suit Americans. That is when prices went down, after they exceeding because of low sales and having items shipped from Sweden.

IKEA sold their furniture cheap in stores like Wal-Mart, Costco and Office Depot. At the same time their competitor, Ethan Allen attempted to rise above. They offered high-quality, well-designed furniture priced higher than IKEA. Ethan Allen had it so people would have to wait a few weeks before it was delivered, while IKEA already had theirs in stock.

Due to sales IKEA's revenues went from $600 million in 1997 to $1.27 billion in 2001. By 2008, IKEA was the second-largest market in the United States. However, they came in first overseas in Germany. There were more