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Ikea Case Study

Essay by   •  August 13, 2011  •  Case Study  •  5,642 Words (23 Pages)  •  1,984 Views

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Organization's History:

IKEA is a private company which controlled by INGKA Holding B.V. which is a Dutch corporation. It started its business of home products' design and sell ready-to-assemble furniture in Sweden. Its products cover every part of the home that it hopes as long as people need furniture, they will think of IKEA at first.

IKEA get many awards. From 2006, IKEA has been named to business Week's List of the Best Global Brands for four consecutive years. In addition, IKEA has been listed on Working Mother magazines' annual list of the "100 Best Companies for Working Mothers" for four consecutive years. Furthermore, in 2009, TIME Magazine listed IKEA as one of the top 8 most global eco conscious companies.

The first IKEA was found in 1943, it was registered by Ingvar Kamprad. The first two letters I and K stand for Ingvar Kamprad's name. The E stands for Elmtaryd which is the name of the farm that Kamprad grow up. Finally, A stands for Agunnaryd where is the village that Kamprad's home parish in south of Sweden. In 1946, IKEA's first advertisement "wholesale ballpoints pens" appears in the News paper by Kamprad. In 1948, IKEA has many significant changes: appear the first warehouse on the Elmtaryd farm, start use mail order and introduce modern furniture into the IKEA Product Ranch. In 1951, IKEA distribute its first catalogue. In 1953, IKEA bought Albin Lagerblad's furniture and converted into the first show room to help customers compare products' function, quality and prices. In 1955, IKEA start to design furniture by itself. The commitment, providing functional, well-designed home furnishings at prices so low that most people can afford them, is still in use. In 1956, IKEA's first self-assembly product comes out and appeared in the IKEA Catalogue. In 1958, the first IKEA Store opens in Almhuit, Sweden. In 1963, the first IKEA Store outside Sweden opens in Norway. In 1965, IKEA Store opens in Stockholm, at the time, it was the largest home furnishing store in Europe. In 1973, IKEA start selling not only furniture but also pianos, TV's and radios. In the same year, the first IKEA store opens outside Scandinavia in Switzerland. In 1974, a plastic chair developed by IKEA designers. In 1978, IKEA comfortable POEM armchair is introduced. In 1980, the KLIPPAN sofa with removable and washable covers is introduced. In 1981, the first series of carton storage appear. In 1982, IKEA introduce a lot of products to make home more safety for children. In 1985, IKEA set up a new department, IKEA at work, to offer some special offers to small businesses. It also opens the first store in America. In 1988, the NEXUS kitchen series is introduced. In 1991, the industrial group Swedwoon begins as a part of IKEA Group. This action has help IKEA to keep low price and increase production competence. In 1994, IKEA set up a series of furniture for children and in 1997, Children's IKEA is launched; it is specially developed for children. In 1998, the first IKEA Store opens in China. In 2001, IKEA set up its own railway, IKEA Rail, and begin operating. In 2003, IKEA become the largest furniture retailer in the world until now.

In 2010, the IKEA group opened 12 new stores. In January 2011, IKEA had total 280 stores, which welcomed a total of more than 600 million visitors from all over the world, during the year. For the 280 stores, they located in Europe, Asia and North America. There are 48 stores in North America, 204 in Europe, 12 in Russia, 3 in Australia and 13 in Japan and China. A further 34 stores are owned and run by franchisees outside the IKEA Group. In addition, the IKEA group had 31 trading service offices in 26 countries, and 28 distribution centers and 11 customer distribution centers in 16 countries. The largest two IKEA stores are distributing in Sweden and China. In the furniture industry, it has the largest economies of scale. Besides, it is the leader of furniture retailers in the world.

As we mention the timeline of the IKEA above, the company is very focusing on innovation about their products. Mikael Ohlsson, president and CEO of IKEA Group, said innovation is needed to build sustainable solutions into the IKEA range. In fact, IKEA is good at innovation; it created many new types of products with low price and developed the children markets. Those innovations have a significant improve on IKEA's revenue and make them successful.

From 1999 to 2010, IKEA sales have sustainable increase from 7.6 billion to 23.1 billion of Euros. Even though the world's economy conditions are not good in recent years, IKEA is still able to get more profits. In fiscal year 2010, the sales increase 7.7% to 23,539 millions of Euro and net profit grew 6.1% to 2,688 millions of Euro. It has a major success in Europe. Its sales per region are concentrated in Europe, which is about 79%. However, it still gets success in North America. The IKEA's top three sales countries are Germany (16%), USA (11%) and France (10%). Moreover, IKEA focus purchasing the raw material on Asia and Europe with low price. The top three purchasing countries are China (20%), Poland (18%) and Italy (8%).

Industry Information

Furniture is one of important item in home. It can provide a comfortable environment for working and living, so people could not leave it. There are many types of furniture in industry that use in our daily life, such as tables, chairs and beds. In addition, furniture can be made from many different types of materials, such as metal, wood and plastic.

There is a value chain in furniture industry. The value chain has three stage processes and the process value is added at each stage. The first stage is about obtaining primary resource. For example, wood is one of important raw material to use in manufacture of furniture. The industry is obtained it from many suppliers. The second stage is about manufacturing furniture. When the companies get raw materials, they will start to manufacture different types of furniture according to market demand. The last stage is about selling products. After complete manufacturing, it is time for sales. Companies like IKEA will have their own store or franchise to sell products directly to customers.

Actually, with the economic goes down in many countries, it is a challenge for the whole furniture industry because more people are not preferred to pay too much many on purchasing furniture. In addition, the raw material and human resources are more expensive. Therefore, it is a greater challenge for some high class furniture companies, such as Ulferts. Those companies may get a series of problems during recession. Firstly, they will lose customers and profits. In addition, with demand is more than

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