Known as one the largest global home-furnishing retailers, IKEA currently has over 139,000 employees located in 53 countries and generates roughly 39.3 billion US dollars in annual sales (IKEA, 2014). Ingvar Kamprad began selling different types of items and founded the company in Agunnaryd, Sweden in 1943. Kamprad found that his greatest entrepreneurial opportunity was in furniture. Many households at that time were changing from receiving furniture that was handed down to desiring new, inexpensive, and stylish furniture. Kamprad was able to find a business opportunity to change the current social situation since a lot of the furniture was priced high at the time. He ...view middle of the document...
This actually benefited IKEA as Kamprad found independent Swedish furniture makers and sources in Poland, which helped to reduce its costs to be able to lower its prices more for customers (Bartlet & Nanda, 1996).
IKEA opened its first warehouse-showroom in 1953, from a converted factory. The company had a turnover of eighty times more than your average furniture store. By 1965, IKEA had opened a store on the outskirts of Stockholm making it the cities second IKEA location. Seven more stores were opened in Scandinavia by 1973. Since the company appealed to customers who were younger and seeking more inexpensive furniture items IKEA proved to be very successful in Sweden. Kamprad found an untouched group of customers and felt that the company would no longer try to beat the competition but instead change the rules. They listened to customers and created a leap in value for them (Kim & Mauborgne, 2005).
IKEA’s Internationalization: Importance, Challenges, and Successes
Kamprad began thinking of expanding into other countries in the early 1970’s when the sales of IKEA furniture began to go bad. The German-speaking countries of Europe seemed to be the largest market for furniture and Kamprad decided Switzerland would be IKEAs first target location. A huge challenge in Switzerland was that the cost of furniture was high and located in downtown areas. Most only offered furniture from sturdy dark woods that came in a traditional design. Whereas, IKEA offered the customer a more contemporary design. IKEA decided to open its store in Switzerland in the Zurich suburbs in order to overcome this challenge. They also offered new concepts such as cash and carry and self-services. The new store proved to be a huge hit and customer count was more than 650,000 during the first year of operation (Bartlet & Nanda, 1996).
IKEA continued to expanding into parts of West Germany, where large exporters and furniture producers were located but only had showrooms in which they displayed their elaborate furniture without actually having a large on hand of inventory. IKEA was able to control this furniture market by promising immediate delivery and low prices to their customers. Ten stores had opened up in West Germany by 1979 and the company continued to open several stores around Europe through the 1980s. From there, stores began opening up worldwide. IKEA opened its first store in Canada in 1979 and then began moving into the United States, which seemed to be the largest furniture market in the world. In 1987, IKEA began opening stores in the United Kingdom. Its first store was in London and was the largest home furnishing store in the country
Management Processes and Effectiveness
Kamprad used his personal view on life to create the management processes for IKEA. He felt IKEA’s spirit contained enthusiasm, simplicity in behavior, cost consciousness, constant will to renew and humbleness before the task. A clear management style and organization...