Ikea

Opening case study IKEA

Established in the 1940s in a small village in Sweden by Ingvar Kamprad, IKEA has become one of the world’s leading retailers of home furnishings. In 2002 it was ranked 44th out of the top 100 brands by Interbrand, topping other known brands such as Pepsi. In 2002, it had more than 160 stores in 30 countries. IKEA’s strategy is based on selling high-quality, Swedish designed, self-assembly furniture products at low price. The IKEA business idea is: ‘We shall offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.’ IKEA targets price-conscious young couples and families who are willing and able to transport and assemble furniture kits. By the early 1960s the Swedish market was saturated and IKEA decided to expand its business formula outside Sweden. IKEA’s CEO, Anders Dehlvin, noted: ‘Sweden is a very small country. It’s pretty logical: in a country like this, if you have a very strong and successful business, you’re bound to go international at some point. The reason is simple—you cannot grow any more.’ IKEA opened its first store outside Sweden in 1963 in Norway. In 1969 it opened its second international store, in Denmark. It moved outside the Scandinavian countries when it opened its store in Switzerland in 1973, and then entered a new country every couple of years. Under IKEA’s global strategy, suppliers are usually located in low-cost nations, with close proximity to raw materials and reliable access to distribution channels. IKEA has over 2,500 suppliers scattered in over sixty countries. IKEA works closely with its suppliers by helping them to reduce costs, and sharing technical advice and managerial knowhow with them. In return IKEA has exclusive contracts with its suppliers. These suppliers produce highly standardized products intended for the global market. IKEA’s internationalization strategy in Scandinavian countries and the rest of...