Case Analysis: Ingvar Kamprad and IKEA
Case Analysis: Ingvar Kamprad and IKEA
Our group will illustrate IKEA’s general development in chronological order. We analyze its’ different strategy in corresponding stage, and look into IKEA’s future development.
Part 1：IKEA’s initial development
1. Sources of IKEA’s successful entry in Sweden: Ingvar Kamprad saw a great opportunity when the furniture prices increased 41% faster than household goods between 1935 and 1946, and started selling low price, good quality and simpler design furniture primarily to the younger generation of customers who wanted to buy furniture for their first apartment. The tradition in Sweden was to sell expensive, long lasting (family heirloom) furniture, which after the war was too expensive for people. Instead of locating small stores in the central –more expensive part- of the city, he positioned his warehouses in the suburbs, which was a more cost efficient location which also allowed customers to park their cars. Also, because the furniture cartel banned Kamprad to sell directly to customers at shows and persuaded the manufacturing cartel to stop supplying furniture, IKEA started to sell with the help of catalog and started to supply from a different supplier, which allowed him to reduce his prices even more. He also introduced less expensive raw materials and a less-formal working environment.
2. Management process in the Europe-wide operation: In the Europe-wide operation process, we think the most challenging task for IKEA is to find a most effective and appropriate management structure.
When IKEA was only a start-up company in Sweden, a multi-level structure is OK because in the expansion stage, clear definition of different departments was not required. However, with the accelerated expansion, establishing a more mature structure turned out to be quite necessary, for it’s the base of management process. Therefore, during the early 1980’s, the company gradually shifted from an upside-down triangle structure to a
Our group will illustrate IKEA’s general development in chronological order. We analyze its’ different strategy in corresponding stage, and look into IKEA’s future development.
Part 1：IKEA’s initial development
1. Sources of IKEA’s successful entry in Sweden: Ingvar Kamprad saw a great opportunity when the furniture prices increased 41% faster than household goods between 1935 and 1946, and started selling low price, good quality and simpler design furniture primarily to the younger generation of customers who wanted to buy furniture for their first apartment. The tradition in Sweden was to sell expensive, long lasting (family heirloom) furniture, which after the war was too expensive for people. Instead of locating small stores in the central –more expensive part- of the city, he positioned his warehouses in the suburbs, which was a more cost efficient location which also allowed customers to park their cars. Also, because the furniture cartel banned Kamprad to sell directly to customers at shows and persuaded the manufacturing cartel to stop supplying furniture, IKEA started to sell with the help of catalog and started to supply from a different supplier, which allowed him to reduce his prices even more. He also introduced less expensive raw materials and a less-formal working environment.
2. Management process in the Europe-wide operation: In the Europe-wide operation process, we think the most challenging task for IKEA is to find a most effective and appropriate management structure.
When IKEA was only a start-up company in Sweden, a multi-level structure is OK because in the expansion stage, clear definition of different departments was not required. However, with the accelerated expansion, establishing a more mature structure turned out to be quite necessary, for it’s the base of management process. Therefore, during the early 1980’s, the company gradually shifted from an upside-down triangle structure to a