Edward Na Jun hee Kim

Erdem Tokmakoglu

ContentsI. Company OriginsII. IKEA Strategy – Early StagesIII. IKEA Strategy – Up to Recent StagesIV.New Directions and Future

Ingvar Kamprad, Management Philosophy and PracticesIngvar Kamprad, Management Philosophy and Practices

I ngvarK ampradE lmtarydA gunnyard

IKEA Timeline

1943 IKEA founded by Ingvar Kamprad1947 Furnitures introduced into IKEAs product range1953 First showroom introduced in Älmhult 1955 Begin to design their own furniture1963 First international expansion in Oslo (Norway)1965 Flat packages and Knock-­down kits introduced1974 opened warehouses in Munich (Germany) and Zurich (Switzerland)

1976 First expansion outside Europe, Vancouver (Canada)1986 Anders Moberg appointed 2° CEO1997 Launch of website www.IKEA.com2013 IKEA Group exceeds 100,000 co-­workers operating

in 44 countries.

Income Statement (12’)

Facts & Figures

Ingvar Kampard, Management Philosophy and Practices

‘ To create a better everyday life for the majority of the people ’‘ To create a better everyday life for the majority of the people ’

Ingvar Kamprad

“Only while sleeping one makes no mistakes”

Testament of a furniture dealer

1. Product range, profile, quality – our identity

2. IKEA spirit. A strong and Living Reality

3. Profit gives us resources4. To Reach Good Results with Small

Means5. Simplicity is a Virtue

6. The Different Way7. Concentration of Energy

– Important to our Success8. To Assume Responsibility

– A privilege9. Most Things Still Remain to be

done. A Glorious Future

Ödmjukhet

IKEA strategy – Early Stages

Cost-­ consciousness

Product range-­ finding low priced materials-­ matching products to capabilities-­ developing long-­term relationships with suppliers

Excessive differentiation and wheel reinventions -­> unnecessary expenses

Greater coordination & standardization began to arise

-­> ex ) studios : standardized in-­store display areas

IKEA strategy – Early Stages

Ingvar Kampard, Management Philosophy and Practices

Designing Interactive Strategy (1993) Strategy is the art of creating value

Global Competition

Changing Markets

New Technology “Qualitatively

New Ways of Creating Value”

Forecasts based on Projections

Unreliable Harder

More Opportunities

More Uncertainties Greater Risk

Successful companies Not just add value, but reinvent it The focus of strategic analysis is not the company or even the industry but the value-­creating system itself

Create an ever-­improving fit between competencies and customers

Strategy as systematic social innovation;; the continuous design and redesign of complex business systems

IKEA: The Wealth of Realizing New Ideas IKEA’s transformation from a small

Swedish mail-­order furniture operation into the world’s largest retailer of home furnishings

Simple

Global Sourcing

Customer self-­service

The IKEA Effect: When Labor Leads to Love(2011) Labor is not just a meaningful experience – it’s also a marketable one.

E.g.) Instant cake mixes Labor enhances affection for its results When people construct products themselves, they come to overvalue their (often poorly made) creations.

Origami, they valued them as highly as origami made by experts

The limits of IKEA EffectØ Only when the labor is fruitful: when participants failed to complete an effortful task, the IKEA effect dissipated

Ø Difficult enough to lead to higher valuation but not so difficult that customers can’t complete them

The Experimental Roots of Revolutionary Vision (2006)

A Process of deliberate formulation?

A General Vision Both proactively developed a viable course of action and reactively adapted to the circumstances

How did IKEA’s revolutionary strategy come

about?

Global product sourcing

Customer self-­service

Plenty of Amenities

Unusual shopping experience

Well-­designed furniture

Logical Incrementalism Actual strategic management practices have little resemblance to the rational and analytic approach to strategic planning

In the real world, the processes are often fragmented, evolutionary and largely intuitive

A general sense of direction is necessary to guide the organization and its employees

How IKEA’s Strategy Was Created Continuation of adaptation and improvementrather than deliberate strategy

E.g.) Global Sourcing of products (50% lower)

IKEA’s strategy consisted of selling furniture at much lower prices

the Swedish retail cartel warned local manufacturers

Looking for suppliers outside Sweden to overcome a boycott

New Horizons New Horizons

Accelerated Expension AcceleratedExpension

Concerns

A-­class sites Less efficiency and less willing employees Risky investments as 4-­6 stores every year Increasing median age and income level Standardization failures

Competition Intratype Competition

Crate and Barrel Pier 1 Pottery Barn Furniture retailers utilizing

similar store layouts M.Jacobs Ashley’s Home Furnishin

gs Ethan Allen

Intertype Competition Home Improvement Stores

Home Depot Jerry’s

Department Store’s Meier & Frank Macy’s

Discount Retailers Wal-Mart Fred Meyers

IKEA The reconfiguration value chain gives

ü less cost of maintaining manufacturing facilitiesü Cost savings from the outsources and delivery servic

eü Creates wide market segmentsü Unique features stores

IKEA

Cost Leadership & Product Differentiation Ware-house sales so no delivery prices self-service flat-pack boxes Unified Modern Design Low price materials as pinewood Matching products to capabilities Monopoly created by economies of scale Tax

Discussion Questions

For the future, as IKEA expands further into new markets, will it be more beneficial for the brand to stick to consistent strategy or to adopt more to local market?

Would it make sense to extend the brand towards a more upscale product line?0-­25 47%25-­35 3235-­45 1445+ 7

Design 14%Price 44%Quality 3%

Large assortment 16%Catalog 11%

Recommendations 1%Guarantees 0Others 11%