Process of Establishment

What began as a small store …

…. become one of the most successful businesses today, with 349 stores in 43 countries.

Process of Establishment

Ingvar Kamprad Elmtaryd Agunnaryd

Process of Establishment

Ingvar started selling furniture…

… keep the costs low!

Philosophy of the Company- What factors account for the success of IKEA?

Strategy :

Product differentiation and cost leadership

more than 9,000 different products

This vision, "to create a better everyday life for the many people,"

reflects this strategy in an effective manner!

…wide range of well-designed, functional home furnishing products at low

prices that as many people as possible will be able to afford.

Philosophy of the Company –How to become a cost leader?

Constantly trying to lower production and distributive

costs

• Flat-pack – reduces packaging costs

• Furniture assembled by consumer – reduces transportation

cost

• High volume production – economies of scale

Philosophy of the Company – Ikea is not just a store

Ikea customers typically spend more time in the stores

Ikea distinguishes itself from the rest of the competitors

….Shopping in Ikea is an experience!

Philosophy of the Company – Ikea, the healthy way of life

IKEA is aware of the important effects of social responsibility

• minimize any negative impact on the environment

• renewable and recyclable materials

• lower emission of CO2

Org Chart of IKEA

Subsidiaries

Actually IKEA doesn’t have that much subsidiaries, maybe the reason for this, can be the pureness of Småland whoever knows…

Corporate Structure

Because they are not quoted to stock exchange IKEA’s corporate structure is emerges from union of so many global corporation, but the ruling Holding is located on Netherlands

Managerial Context

Accountability of employees in IKEA can be described as following: Store employees-Store Manager-Service Offices-Headquarters

IKEA has a strong Organizational culture, for that reason it is hard to see contradictious people in the organization, there is a strong hierarchy related with profession.

Code Of Ethics

IKEA is in an everlasting war with some unethical issues. Some of this issues are listed below:

Child Labor Issue

Environmental Polution Issue

Fair Wages to Employees of Suppliers.

And Finally a Vital one, Safety in work area

Child Labor Issue

IKEA strictly controls if there is a child worker in their suppliers facilities or not, IKEA is famous with its anti-child labor act in retailing business.

Environmental Polution

IKEA is controling its suppliers relations with nature. If a supplier of IKEA is not interested with preventing environmental polution, IKEA has rights to terminate its contract with this supplier.

Employee Issues

Fair wage and safe working conditions should be provided for employees by the suppliers of IKEA if they want to work with IKEA.

Planning In IKEA

Downside you are seeing King Arthur and the knights of the round table. The thing with the round table is, everyone has the same statue in the roud table so they can reach their voice to the king easily. IKEA has a planning practice like this, everyone has right to say his or her own opinion and this thoughts would be regarded as important resource regardless of empty talks.

Working Environment

There is no room system in the IKEA Headquarters so everyone works side by side.

Here is a picture from Phoenix Office of IKEA:

Motivation of Employees

Since there is a promotion based system in IKEA, it is not so hard to motivate employees. IKEA is also making a profit share with its employees and that is huge motivator for employees.

Competitive Advantages

IKEA is a giant company who sits on the throne of world furniture retailing industry, for that reason they have so much competetive advantages, some of them can be listed as;

R&D

Economies of Scale

Unique Designs

Rooted History

Excellent Service

Social Responsibility

R&D

Research and Development in IKEA is crucially important, nowadays IKEA launched a R&D Center at Orla, Denmark.

Since IKEA selling more than 1 million piece of product in a day small decreases in costs means big profits for company, so R&D process is so important and primary for them.

Economies of Scale

IKEA has an incredible purchasing power, for that reason IKEA can offer the quality furniture for so low prices.

Unique Designs

IKEA has one of the best furniture designers in the world, with the help of this designers IKEA can give whatever they need to its customers.

And also the IKEA style and culture should not be missed out.

Self Assembling

You should self assemble a product you’ve bought from IKEA, at first glance it can be regarded as a negative thing but we think it gives the feeling of accomplishment to human being, and for that reason it is an advantage.

Rooted History

IKEA is a brand that has a glorious history. They are in the furniture business since 1941.

This history provides so much data about the furniture industry to company, and with the blend of this data with experience, IKEA got the first seat in furniture retailing industry in 2007.

Social Responsibility

Social Responsibility is the most important thing for the sustainibility of a business.

IKEA has its own charity organization; IKEA Foundation for children in poverty.

IKEA is also doing project based social responsibility like sending 500.000 blankets to Pakistani Eartquake in 2006

In 2009 UNICEF announced that IKEA Foundation has become the biggest partner of agency.

Social Responsibility(Continuing)

IKEA is also selling soft toys for the benefit of children, and also giving free gift soft toys to children as a social responsibility. It is so easy to make a child happy, and they are making this.

Smaland(Play Ground) and Swedish Meatballs This places are also a competitive advantages for IKEA.

They are making people to enjoy the delicious food for reasonable prices when shopping.

IKEA also has a playing ground called Smaland(hometown of IKEA) that has the atmosphere of a Swedish forest. Parents can give up their childrens to Smaland for free and enjoy the shopping knowing their child is happy and safe.

This secondary things made up an evolutionary concept like IKEA, and this makes IKEA shops special.

Financial Commentary

Since IKEA not quoted to stock exchange we cannot have so much detailed information about the business of IKEA but they are announcing some figures to public.

In the light of this figures, we can say that IKEA has a robust financial position, some numbers are listed below:

Sales Income(2000): 9 billion Euros

Sales Income(2014): 28 billion Euros

Owner’s Equity(2000): 2.1 billion Euros

Owner’s Equity(2014): 30 billion Euros

After the millenium IKEA did so much to achieve to this point, and they are at a perfect financial position now.

Risks and Threats in Business

Actually there is not so much to worry for IKEA at this point cause their situation is stable.

Giant competitors could want to join this market, if IKEA fails to protect its uniqueness and cheap price, this competitors can be a problem for them.

Another risk for IKEA can be the change in trends and type of buyers.

Final Conclusions

IKEA is the leader company in terms of charity donations and recycling, this makes them a lovely brand in the eye of the customer.

IKEA is one of the first companies starts to share its profit with its employees and this profit sharing idea is putting the company to a good place on employees eye.

They are finely managing every situation and there is not that much predictable risks for them , because of this they are in a really stable situation.

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Viktoria Fröhlich

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