Category: IKEA

Ikea’s History, Legal Structure And Warranties

HISTORY

The thought of owning his own business intrigued young Ingvar Kamprad, for at the age of six, in 1931, Kamprad began selling matches. But this idea/passion quickly grew as Kamprad learnt to bulk buy and resell the matches to earn a larger profit. As he grew older it expanded into selling flower seeds, all sorted cards, decorations and stationery.

This passion stuck because in 1943 when Ingvar Kamprad turned 17, was given a gift from his father. This gift allowed Kamprad to turn the few matches sales into a business. Kamprad named the business IKEA, after his initials and the initials of the farm and village he grew up in. I.K standing for Ingvar Kamprad, E standing for Elmtaryd and A in place of Agunnaryd. With the new name also came new products. These products included: picture frames, table runners, watches and jewellery.

In 1945, Kamprad made his first advertisement in the local newspaper and started to sell furniture in 1948. Soon after the introducement of furniture, the business started to rapidly grow and now needed a catalogue. The same catalogue idea is now used today.

Although the furniture is now in a catalogue, much easier to shop for consumers, there still isn’t any showrooms where customers can experience what it may be like to own IKEA’s products. However in 1956, along with the first open showroom which demonstrates quality and feel, IKEA furniture is now a lot more compact and relies on self-assembly. The first item to be flat packaged was LÖVET, a table with the legs removed.

This sparked revolutionary ideas and pushed for bigger items, more options, variety and altogether easy, accessible, cheap and compact furniture. Now the range was massive and required IKEA’s first store. In 1958, the first store opened with 67,000 square metres of space making in the largest in Scandinavia at the time.

Finally, the business began to settle and Kamprad and his employees began to expand the range of products at IKEA through the 1960s-1970s. Furniture produced from this time included the POÄNG and BILLY (see Figure ii & iii).

Although through the next 10 years IKEA went through a lot of monumental changes. The changes included:

• Expanding the company to France and opening a warehouse/ store.
• IKEA Group starts up. IKEA Group is a structure that manages many departments such as vision and business ideas, and sustainability along with investing for the future.
• IKEA Family is launched as a way of rewarding regular customers with membership deal and prices.
• IKEA expands into Belgium, USA, UK and Italy.

Founder Ingvard Kamprad retires and pursues connecting company, INGKA Holding B.V.

Even though the retirement of the founder, IKEA as a company kept soaring in sales, growth and ideas. IKEA had recently opened a children’s section which was very popular, but had also opened a store in Beijing, China and launched their first website. Now with mass furniture being made, IKEA was using a lot of resources to provide for the sales. To cope through 1980 – 1990, IKEA implemented environment policies, bought their own sawmills and production plants, became a member of FSC (Forest Stewardship Council), employed a forestry manager and donated funds to UNICEF.

Today IKEA has grown into the largest multinational furniture retail company, servicing 52 countries in 423 stores. IKEA’s product’s worth for 2018 was AUD$60.5 billion and they hold nearly 1% of the world’s product wood consumption.

LEGAL STRUCTURE

IKEA believes in long-term independence, meaning IKEA is a private company with only multiple allowed shareholders. IKEA is aware of this and says that, “As a private company, devoting significant resources to make IKEA more affordable, accessible and sustainable for IKEA customers. A part of that is developing new store formats and e-commerce capabilities across the IKEA value chain. This of course impacts short-term results.”

IKEA Group CFO, Martin van Dam

Although due to IKEA’s complicated of departments, both non-profit and profit, the corporate is often separated into two parts: operations and franchising.

GUARANTEES & WARRANTIES

IKEA provides multiple warranties, however, they depend on many factors. Australian IKEA Guarantees are protected under the Consumer Law. IKEA’s guarantees last for different amounts of different products, for example,

5-year guarantee

• cookware
• appliances

10-year guarantee

• bathroom basins
• sofas and armchairs

15-year guarantee

• knives
• other cookware

25-year guarantee

• mattresses
• kitchen systems

IKEA also has a price guarantee. This ensures that the prices will stay relatively the same for different countries (not including prices of taxes). They also give warnings that items may have a slight colour/ size difference.

Price protection can also be added to members purchases and allow a product to be refunded the difference if the item goes on sale. This protection lasts for 90 days and requires a receipt.

IKEA Company: Overview And CSR Analysis

Introduction

What is Corporate Social Responsibility?

Corporate Social Responsibility, also known as CSR, is when a corporation has a degree of responsibility, which not only falls in the category of the economic consequences of their activities, but also for the environmental and social implications. The key factors of CSR are the economic, social and environmental aspects of corporate activity.

Three Benefits

There are multiple benefits to engaging in Corporate Social Responsibility. It is presumed that when a company engages in CSR, it functions in ways that benefits the environment and society, instead of negatively impacting them.

• One of the benefits to engaging in CSR gives the company a better brand recognition. This boosts the overall impact the company has on consumers, giving them a more positive view on the company.
• Positive business reputation is also another benefit. Having a positive business reputation gives the company a higher advantage over similar companies.
• Having increased sales and customer loyalty is also a beneficial factor to participating in CSR. This guarantees that loyal customers will constantly go back to the certain company.

Company Overview

IKEA is a furniture and lifestyle company, originating in Swedish with its headquarters in Delft, Netherlands. They design and sell furniture ready to assemble, home accessories and kitchen appliances.

Economic Data

Ikea is based in Delft, Netherlands, with an economic freedom score of 77.0 – which is ranked as the 14th freest economy in the world. They have a 2.2% 5 year compound-annual growth, with around $56, 383 per capita.

Exports

The Netherlands’ main exports include machinery and transport equipment, chemicals, mineral fuels, food and livestock and manufactured goods. Their main export partners are:

• Germany (24.2%)
• Belgium (10.7%)
• United Kingdom (8.8%)
• France (8.8%)
• Italy (4.2%)

Imports

Their main imports are Crude Petroleum ($36.4B), Refined Petroleum ($33.1B), Broadcasting Equipment ($17.8B), Office Machine Parts ($15.9B) and Computers ($11B). The top export destinations of the Netherlands are:

• Germany ($89.9B)
• Belgium-Luxembourg ($67.6B
• The United Kingdom ($47B)
• France ($29.8B)
• Italy ($24.8B)

CSR Analysis

IKEA’s CSR efforts are led by Pia Heidenmark Cook, their Chief Sustainability Officer. They began their CSR research in 2012, under the title People & Planet Positive.

Their main efforts include:

• Supporting the local communities – in Australia, IKEA Perth and Adelaide have contributed to improve the environment where children develop and live.
• Empowering and educating workers – beginning in January 2015, IKEA has established a new hourly wage, focusing more on the workers needs rather than the market standard.
• Addressing the issues of gender equality & minorities – annually (May 17), the company celebrated IDAHOT, the international day against transphobia, homophobia and biphobia, to stand up for the rights of lesbian, gay, bisexual, transgender, and people of all sexual orientations and gender identities.
• Reducing energy consumption – IKEA strives to reduce their energy consumption, expecting to become energy positive this year. Their current achievements include: owning 700,000 solar panels installed in their buildings and owning and operating a total of 327 wind turbines around the world. Around 60% of their products are based on renewable materials and 10% contain recycled products.

Ikea has good CSR, because they have focused on both environment and the community and care about their employees. A recommendation would be to continue supporting smaller communities.

Conclusion

If IKEA engaged in more CSR, then their public image would be seen more positively which will encourage new customers to buy their products.

In conclusion, IKEA practices more than enough CSR proportionate to their size and business type. They have a strong code of ethics called the IKEA way (IWAY).They are highly committed to Corporate Social Responsibility.

Bibliography

1. https://research-methodology.net/ikea-corporate-social-responsibility/
2. https://www.smh.com.au/business/companies/ikea-australia-s-sales-stay-flat-packed-as-losses-continue-20191224-p53mpq.html
3. https://www.heritage.org/index/country/netherlands
4. https://oec.world/en/profile/country/nld/
5. https://en.wikipedia.org/wiki/Economy_of_the_Netherlands
6. https://research-methodology.net/ikea-corporate-social-responsibility/

IKEA Furniture Company: Business Strategy, Swot Analysis And Porters 5 Forces

Company Introduction

IKEA is known as one of the most successful global retailers that the world has ever seen. Known for their excellent customer fulfillment system, warehousing techniques, good relationship with suppliers, etc., but most of all its furniture product line that delivers stylish quality at a low-cost strategy. The culture within the company is known to create a unique atmosphere for its employees and customers, ensuring they perform at the highest level. The established Ingvar Kamprad is known to be one of the world’s wealthiest people. He started out producing products via mail. During this journey he discovered a problem within the logistical side of his fulfillment system, and ever since then Kamprad was able to become successful through buying storage and allowing the growth of his vision.

Business Strategy

IKEA utilizes a great long-term strategy of cost leadership which has shown to be successful on a global scale. They aim to keep prices low for those who can’t afford it, allowing the customer to be satisfied with their options. The company puts style at the front of their brand image. When customers go into a store it is set up with specific product positioning which has been an effective marketing strategy for their business. Kamprad wanted IKEA’s employees and customers to feel relaxed and in a unique refreshing environment. Lastly noted as a key business strategy is the self-assembly led suppliers wanting no part in selling to IKEA. This forced them to find new suppliers. In doing so Poland turned out to be an extremely cheaper supplier and created a great relationship between them.

SWOT Analysis

Analyzing IKEA’s Strengths, they have a great variety of products that have suitable styles for today’s market. They’re very strong in the global market for example, China, they provide low cost and their brand image is greatly reputable. Weaknesses for IKEA are transportation costs, locations of stores, getting more appeal to Americans, furniture assembly might not be for everyone and local competition. Threats IKEA should be aware of are, status of the global economy. The amount of control they may have in the global market. Opportunities show expansion to more markets, more effective advertisement, appeal to a younger market, they can have a low entry barrier in some countries. Threats are the way people are shopping, such as online, e-commerce, etc. Possibility of a recession. The more competition that enters the market. An issue they may face is the amount of manpower discussed in the article. That needs to be addressed right away within their business strategy team.

Porters 5 Forces

Bargaining power of suppliers: The amount of suppliers IKEA has a very efficient amount. They can control the pricing with their suppliers which is a crucial advantage. They have the right strategy that suits them and as discussed in the article it has done a great deal for the company. Bargaining power of buyers: should be understood that IKEA has limited to no control. Their customers all have a different variety of needs, making IKEA trying to fulfill all of them. Rivalry among existing competitors: IKEA’s competitors are growing, and they are innovating quickly. IKEA must be aware of this and try to stop them from consuming foreign markets. Threats of substitutes: For IKEA there doesn’t show a sign of need for concern. Being one of the most successful companies in the industry with many valued customers allows them to hold this status. IKEA should keep a close eye on their market sensing capabilities to avoid this threat. Threat of new entrants: Interpreting IKEA’s status I comparison to its competitors is clear cut. The firm holds great power within the industry due to its brand image and product differentiation. IKEA can look at how profitable they are and understand the market conditions predicting any possible competitor entrants.

Conclusion

IKEA’s overall business strategy is very successful. The company has great leader experience. I believe Kamprad is a transitional leader who can give insight to all divisions of management for future success. IKEA must continue its global success by utilizing its low-cost differentiation strategy more efficiently. In China I suggest finding a new strategy that will utilize local suppliers so pricing will be more controllable. They have great adapting skills within their market by redefining its offerings. IKEA can continue its excellent manufacturing skills by getting the right manufacturer for the job. I believe targeting new vast markets can be vital for the continuation of success. Keep aiming at the younger target market as there are immersive opportunities within it. All recommendations and expanding require more manpower. IKEA can hire more levels of management across all foreign markets to insure sustainability. If IKEA can build off its great product and low costing strategy along with adding more promotion and target market options this will increase profits, revenue and market share.

Target Market, Product, Price, Distribution And Promotion Of IKEA

INTRODUCTION

IKEA is one of the largest store that produces varieties of furnishing items. Ikea produces very ecofriendly products that which are reusable and recyclable. Ikea has different branches around the world. It produces around 9500 varieties of furnishing products. Present ikea is one of the leading furnishing store. Customers choose, transport and assemble the furniture themselves, in a way the customers of other furniture and home furnishings retailers, although others are now imitating the IKEA model. Ikea has been focussed on cost leadership strategy.

The given case study mainly focussed on the following points:

• Target Market
• Product
• Price
• Distribution
• Promotion

Target Market

The market is mainly focussed on young people of all ages and also the people who are literally educated people. Because the young people are starting their careers and building up their homes for children. Canada is typical in its customer profile and can be used to represent the global customer. In Canada the target customer household has an income of $35,000 – 40,000 (middle level), owns a apartment or a townhouse has both husband and wife has jobs are in the primary age group 35–44, or the secondary group 25–34, has two children, and they change houses frequently so to that type of people the ikea products are very usable because the products shifting is very easy.

Product

The product is homogenous and country to country the production is different. Ikea design process is very light and modern. According to the people the designing of products varies. Ikea designs but not manfactures. At present ikea consists of more than 1800 suppliers and in terms of 55 countries. Ikea is an example of strategic center enterprise that menas which the company works at the center alliance of network. Becoming an ikea supplier is not an easy job but once if it done then the supplier can access to the global markets. Ikea consists of varieties of products such as sofas,spons,plants,pots etc. Ikea play a prominent role in assisting the suppliers.

Price

Ikea has a lot of competitive strategies and coming to the price strartigies if ikea price is 30-50% and atleast 20-30% but those are fully assembled. Ikea does everything to keep price down. For example if the price of a chair changes from one year to another year where this follows a competitive strategy. It has been able to be unique for itself for carrying out the following activities.

• Maintaining relationship with customers.
• Maintaining relationship with suppliers.
• Cost reduction.
• Innovative designs.

By doing these type of activities many of the customers are attracted to ikea products.

Distribution

Ikea has own global distribution and retailing network with 18 distribution centers in 2003. The 70% distribution can be carried out through container ports, major trucks, railways. And the remaining 30% going direct from supplier to store. Its stores are usually located well outside city centres but with plenty of free parking space. Ikea has own largest outlets, but is prepared to in franchise markets which is smaller to carry a bigger risk because of initial unfamiliarity with or hostility to ikea concept. The normal rules and expectations of a furniture store do not apply to ikea. The normal rules and expectations of a furniture store do not apply to ikea. In some regions where the cost is not prohibitive, ikea has used mail order system.

Promotion

The main promotion of ikea is well designed catalogue it is a well designed,almost collectors item. Catalogue has become a design icon, rather than like London undergroundmap, coco-cola bottle. The catalogue is the best promotion concept for ikea while the consumer entering into the store the catalogue gives the clear understanding about the products. In 2002 the ikea designed catalogue in 34 different languanges. More than publicity ikea gives more concentration to the catalogue only. Ikea produces around 400000 copies of catalogues in 2002. Some of the catalogues are sent to cardholder homes.

Second promotion method that ikea uses the colourful and attractive outlets. While a consumer entering into an ikea store it is used to look like a home. In ikea store they provide customers tape, pencil, and notepad to assist them in making a choice. Combination of low price and high quality normally attracts the customer. Innovation and renovation of things in ikea recently the distribution of model kit for designing own kitchen.

Competition

Ikea faced lot of problems when they entered into the American markets. Before entering into the American market ikea entered into Canadian markets. By entering into Canadian markets the ikea started learning process about the business strategies. When ikea is started the small markets are the competitors to ikea. . And ikea started store in the year 1976 within 10 years ikea started nine stores. When entered into American markets they got so many losses for 3 years at finally they sustained and the expansion of the stores is done.

Conclusion

Ikea is the best furnishing store that which every category of people can afford for buying the products. If ikea increases the production and stores more than it should be in the race of 1 companies list. The operations in the store should be carried out in strategically way then company get more profits and sales