INTRODUCTION
IKEA was founded in 1943 by a Swedish national Ingvar Kamprad when he started a
local catalog company. After selling basic household appliances for four years,
Kamprad finally began selling home furnishin
...
INTRODUCTION
IKEA was founded in 1943 by a Swedish national Ingvar Kamprad when he started a
local catalog company. After selling basic household appliances for four years,
Kamprad finally began selling home furnishings. In 1953, he started with his first
furniture showroom. When he started selling his reasonably priced furniture, his
adversaries tried to run him down by banning the local suppliers from providing raw
material and furniture to IKEA. Moreover Ikea was not permitted to showcase its
furniture in industry exhibitions. So Kamprad came up with a creative business
model. Ikea learnt how to design its own furniture, purchased raw material from
Polish suppliers, and created its own exhibitions. In 1965, Ikea started their first
flagship store in Stockholm. With more than 300 stores worldwide, IKEA is the
world's largest furniture retail chain today.
Business Model of Ikea
During the initial phase when Ikea faced stiff competition from many big giants,
Ikea’s engineers focused on cost-efficiency with high-quality materials. This led them
to come up with a great concept to cut down on their shipping charges. They started
‘flat-packaging’ of their furniture and revolutionized the whole furniture industry. The
company’s furniture was shipped disassembled and they could ship six times more
furniture than what could do earlier. Their shipping frugality resulted in low-priced
furniture. The company prided itself on its philosophy of “democratic design” that
resonates with the masses. Their corporate slogan “low price with meaning” cleverly
differentiates its products as agreeable and inexpensive but cheap.
Furthering their low price strategy, the pragmatic-cost cutting sensibility pervades
through the whole organization. For example, their offices tend not to be extravagant
and their executives do not fly with business class. The self-serving ethos that runs
in the company makes their business model even more functionalistic. Its customers
hand-pick the parts of the desired furniture and assemble them on their own. The
minimalistic furniture of Ikea provides simple solutions to people by scrimping and
saving in each direction. Ikea’s engineers would redesign a product multiple times
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