The Internationalisation of IKEA

Introduction to Ikea Founded in 1943

The Ikea logo is blue and yellow due to its heritage

The Swedish lifestyle is reflected in the Ikea product range

The Ikea Concept is: “Its to create a better everyday life

for many people.We shall achieve this through the business idea, which is to offer a wide range of well-designed, functional home furnishing products at prices so low, that as many people as possible will be able to afford them”

... Ikea asks customers to work as a

partner

So that together Ikea can create a better life for everyone.

... The Ikea group has 154 stores in

22 countries

Last year a total of 268million people visited the Ikea groups stores worldwide.

Operating Strategy: Ikea does not have its own

manufacturing facilities uses sub-contracted manufacturers all

over the world Ikea shoppers are ‘pro-sumers’ Customers have to assemble products

themselves Ikea provides catalogues, tape

measures, shopping lists, pencils.

How the Ikea Group Works Work at Ikea is organized to match

the needs of the customers to the potential of the suppliers in the best possible way.

Ikea co-workers all over the world contribute

Group Support Functions: Finance and

Treasury PR &

Communications Social &

Environmental Affairs

Property

Risk Management Legal Affairs Human Resources Retail

Development Logistics

Ikea’s Culture: Ingvar Kamprad believes:

“Most things still remain to be done - a glorious future! Time is your most important asset!”

Ikea is built upon this philosophy all the way from the design teams to suppliers and the customer

Ikea’s Culture Continued The aim of Ikea is to eliminate excessive

levels of management with a very flat organization.

Bureaucracy is fought at all levels Kamprad believes that “Simplicity and

common sense should characterize planning and strategic direction”

Culture emphasizes efficiency and low cost

Why Leave the Domestic Market? Reactive or Proactive approach to

internationalization? Ikea demonstrates a proactive approach “The importance of their own opportunities

available to them in other markets to exploit those opportunities rather than the negative factors which existed in their own markets” (Alexander, 1997)

Ikea’s first store opened in Sweden in 1953 Ikea’s second store opened in Oslo, Norway in

1963

Where is IKEA? Australia –5 Austria – 5 Belgium – 4 Canada – 11 China – 2 Czech Republic – 3 Denmark – 4 Italy – 8 Netherlands – 10 Norway – 5 Poland – 7 Russia 2

Slovakia – 1 Spain –5 Finland – 2 France –13 Germany – 31 Hungary – 2 Sweden – 13 Switzerland – 6 UK – 11 USA - 16

IKEA’S Policy Conservative Policy

Establish supplier links before opening

Strategic risk reducing approach

Format The organisation allowed rapid

growth Expansion group Construction group Initially – had a very flat

management style Open management characterises

Ikea

How? Fully Owned Subsidiaries

Stable markets which are deemed identical to the home market

Set up by expansion teamThis is used in Europe and N America

Franchising Unknown, high risk markets Expansion group is involved Carries basic items They are compared to overall corporate

performance Fees are paid to IKEA Able to maintain centralised control

Time Line 1958 – Almhult 1963 – Norway 1965 – Stockholm 1969 – Denmark 1973 – Zurich –

Switzerland 1974 – Munich – Germany 1975 – Australia 1976 – Canada 1977 – Austria 1979 – Netherlands 1981 - France

1984 – Belgium 1985 – USA 1987 – UK 1989 – Italy 1990 – Hungary + Poland 1991 – Czech Republic +

United Arab Emirates 1996 – Spain 1998 – China 2000 - Russia

Switzerland This was their first store outside

Sweden Ignored the fact that furniture here

was of traditional design Attracted 650,000 visitors in first

year

Germany Oct ’74 - 2003 Constituted the largest market for

furniture Large store in Zurich 1974 opened near Munich IKEA differentiated themselves by

offering immediate delivery 37,000 visitors in first 3 days Legal proceedings against IKEA

... Began to be acknowledged

10 new stores in the next 5 years

50% share in the cash and carry segment

Canada March ’76 - 2003 In 1979 bought a problem

franchise in Canada He turned it into a lucrative

business within three years Continued to grow within Canada

America June ’85 - 2003 Had enormous potential Imitators appeared e.g. Stor Management decided to accelerate

its expansion plans 1990 – began to struggle Now going from success to

success

Management Change In 1986 appointed Andres Moberg

as president Before this the company had been

managed informally Impacted on management style Formal budget and planning

process

Corporate Plan Was developed for three years Aims: -

Finding low priced materials Matching products to capabilities Developing long term relationships

with suppliers

Continued… Combination of low cost

standardisation, technology and quality

IKEA Rail 2001

The catalogue is now produced in 34 languages

Further Expansion 1987 – entered the UK 1989 – entered Italy Plans to build a presence in Russia

and East Europe 1st East Europe outlet was in

Budapest- Joint Venture

Further Expansion continued 1988 – Ikea Poland built a $25M

warehouse and retail centre Established a joint venture with a

woodworking factory Office in Vienna coordinated the

activities in Eastern Europe

Facts and Figures The turnover for the year

1/09/2001 – 31/08/2002 was 12bn Euro

Turnover per region – Middle East, Australia, Asia – 4% North America – 19% Europe – 77%

Top Five Sales Countries

0

5

10

15

20

25

Country

Perc

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f sal

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Germany UK USA France Sweden

Future Japan has been announced as the next

venture Want to open two stores in Tokyo Focus on the US is on existing markets New stores and relocations New distribution centres Somerville No plans for Ireland at the moment

Conclusion Ikea at first did not recognise the need to

adapt to culture Needed to decide how far they could push

their common concept in other countries Ikea does not manufacture its own

products but works with a complex network of suppliers

Success is based on the idea of keeping the cost between manufacturers and consumers down