Iván Salas Maldonado-Ingvar Kamprad and IKEA.

04/12/2023

Q1. The key sources of success of IKEA in the furniture market in Sweden was the
differentiation with its competitors, not only in the prices offered that was very low compared with
competitors, but also in offering high quality products to consumers and a very strict control over
low-cost strategies to focus on selling on the middle-class sector of Sweden and make
accessible this furniture products to everyone. It was such this success that was accused of
selling imitations and banned in 1951 to sell to customers in the fairs and the retail cartel
members organize with the manufacturers to don’t sell products to IKEA, but this adversity just
motivated Kamprad, the founder, to seek for new sources of manufacturing in Poland adopting
an aggregation strategy to make their cost of manufacturing even lower than before. This leaded
to IKEA to growth faster in the furniture retailing business in Sweden and convert a disused
factory in a warehouse-showroom. In the next two years, the income of the company increased
from SKr three million in 1953 to six million in 1955 and in just six years, the company registered
Skr 40 million in sales. In few words, the main source of success of IKEA in Sweden furniture
market was their focus on younger buyers that make the company to design strategies to
differentiate from its competitors such as a low-cost strategy, with low price and high quality and
including other features such as the self-service concept and the high activity of merchandizing
promoting its products.

Q2. After the successful growth of IKEA in Sweden, in 1970´s the next obvious strategy was
going abroad in global markets to avoid the stagnation of the company in order to keep
differentiating with competitors that was convinced that retailing furniture products was only
effective in local businesses. Besides this, they had an advantage on their overhead low-costs
and an oil crisis in 1973 that benefited their customers looking to get their value for money
products.

The global strategy in IKEA was very important in the growth of the company and improvement
of profiles in corporate governance, developing leadership skills in new top managers in high
command positions and create great confidence inside the people of the company, motivating
even more the international expansion. Some of the successful cases were in 1987 entering the
UK market opening the biggest home furnishing store close to London. In Italy, 1989 they
opened their first store with excellent results, Etc.

The first step of the globalization strategy was to reach German speakers countries, as this was
the biggest market of furniture retailing in Europe in that time, this became in their main priority.
But it was not an easy task, the first challenge that IKEA faced on trying to expand abroad was
the complaints of the German retailer´s trade association arguing that the quality requirements
of the furniture products of IKEA was very low and don’t have the right standards of the
Möbelfakta seals and had to face legal charges restricting the use of this seals and their
advertising strategies and finally curtailing IKEA´s operations in Germany.

Q3. Another key factor of IKEA´s succeed was the impossibility of rival companies to imitate their
business model, firs in Sweden its local competitors believed that a furniture business was only
effective in local markets and focused in older generations and disproportionately use a lot of
resources in a small niche market at high prices; Ikea differentiated from its competitors as
analyzing this as an opportunity and offering what competitors can´t, low price products at good
quality with low cost and marketing strategies and other features like self-service or cash-and-
carry concepts.

On the other hand, in global markets, the imitators didn’t take to much time to emerge, in
California another furniture retailer company starts to copy the ideas of IKEA´s company and
business model in a very similar way. The first measure they took was to start legal proceedings
against them, and then, in 1989, they accelerate their expansion plans in United States to save
their image and protect from future imitators to occupy their core markets in Philadelphia,
Washington, Baltimore and Pittsburgh and other six more three years later.

Q4. The management process of coordinating and directing operations of IKEA in Europe
market starts near to Munich for two main reasons, it was the biggest and best organized for
furniture products and it was the largest producer and exporter. The operations consisted on
setting up elaborated furniture showrooms and taking responsibility on order takers for
manufacturers and holding little inventory of their own, but the effectiveness of this was not as
expected because the costumers usually had to wait for weeks or months for the delivery of its
products and the manufacturers needed to operate under instability on demand as the downturn
effects of the economy slowed constantly.

Q5. In 1986 Ingvar Kamprad, the founder of IKEA, gives the position of president of the
company to Anders Moberg, that had to face important challenges of potential ambitious global
expansion plans. including diversification into new segments, and a market-specific approach to
sustain growth. To preserve the unique IKEA culture during rapid expansion, cultural integration
strategies and diversity in leadership were proposed. Some of the changes that impacted the
company with Anders administration was a more formalized approach on systematization and
delegation of activities. But some of the problems during Anders Moberg administration was the
growing profitability made the employes less willing to sacrifice and more anxious to share the
benefits, expansion plans became more ambitious and increased the risk of overextending the
brand and losing company's cultural values and adapting cultural differences between the
company and its main potential markets and how IKEA could extend their philosophy and store
markets in all stores maintaining the same pace of global growth. But the biggest concern of the
company was how well would the company still be in the future after the departure of Ingvar
Kamprad and how longer will be survive.