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Introduction

IKEA is one of the world’s most successful global retailers. By 2017, it had 355 home furnishing superstores stores in 29 countries and registered 817 million unique store visits. IKEA’s low-priced, elegantly designed merchandise, displayed in large warehouse stores, generated sales of €31.4 billion in 2017, up from €4.4 billion in 1994, and €2.4 billion in net profit. Founder Ingvar Kamprad died in January 2018 at the age of 91. At the time, he was one of the world’s richest men, with a net worth of $58.7 billion.

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Company Background

IKEA was established by Ingvar Kamprad in Sweden in 1943 when he was 17 years old. The fledgling company sold fish, Christmas magazines, and seeds from his family farm. It wasn’t his first business—that had been selling matches which the enterprising Kamprad had purchased wholesale in 100 box lots (with help from his Grandmother who financed the enterprise) and then resold individually at a higher mark-up. The name IKEA was an acronym, I and K being his initials, while E stood for Elmtaryd, the name of the family farm, and A stood for Agunnaryd, the name of the village in Southern Sweden where the farm was located. Before long Kamprad had added ballpoint pens to his list and was selling his products via mail order. His warehouse was a shed on the family farm. The customer fulfillment system utilized the local milk truck, which picked up goods daily and took them to the train station.

In 1948, Kamprad added furniture to his product line. In 1949, he published his first catalog, distributed then as now, for free. In 1953, Kamprad found himself struggling with another problem: The milk truck had changed its route, and he could no longer use it to take goods to the train station. Kamprad’s solution was to buy an idle factory in nearby Almhult and convert it into his warehouse. With business now growing rapidly, Kamprad hired a 22-year-old designer, Gillis Lundgren. Lundgren originally helped Kamprad to do photo shoots for the early IKEA catalogs, but over time he started to design more and more furniture for IKEA, eventually designing as many as 400 pieces, including many bestsellers.

IKEA’s goal as it emerged over time was to provide stylish, functional designs with minimalist lines that could be manufactured cost efficiently under contract by suppliers and priced low enough to allow most people to afford them. Kamprad’s theory was that “Good furniture could be priced so that the man with that flat wallet would make a place for it in his spending and could afford it.” Kamprad was struck by the fact that furniture in Sweden was expensive at the time, something that he attributed to a fragmented industry dominated by small retailers. Furniture was also often considered a family heirloom, passed down across the generations. He wanted to change this: to make it possible for people of modest means to buy their own furniture. Ultimately, this lead to the concept of what IKEA calls “democratic design”—a design that, according to Kamprad, “was not just good, but also from the start adapted to machine production and thus cheap to assemble.” Gillis Lundgren was instrumental in the implementation of this concept. Time and time again, he would find ways to alter the design of furniture to save on manufacturing costs.

Lundgren also stumbled on what was to become a key feature of IKEA furniture: self-assembly. Trying to efficiently pack and ship a long-legged table, he hit upon the idea of taking the legs off and mailing them packed flat under the tabletop. Kamprad quickly noticed that flat packed furniture reduced transport and warehouse costs, and also reduced damage (IKEA had been having many problems with furniture damaged during the shipping process). Moreover, customers seemed willing to take on the task of assembly in return for lower prices. By 1956, self-assembly was integral to the IKEA concept.

In 1957, IKEA started to exhibit and sell its products at home furnishing fairs in Sweden. By cutting retailers out of the equation and using the self-assembly concept, Kamprad could undercut the prices of established retail outlets, much to their chagrin. Established retailers responded by prohibiting IKEA from taking orders at the annual furniture trade show in Stockholm. Established outlets claimed that IKEA was imitating their designs. This was to no avail, however, so the retailers went further, pressuring furniture manufacturers not to sell to IKEA. This had two unintended consequences. First, without access to the designs of many manufacturers, IKEA was forced to design more of its products in house. Second, Kamprad looked for a manufacturer that would produce the IKEA designed furniture. Ultimately he found one in Poland.

To his delight, Kamprad discovered that furniture manufactured in Poland was as much as 50% cheaper that furniture made in Sweden, allowing him to cut prices even further. Kamprad also found that doing business with the Poles required the consumption of considerable amounts of vodka to celebrate business transactions, and for the next 40 years his drinking was legendary. Alcohol consumption apart, the relationship that IKEA established with the Poles was to become the archetype for future relationships with suppliers. According to one Polish manager, there were three advantages of doing business with IKEA: “One concerned the decision making; it was always one man’s decision, and you could rely upon what had been decided. We were given long-term contracts, and were able to plan in peace and quiet … A third advantage was that IKEA introduced new technology. One revolution for instance, was a way of treating the surface of wood. They also mastered the ability to recognize cost savings that could trim the price.” By the early 1960s, Polish-made goods were to be found on over half of the pages of the IKEA catalog.

By 1958, an expanded facility at the Almhult location became the first IKEA store. The original idea behind the store was to have a location where customers could see assembled IKEA furniture. It was a supplement to IKEA’s main mail order business; but it very quickly became an important sales point in its own right. The store soon started to sell car roof racks so that customers could leave with flat packed furniture loaded on top. Noticing that a trip to an IKEA store was something of an outing for many shoppers (Almhult was not a major population center, and people often drove in from long distances), Kamprad experimented with adding a restaurant to the Almhult store so that customers could relax and refresh themselves while shopping. The restaurant was a hit and became an integral feature of all IKEA stores.

The response of IKEA’s competitors to its success was to argue that IKEA products were of low quality. In 1964, just after 800,000 IKEA catalogs had been mailed to Swedish homes, the widely read Swedish magazine Allt i Hemmet(Everything for the Home) published a comparison of IKEA furniture to that sold in traditional Swedish retailers. The furniture was tested for quality in a Swedish design laboratory. The magazine’s analysis, detailed in a 16-page spread, was that not only was IKEA’s quality as good if not better than that from other Swedish furniture manufacturers, the prices were much lower. For example, the magazine concluded that a chair bought at IKEA for 33 kroner ($4) was better than a virtually identical one bought in a more expensive store for 168 kroner ($21). The magazine also showed how a living room furnished with IKEA products was as much as 65% less expensive than one furnished with equivalent products from four other stores. This publicity made IKEA acceptable in middle-class households, and sales began to take off.

In 1965, IKEA opened its first store in Stockholm, Sweden’s capital. By now, IKEA was generating the equivalent of €25 million and had already opened a store in neighboring Norway. The Stockholm store, its third, was the largest furniture store in Europe and had an innovative, circular design that was modeled on the famous Guggenhiem Art Museum in New York. The location of the store was to set the pattern at IKEA for decades. It was situated on the outskirts of the city, rather than downtown, and there was ample space for parking and good access roads. The new store generated a large amount of traffic, so much so that employees could not keep up with customer orders, and long lines formed at the checkouts and merchandise pick up areas. To reduce the lines, IKEA experimented with a self-service pick up solution, allowing shoppers to enter the warehouse, load flat packed furniture onto trolleys, and then take it through the checkout. It was so successful that this soon became the norm in all stores.

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International Expansion

By 1973, IKEA was the largest furniture retailer in Scandinavia with nine stores. The company enjoyed a market share of 15% in Sweden. Kamprad, however, felt that growth opportunities were limited. Starting with a single store in Switzerland, over the next 15 years the company expanded rapidly in Western Europe. IKEA met with considerable success, particularly in West Germany where it had 15 stores by the late 1980s. As in Scandinavia, Western European furniture markets were largely fragmented and served by high-cost retailers located in expensive downtown stores selling relatively expensive furniture that was not always immediately available for delivery. IKEA’s elegant, functional designs, with their clean lines, low prices, and immediate availability, were a breath of fresh air, as was the self-service store format. The company was met with almost universal success even though, as one former manager put it: “We made every mistake in the book, but money nevertheless poured in. We lived frugally, drinking now and again, yes perhaps too much, but we were on our feet bright and cheery when the doors were open for the first customers, competing in good Ikean spirit for the cheapest solutions.” 

The man in charge of the European expansion was Jan Aulino, Kamprad’s former assistant, who was just 34 years old when the expansion started. Aulino surrounded himself with a young team. Aulino recalled that the expansion was so fast paced that the stores were rarely ready when IKEA moved in. Moreover, it was hard to get capital out of Sweden due to capital controls, so the trick was to make a quick profit and get a positive cash flow going as soon as possible. In the haste to expand, Aulino and his team did not always pay attention to detail, and he reportedly clashed with Kamprad on several occasions and considered himself fired at least four times, although he never was. Eventually the European business was reorganized, and tighter controls were introduced.

IKEA was slow to expand in the United Kingdom, where the locally grown company Habitat had built a business that was similar in many respects to IKEA, offering stylish furniture and at a relatively low price. IKEA also entered North America, opening up seven stores in Canada between 1976 and 1982. Emboldened by this success, in 1985 the company entered the United States. It proved to be a challenge of an entirely different nature.

On the face of it, America looked to be fertile territory for IKEA. As in Western Europe, furniture retailing was a very fragmented business in the United States. At the low end of the market were the general discount retailers, such as Wal-Mart, Costco, and Office Depot, which sold a limited product line of basic furniture, often at a very low price. This furniture was very functional, lacked the design elegance associated with IKEA, and was generally of a fairly low quality. Then there were higher-end retailers, such as Ethan Allen, which offered high-quality, well-designed, high-priced furniture in full-service stores staffed by knowledgeable salespeople. High-end retailers would often sell ancillary services as well, such as interior design. Typically, these retailers would offer home delivery service, including set up in the home, either for free or for a small additional charge. Since it was expensive to keep large inventories of high-end furniture, much of what was on display in stores was not readily available, and the client would often have to wait a few weeks before it was delivered.

IKEA opened its first U.S. store in 1985 in Philadelphia. The company had decided to locate on the coasts. Surveys of American consumers suggested that IKEA buyers were more likely to be people who had travelled abroad, who considered themselves risk takers, and who liked fine food and wine. These people were concentrated on the coasts. As one manager put it, “There are more Buicks driven in the middle than on the coasts.” 

Although IKEA initially garnered favorable reviews, and enough sales to persuade it to start opening additional stores, by the early 1990s it was clear that things were not going well in America. The company found that its European-style offerings didn’t always resonate with American consumers. Beds were measured in centimeters, not the king, queen, and twin sizes with which Americans are familiar. American sheets didn’t fit on IKEA beds. Sofas weren’t big enough, wardrobe drawers were not deep enough, glasses were too small, curtains too short, and kitchens didn’t fit U.S. size appliances. In a story often repeated at IKEA, managers noted that customers were buying glass vases and using them to drink out of, rather than the small glasses for sale at IKEA. The glasses were apparently too small for Americans who like to add liberal quantities of ice to their drinks. To make matters worse, IKEA was sourcing many goods from overseas priced in the Swedish kroner, which was strengthening against the U.S. dollar. This drove up the price of goods in IKEA’s American stores. Moreover, some stores were poorly located, and they were not large enough to offer the full IKEA experience familiar to Europeans.

Turning around its American operations required IKEA to take some decisive actions. Many products had to be redesigned to fit with American needs. Newer and larger store locations were chosen. To bring prices down, goods were sourced from lower cost locations and priced in dollars. IKEA also started to source some products from factories in the United States to reduce both transport costs and dependency on the value of the dollar. At the same time, IKEA was noticing a change in American culture. Americans were becoming more concerned with design, and more open to the idea of disposable furniture. It used to be said that Americans changed their spouses about as often as they changed their dining room table, about 1.5 times in a life time, but something was shifting in American culture. Younger people were more open to risks and more willing to experiment, and there was a thirst for design elegance and quality. Starbucks was tapping into this, as was Apple Computer, and so did IKEA. According to one manager at IKEA, “Ten or 15 years ago, travelling in the United States, you couldn’t eat well. You couldn’t get good coffee. Now you can get good bread in the supermarket, and people think that is normal. I like that very much. That is more important to good life than the availability of expensive wines. That is what IKEA is about.” 

To tap into America’s shifting culture, IKEA reemphasized design and started promoting itself with a series of quirky, hip advertisements aimed at a younger demographic; young, married couples, college students, and 20- to 30- something singles. One IKEA commercial, called “Unboring,” made fun of the reluctance of Americans to part with their furniture. One famous ad featured a discarded lamp, forlorn and forsaken in some rainy American city. A man turns to the camera sympathetically. “Many of you feel bad for this lamp,” he says in thick Swedish accent, “That is because you are crazy.” Hip people, the commercial implied, bought furniture at IKEA. Hip people didn’t hang onto their furniture either; after a while, they discarded it and replaced it with something else from IKEA.

The shift in tactics worked. IKEA’s revenues doubled in a four-year period to $1.27 billion in 2001, up from $600 million in 1997. By 2017, the United States was IKEA’s largest market after Germany, with 48 stores accounting for 14% of total global revenues. Having learned vital lessons about competing in foreign countries outside of continental Western Europe, IKEA continued to expand internationally in the 1990s and 2000s. It entered the United Kingdom in 1987, and by 2018 had 18 stores in the country. IKEA also acquired Britain’s Habitat in the early 1990s and continued to run it under the Habitat brand name. In 1998, IKEA entered China, where it had 24 stores by 2016, followed by Russia in 2000 (14 stores by 2012), and in 2006 Japan, a country where it had failed miserably 30 years earlier (by 2012, IKEA had 6 stores in Japan). In total, by 2017 there were 355 IKEA stores in 29 countries. The company’s plans call for continued global expansion, opening 20 to 25 stores per year, funded by an investment of around €20 billion.

As with the United States, some local customization has been the order of the day. In China, for example, the store layout reflects the layout of many Chinese apartments, and because many Chinese apartments have balconies, IKEA’s Chinese stores include a balcony section. IKEA also has had to adapt its locations in China, where car ownership is still not widespread. In the West, IKEA stores are generally located in suburban areas and have lots of parking space. In China, stores are located near public transportation, and IKEA offers delivery services so that Chinese customers can get their purchases home. IKEA also found that prices considered low in Europe and North America were higher than average in China. Local furniture makers had access to cheap labor and raw materials, and their design costs were usually nil because they simply copied the furniture designs of other companies, including IKEA. IKEA also had to deal with relatively high tariffs on furniture imported into China. To deal with these problems, IKEA built a number of factories in China and increased local sourcing of materials, raising local sourcing from 30 to 65%. These moves enabled it to cut its prices on many items by up to 60%.

In something of a shift from its typical mass market approach, IKEA worked hard in China to position itself as an aspirational, Western brand for young middle-class Chinese. This demographic is benefiting from China’s rapid economic development, has relatively high incomes, is better educated, and is more aware of Western styles and more open to IKEA’s product.

The other decision IKEA had to make in China was how to respond to local competitors copying its designs, which occurred frequently. The company concluded that Chinese intellectual property laws were not yet strong enough to deter such activities, so it decided not to react with lawsuits. Instead, the company stepped up its marketing, using Chinese social media and microblogging website Weibo to target the young, upwardly mobile middle class and build demand for the IKEA brand. All of these moves seem to be bearing fruit. IKEA’s sales in China have been growing at a robust pace. For fiscal 2017, IKEA reported a 14% increase in sales in China to $1.98 billion on the back of an 11% increase in store traffic. The company also announced plans to open another three Chinese stores. 

IKEA’s latest target market is India, where it has plans to invest €1.5 billion and ultimately open 40 stores. In late 2012, India’s foreign investment board approved Ikea’s plans to open stores in the country. However, the approval came with strings attached. The board denied IKEA to offer products in areas that the government thinks are politically sensitive, and where it wants to protect local retailers. These include food and beverage outlets, which are a standard feature of its stores around the world, and 18 of the 30 product categories it had initially applied for. Those 18 categories include gift items, fabrics, books, toys, and consumer electronics. The government also required a significant amount of local sourcing. Adapting to these demands took time. After years of preparation, IKEA opened its first Indian store in Hyderabad in July 2018. The company hopes to have 30 stores open in India by 2025.

IKEA has refused to adapt to business practices that clash with its values. The company prides itself on its “clean” image and is willing to halt investment in order to protect that. In the mid 2000s it put investment in Russia on hold as a protest against endemic corruption. It subsequently fired two senior executives in the country for allegedly turning a bribe to a subcontractor to secure electricity supply for its St. Petersburg outlets. 

Senior executives at IKEA have been known to complain that they could expand the business faster, were it not for administrative “red tape” in many countries that slows down the rate of expansion. According to the current CEO, Mikael Ohlsson, the amount of time it takes to open a store has roughly doubled to 5 or 6 years since the 1990s. Ohlsson singled out German local authorities for designing planning restrictions to protect local city center shops that are detrimental to IKEA’s expansion plans. Ohlsson argues that such regulations are holding back investment by IKEA, and thus job creation, across the European Union. 

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The IKEA Concept and Business Model

IKEA’s target market is the young, upwardly mobile, global middle-class who are looking for low-priced but attractively designed furniture and household items. This group is targeted with somewhat wacky, offbeat advertisements that help to drive traffic into the stores. The stores are large warehouses festooned in the blue and yellow colors of the Swedish flag that offer 8,000 to 10,000 items, from kitchen cabinets to candlesticks. There is plenty of parking outside, and the stores are located with easy access to major roads.

The interior of the stores is configured almost as a maze that requires customers to pass through each department to get to checkout. The goal is simple: to get customers to make more impulse purchases as they wander through the IKEA wonderland. Customers who enter the store planning to buy a $40 coffee table can end up spending $500 on everything from storage units to kitchenware. The flow of departments is constructed with an eye to boosting sales. For example, when IKEA managers noticed that men would get bored while their wives stopped in the home textile department, they added a tool section just outside the textile department, and sales of tools skyrocketed. At the end of the maze, just before the checkout, is the warehouse where customers can pick up their flat packed furniture. IKEA stores also have restaurants (located in the middle of the store) and child-care facilities (located at the entrance for easy drop off) so that shoppers stay as long as possible.

Products are designed to reflect the clean Swedish lines that have become IKEA’s trademark. IKEA has a product strategy council, a group of senior managers who establish priorities for IKEA’s product lineup. Once a priority is established, product developers survey the competition, and then set a price point that is 30 to 50% below that of rivals. As IKEA’s website states, “We design the price tag first, then the product.” Once the price tag is set, designers work with a network of suppliers to drive down the cost of producing the unit. The goal is to identify the appropriate suppliers and least costly materials, a trial-and-error process that can take as long as 3 years. In 2008, IKEA had 1,380 suppliers in 54 countries. The top sourcing countries were China (21% of supplies), Poland (17%), Italy (8%), Sweden (6%), and Germany (6%). Some suppliers have been with IKEA for a long time and work closely with the company on cost and quality issues. IKEA is often their major customer.

IKEA devotes considerable attention to finding the right supplier for each item. Consider the company’s best-selling Klippan love seat. Designed in 1980, the Klippan, with its clean lines, bright colors, simple legs, and compact size, had sold over 1.5 million units by 2010. IKEA originally manufactured the product in Sweden but soon transferred production to lower-cost suppliers in Poland. As demand for the Klippan grew, IKEA decided that it made more sense to work with suppliers in each of the company’s big markets to avoid the costs associated with shipping the product all over the world. In 2010, there were five suppliers of the frames in Europe, plus three in the United States and two in China. To reduce the cost of the cotton slipcovers, IKEA concentrated production in four core suppliers in China and Europe. The resulting efficiencies from these global sourcing decisions enabled IKEA to reduce the price of the Klippan by some 40% between 1999 and 2005.

Price declines over time, such as those seen with the Klippan love seat, are the norm at IKEA. The company’s signature Poang chair, 1.5 million of which are sold every year, has gotten dramatically cheaper over time. In 1988, this chair cost $350 (in 2016 dollars). By 2016, the price had fallen to $79. Other IKEA mainstays have followed a similar path. The venerable Lack table sold for $56 in 1985 (in 2016 dollars) but goes for $10 today. The Billy bookcase costs 30% less in real terms than it did when introduced in 1978. In general, long-running products seem to drop in price by 1% per year, primarily due to constant tweaking of design, technological advances in production, and sheer economies of scale. Indeed, if IKEA can’t figure out how to reduce prices over time, the product is often discontinued. 

For insight on how IKEA achieves this, consider the iconic Bang mug, some 25 million of which are sold every year. IKEA changed the height of the mug when it realized is could make slightly better use of the space in its supplier’s kiln in Romania. Tweaking the handle design made them stack more compactly, doubling the number that could be placed on a pallet, which halved the cost of getting them from the kiln in Romania to shelves in the shop. Initially, IKEA asked its Romanian supplier to price up to a million units in the first year. Then it asked, “What if we commit to five million a year for three years”? That cut costs by another 10%.

Then there is the Billy bookcase. The factory in Sweden that produces this bookcase makes 37 times as many bookcases per year as it did in the 1980s, yet the number of employees has only doubled thanks to automation. The factory employees never actually touch a bookshelf–their job is to tend the machines, imported from Germany and Japan, which work constantly to cut, glue, drill and pack the various components of the Billy bookcase. There are now 60 million Billy bookcases in the world, nearly one for every 100 people. Along the way IKEA and its supplier have clearly learned a lot about how to produce the bookcase more efficiently. 

Although IKEA contracts out manufacturing for most of its products, since the early 1990s a certain proportion of goods have been made internally (today, around 90% of all products are sources from independent suppliers, with 10% being produced internally). The integration into manufacturing was born out of the collapse of communist governments in Eastern Europe after the fall of the Berlin Wall in 1989. By 1991, IKEA was sourcing some 25% of its goods from Eastern European manufacturers. It had invested considerable energy in building long-term relationships with these suppliers, and had often helped them to develop and purchase new technology so that they could make IKEA products at a lower cost. As communism collapsed and new bosses came in to the factories, many did not feel bound by the relationships with IKEA. They effectively tore up contracts, tried to raise prices, and underinvested in new technology.

With its supply base at risk, IKEA purchased a Swedish manufacturer, Swedwood. IKEA used Swedwood as the vehicle to buy and run furniture manufacturers across Eastern Europe, with the largest investments being made in Poland. IKEA invested heavily in its Swedwood plants, equipping them with the most modern technology. Beyond the obvious benefits of providing IKEA a low-cost source of supply, Swedwood has also enabled it to acquire knowledge about manufacturing processes that are useful both in product design and in relationships with other suppliers, giving IKEA the ability to help suppliers adopt new technology and drive down their costs.

For illustration, consider IKEA’s relationship with suppliers in Vietnam. It has expanded its supply base here to help support its growing Asian presence. IKEA was attracted to Vietnam by the combination of low-cost labor and inexpensive raw materials. IKEA drives a tough bargain with its suppliers, many of whom say that they make thinner margins on their sales to IKEA than they do to other foreign buyers. IKEA demands high quality at a low price. But there is an upside; IKEA offers the prospect of forging a long-term, high volume business relationship. Moreover, IKEA regularly advises its Vietnamese suppliers on how to seek out the best and cheapest raw materials, how to set up and expand factories, what equipment to purchase, and how to boost productivity through technology investments and management process.

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Organization and Management

In many ways, IKEA’s organization and management practices reflect the personal philosophy of its founder. A 2004 article in Fortune described Kamprad, then one of the world’s richest men, as an informal, frugal man who “insists on flying coach, takes the subway to work, drives a 10-year-old Volvo, and avoids suits of any kind. It has long been rumored in Sweden that when his self-discipline fails, and he drinks an overpriced Coke out of a hotel mini bar, he will go down to a grocery store to buy a replacement”. Kamprad’s thriftiness was attributed to his upbringing in Smaland, a traditionally poor region of Sweden. Kamprad’s frugality is now part of IKEA’s DNA. Managers are forbidden to fly first class and are expected to share hotel rooms.

Under Kamprad, IKEA became mission driven. He had a cause—and those who worked with him adopted it—to make life better for the masses, to democratize furniture. Kamprad’s management style was informal, nonhierarchical, and team based. Titles and privileges are taboo at IKEA. There are no special perks for senior managers. Pay is not particularly high, and people generally work there because they like the atmosphere. Suits and ties have always been absent, from the head office to the loading docks. The culture is egalitarian. Offices are open plan, furnished with IKEA furniture, and private offices are rare. Everyone is called a “co-worker,” and first names are used throughout. IKEA regularly stages antibureaucracy weeks during which executives work on the store floor or tend to registers. In a BusinessWeek article, then CEO Andres Dahlvig described how he spent some time earlier in the year unloading trucks and selling beds and mattresses. Creativity is highly valued, and the company is replete with stories of individuals taking the initiative; from Gillis Lundgren’s pioneering of the self-assemble concept to the store manager in the Stockholm store who let customers go into the warehouse to pick up their own furniture. To solidify this culture, IKEA had a preference for hiring younger people who had not worked for other enterprises, and then promoting from within. IKEA has historically tended to shy away from hiring the highly educated status oriented elite because they often adapted poorly to the company.

Kamprad seems to have viewed his team as extended family. Back in 1957, he bankrolled a weeklong trip to Spain for all 80 employees and their families as reward for hard work. The early team of employees all lived near each other. They worked together, played together, drank together, and talked about IKEA around the clock. When asked by an academic researcher what was the fundamental key to good leadership, Kamprad replied “Love.” Recollecting the early days, he noted that “when we were working as a small family in Aluhult, we were as if in love. Nothing whatsoever to do with eroticism. We just liked each other so damn much.” Another manager noted that “We who wanted to join IKEA did so because the company suits our way of life. To escape thinking about status, grandeur and smart clothes.” 

As IKEA grew, the question of taking the company public arose. While there were obvious advantages associated with doing so, including access to capital, Kamprad decided against it. His belief was that the stock market would impose short-term pressures on IKEA that would not be good for the company. The constant demands to produce profits, regardless of the business cycle, would in Kamprad’s view, make it more difficult for IKEA to take bold decisions. At the same time, as early as 1970, Kamprad started to worry about what would happen if he died. He decided that he did not want his sons to inherit the business. His worry was that they would either sell the company, or squabble over control of the company and thus destroy it. All three of his sons, it should be noted, went to work at IKEA as managers.

The solution to this dilemma created one of the most unusual corporate structures in the world. In 1982, Kamprad transferred his interest in IKEA to a Dutch based charitable foundation, Stichting Ingka Foundation. This is a tax exempt, non-profit making legal entity that in turn owns Ingka Holding, a private Dutch firm that is the legal owner of IKEA. A five-person committee chaired by Kamprad, and which includes his wife, runs the foundation. In addition, the IKEA trademark and concept was transferred to IKEA Systems, another private Dutch company, whose parent company, Inter-IKEA, is based in Luxembourg. The Luxembourg company is in turn owned by an identically named company in the Netherlands Antilles, whose beneficial owners remain hidden from public view, but are almost certainly the Kamprad family. Inter-IKEA earns its money from a franchise agreement it has with each IKEA store. The largest franchisee is none other than Ingka Holdings. IKEA states that franchisees pay 3% of sales to Inter-IKEA. Thus, Kamprad has effectively moved ownership of IKEA out of Sweden, although the company’s identity and headquarters remains there, and established a mechanism for transferring funds to himself and his family from the franchising of the IKEA concept. Kamprad moved to Switzerland in the 1980s to escape Sweden’s high taxes, and he lived there until his death in 2018.

In 1986, Kamprad gave up day-to-day control of IKEA to Andres Moberg, a 36-year-old Swede who had dropped out of college to join IKEA’s mail order department. Despite relinquishing management control, Kamprad continued to exert influence over the company as an advisor to senior management and an ambassador for IKEA, a role he was still pursuing with vigor in his mid-80s.

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Looking Forward

IKEA has established an enviable position. It has become one of the most successful retail establishments in the world. It has expanded into numerous foreign markets, learning from its failures and building on its successes. It has brought affordable, well-designed, functional furniture to the masses, helping them to, in Kamprad’s words, achieve a better everyday life. IKEA’s goal is to continue to grow, opening 10 to 15 new stores a year. Achieving that growth would mean continued expansion into nonwestern markets, including most notably China and India. Can the company do so? Is its competitive advantage secure?