2 papers and powerpoint for prof. Hayyah

Table of Contents

Introduction……………………………………………………………………………… 1

Sources of IKEA’s Successful Entry…………………………………………………….. 2-3

IKEA’s Internationalization:

Importance, Challenges, and Successes……………………………………………….3-4

Management Processes and Effectiveness……………………………………………….. 4

Ingvar Kamprad’s Role……………………………………………………………………5

Future Challenges and Recommendations……………………………………………….. 5

Conclusion…………………………………………………………………………………6

References…………………………………………………………………………………7

Introduction

Ikea was founded by Ingvar Kamprad in 1943. This company began as a small business that would gain ground and turn Kamprad into a billionaire, his net worth in 2014 was estimated to be at $4.1 billion. Kamprad had a vision for his company and by 1948 he went from selling fish and Christmas decorations to adding furniture into his line of products. Kamprad’s vision took him from delivering goods in a milk truck to running an empire of furniture stores that actually include restaurants so that you can relax before or after your shopping ventures. Mr. Kamprad envisioned something larger than Ikea, he put his focus on the human aspect of the business rather than focusing strictly on profit alone (Bartlet and Nanda, 1996).

Sources of IKEA’s Successful Entry

Retail stores that sold furniture in Sweden were placed under different circumstances than other retail stores. This was mainly because of post-war demand and baby boomers which would not allow Ikea to move forward by focusing on the main objectives that Kamprad set out for his vision of what the company could be. Kamprad then looked at building leverage to obtain the outcome he envisioned, Kamprad then used the offsets of the conditions to motivate his innovation. Some of the circumstances are as follows:

· Leveraging small markets which included manufacturers and distributors

· Producing “good enough” alternatives for people going through social issues from the post war conditions.

· Gain growth by increasing furniture cost due to high demand for products.

Theorist Christensen made a statement in 2006, “Disruptive innovations challenge industry incumbents by offering simpler, good-enough alternatives to an underserved group of customers”. With this being said, the war in Sweden had left Ikea with positioning that would allow them to gain new customers and also placed them correctly to gain a foot hold within their market.

IKEA’s Internationalization: Importance, Challenges, and Successes

At the top of Kamprad’s list was internationalization of his company. He had a strong vision of expanding Ikea in order to offer affordable furniture which would improve the quality of life for people, his vision included moving into Poland and other countries beyond Sweden. With this instilled inside him, he would take on all opportunities to make this happen which included lowering costs, improving designs, and the quality of his goods. Kamprad also wanted to improve on the assembly of his products, making it easier for the consumer to assemble. He also put focus on delivering his products in response to believing that Ikea is there not only to improve lives, but to improve the quality of life for their customers (Allen, n.d.). Over time side-effects from their course of actions became challenges that they must overcome. Some challenges that they faced were legal actions brought upon by German retailers.

The first challenges began when the company moved into other countries. Ikea faced several different challenges at this time, however, the company knew that they would be faced with obstacles because of their firm belief in their plans for expanding. When Ikea moved into Europe in the 1970s there were retailers from Germany that accused the company of misleading customers with false information. Legal actions and accusations for company had little impact on them and did not last long; Ikea then revised some of their plans but held to their core values. In the coming years some of Ikea’s best customers arose from Germany, in 2009 about 15% of Ikea sales were provided by German consumers.

Management Processes and Effectiveness

Since 1974 Ikea has acted as if they were conditioned to respond properly to bad press reviews. The company has always been honest which is reflected by their growing customer base, increasing profits, and the ability to grow their number of stores worldwide. Within the company there were growing concerns on how the company was managing their expansions. The concern was that the expansion plans were managed with the common concept while maintaining the company’s culture and vision. Management had the understanding of what it takes to grow and how being a less developed company came with growing pains.

Because of the rapid growth of Ikea, employees from staff and management were made aware of how the company operated, “This actually puts pressure on management to perform with no security available behind status or closed door” (Bartlet & Nanda, 1996). Overtime this eventually broke Ikea, however, this also made the company put more focus back on their core values and strategies. Ikea’s effectiveness can be linked back to their product range as well as price rules and methods.

Ingvar Kamprad’s Role

Ingvar Kamprad played a huge role in the start of Ikea and to this day goes to great lengths to make the company better for continued success. He is a modest human being who does not show his wealth; instead he shows more of his heart. He has stuck to his vision of making Ikea one of the top furniture retailers today by selling goods that will improve the lives of others at an affordable cost. Keeping things simple seems to be part of what Kamprad does best, he holds on to his personal values which he embedded into the Ikea brand. This company would not be what it is today without the drive of Ingvar Kamprad.

Future Challenges and Recommendations

I think that one of the biggest challenges for Ikea will be losing Kamprad. Ingvar Kamprad is nearly 90 years of age and has lived a long and prosperous life. If the company can keep ahold of Kamprads vision after he is gone then they should continue to thrive, if the executives fall short and veer away from the current culture and strategy that Ikea instills it could mean the end of the organization. Bartlett & Nanda (1996) states that Ikea’s future concerns are derived from rapid growth of spreading into countries with developed economies which is forecasted to be conditioned with average age and income level. If this is forecast is correct Ikea will need to change their direction, the company will need to add new strategies with existing plans. As mentioned earlier, if the company has to do this it could mean future complications within the organization.

Conclusion

I feel that Kamprad acted as a true leader by building his small business into what is now known as Ikea. Kamprad was a visionary who saw hard work and strong ethics paying off at the end. By looking at the trends Ikea went through one could assume that they could keep the same vision and be just as successful. I think that being successful depends on the work ethic behind the people running a company. In this case I can say that Ikea is successful because of Ingvar Kamprad’s vision to expand his company and also keeping core values and morals at heart. If the company maintains this vision they will indeed continue to grow and become stronger as an organization.

References