IKEA

Case

Author: Author:
Robert D. Hisrich
&
Claudine Kearney
Online Pub Date: March 06, 2016 | Original Pub. Date: 2013
Subject: Creativity & Innovation in Business, Entrepreneurial Strategies
Level: | Type: Indirect case | Length: 1299
Copyright: © SAGE Publications, Inc. 2014
Organization: IKEA | Organization size: Large
Region: Northern Europe | State:
Industry: Manufacture of furniture
Originally Published in:
Hisrich, R. D. , & Kearney, C. ( 2013). Scenario: IKEA. In Managing innovation and entrepreneurship (pp.
106– 109). Los Angeles: SAGE Publications, Inc. ISBN: 9781452241357.
Publisher: SAGE Publications, Inc.
DOI: http://dx.doi.org/10.4135/9781506323152 | Online ISBN: 9781506323152
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Abstract
This case reviews the entrepreneurial example of IKEA and the expansion of the company. It
examines the profile of the company's founder, the innovative Ingvar Kamprad, and his early
beginnings in his hometown in Sweden.

Case
Ingvar Kamprad was born in southern Sweden on March 30, 1926, and was raised on a farm called Elmtaryd
near the small village of Agunnaryd. Even as a young boy, Kamprad had an entrepreneurial spirit. At the age
of 5, he discovered a good profit could be made by buying matches cheaply in bulk in Stockholm and then
individually reselling the matches to his neighbors in the country. He started by selling matches to his closest
neighbors, but by the time he was 7, Kamprad put his growing match business on wheels, using his bicycle
to sell matches to customers farther and farther from Elmtaryd. Gradually, Kamprad expanded his business
offerings from selling only matches to also selling flower seeds, greeting cards, holiday decorations, pencils,
and ballpoint pens.

In 1943, when Ingvar Kamprad completed school at the age of 17, his father gave him some money as a
reward for doing well. Kamprad, the eternal entrepreneur, used this money to establish IKEA. The name IKEA
was formed from his initials (I and K) and the first letters of Elmtaryd and Agunnaryd, the farm and village
where he grew up. Initially, IKEA focused on the products Kamprad was already selling, but gradually the
company expanded the product offerings to include wallets, watches, and jewelry. Within 2 short years, IKEA
grew to such an extent that Kamprad could no longer make individual sales calls, and he launched a mail
order service to continue meeting the growing customer demands for his products.

In 1948—just 5 years after starting IKEA—Kamprad introduced his first line of furniture using local
manufacturers in the forests close to his home to supply the finished goods. The furniture line was a huge
success, and Kamprad believed IKEA could become a large-scale furniture provider. In 1951, Kamprad
decided to discontinue all other product lines in order to focus the company's attention solely on producing
furniture. He launched the IKEA catalog strategy, which today remains one of IKEA's major advertising
strategies. However, around this same time, IKEA became embroiled in a pricing war with its main competitor.
As the two companies continued lowering prices, Kamprad became concerned about the quality of the
furniture and the image customers would have of their quality. To address these concerns, in 1953 IKEA
opened its initial furniture showroom to demonstrate the function and quality of IKEA's low-priced products.
Located in Älmhult, Sweden, this first showroom was well received by customers because, for the first time,
they could see the products in real life before purchasing them. The showroom concept worked, and it
became a competitive differentiator with customers choosing IKEA over its competitors, leading to greater
sales volumes.

In 1956, IKEA embarked on another mission that would change the company forever. In response to
a supplier boycott organized by their competitors, IKEA began the process of vertically integrating their
company by designing their own furniture. Coincidentally, around this same time, a local draughtsman
realized that if he took the legs off an IKEA table, he could fit the table into the trunk of his car. Kamprad
recognized the advantages of shipping furniture in such a way, and almost overnight, IKEA launched the
flat pack model and revolutionized the company and the furniture industry. Going forward, IKEA designed
furniture that could be shipped in flat packaging and assembled by customers after purchase, leading to
easier transportation of furniture to customer homes as well as lower prices.

Throughout the next decade, IKEA expanded its stores from Sweden to neighboring countries including
Denmark, Germany, and Switzerland. As increasing numbers of people showed up at IKEA showrooms,
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Kamprad decided to change the layout of the stores from that of a showroom to a self-service warehouse
model that allowed customers to select and load their own furniture. This helped IKEA to further improve the
customer experience and drive costs down even further. Wherever IKEA expanded to, it was successful in
creating a cult-like following from its customers. IKEA opened its first store in the United States in 1985 and
has grown today to be a global retail brand with over 131,000 employees. As of August 2011, the IKEA group
operated 287 stores in 26 countries.

Kamprad's vision has been the driving force behind IKEA's continued success. In 1976, Kamprad wrote and
published The Testament of a Furniture Dealer, documenting IKEA's vision and business idea, which had a
strong influence on the development and vitality of IKEA's corporate culture. From inception, IKEA has been
dedicated to meeting customer demands and providing them with high quality, well-functioning products at
low prices. IKEA in its design thinking has intentionally kept product lines simple to minimize the potential for
damage during transport and make it easier for customers to take their furniture home themselves. Kamprad
believes his company exists not just to improve people's lives but also to improve the people themselves
(“Famous Entrepreneur Advice,” n.d.). By allowing customers to select their furniture from the self-service
warehouse store and to easily assemble their furniture at home, Kamprad believes he is improving customers'
self-sufficiency and self-confidence. The vision of IKEA helping people to improve themselves is reinforced in
IKEA's advertising and catalog.

Despite being one of the richest people in the world, Ingvar Kamprad also has a legendary reputation for
thriftiness. He has always tried to set a good example for his employees by working hard and cutting costs
wherever he can. He is the personification of the company he created and inherently understands that his
workers look to him for direction. Kamprad's level of frugality is matched only by his desire to make the most of
his time. One of his most important maxims that he outlines in his The Testament of a Furniture Dealer is that
“most things still remain to be done.” It is with the goals of efficiency and persistent work that the corporate
philosophy of IKEA is built upon. An example of this is IKEA's focus on strictly maintaining a flat management
structure within the organization.

Kamprad has repeatedly refused to take IKEA public, stating that it would slow the quick decision-making
processes that allowed for IKEA's phenomenal growth. In 1982, Kamprad established IKEA Group and gave
his shares to Stitching INGKA Foundation, a charity supporting “innovation in the field of architecture and
interior” (“IKEA: Flat-pack accounting,” 2006). Kamprad made this move for the express objective of avoiding
high taxes in Sweden and to ensure the company he worked so hard to build could not be ruined or sold by
future members of the Kamprad family. In 1986, Kamprad retired from the CEO position and has since taken
up an advisory role to the holding company.

Through working hard, having a keen ability to turn obstacles into competitive advantages, and encouraging
what is now labeled as Design Thinking, Kamprad successfully built one of the largest and most profitable
companies in history and distinguished himself as one of the most savvy and successful entrepreneurs of our
time. Although his career has not been without its share of controversy, Kamprad has always owned up to his
mistakes and is famous for saying, “Only those who are asleep make no mistakes” (“SUCCESS Quotes by
Legendary Billionaires,” n.d.).

References
Famous entrepreneur advice. (n.d.). Retrieved March 17, 2013, from www.evancarmichael.com/Famous-
Entrepreneurs/825/summary.php.
IKEA: Flat-pack accounting. (2006). The Economist, 379, no. 8477, May 11, 76.
Kamprad, I. (1976). The testament of a furniture dealer: A little IKEA dictionary. Netherlands: Inter IKEA
Systems B.V.
SUCCESS quotes by legendary billionaires. (n.d.). Retrieved March 17, 2013, from www.mycomeup.com/
Success-Quotes/SUCCESS-Quotes-By-Legendary-Billionaires-Updated-Version.html.
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