Ikea Case Study- (Business Model)
Everybody knows that Ikea offers the products at a very lower price than any retail shop.
In this blog, we’ll talk about Ikea Case Study(Business Model) as the Swedish furniture company opened its first retail store in India.
Like Walmart acquired Flipkart and entered the Indian Market. Ikea can destroy the Whole Furniture Market in India.
Ikea has invested 800 crores in India, It has more than 9500 Products and has more than 350 stores in 35 countries.
According to CNN, the new store is spread across 400,000 square feet in the southern city of Hyderabad & plans to invest 105 billion rupees in India.
But have you ever wondered? How Ikea works?
What is the meaning of IKEA?
How IKEA works?
How IKEA business model earns ?
I will be answering all your questions. This IKEA case study will help you get to know about IKEA business model, it’s history & much more:
So, let’s get started:
First of all let us find out what does this IKEA Case Study offers:
WHAT IS IKEA?
IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943.
IKEA is a globally renowned furniture retailer that sells ready-to-assemble furniture, kitchen ware and home accessories.
The company started with selling pens, wallets, jewellery with the concept of meeting consumers demands at the most affordable prices.
After five years into the business, IKEA brought in the furniture. Since then furniture has been the main stream for the business.
IKEA furniture is now a well-known multinational brand.
Let us find out through this IKEA case study about their meaning.
You must be wondering that what is the story behind the unique name the brand has.
The name IKEA isn’t just a fun.. it stands for – Ingvar Kamprad Elmtaryd Agunnaryd.
Short form is more cool to pronounce right ? But it actually has a deeper meaning.
The first two letters of IKEA i.e. I and K are the initials of the name of the founder Ingvar Kamprad.
While, ‘E’ comes from the name of the farm he grew up on – Elmtaryd.
And the last letter ‘A’ comes from the Swedish village, Agunnaryd, where the farm was located.
HOW IKEA EARNS? – IKEA BUSINESS MODEL
In 2017, Ikea profit was 912 Million Dollar. But how?
IKEA Business model is a Price-leadership model. Low prices are the main concern stone of the IKEA vision, business idea and concept.
Do check our blog on Michael Porter’s Generic Strategies where we have discussed Cost leadership in Detail
In the world of IKEA furnishings, the products are named after Swedish towns like Aneboda, Akurum, and Anordna.
But the costumers worry less about the names and care more about how much they cost.
Ikea furniture is a beacon for bargain hunters. Its whole business model evolves around selling their product at the lowest price possible.
IKEA business model revolves around their vision which is – offering a very wide range of well-designed, functional home furnishing products at so low prices that as many people as possible will be able to afford them.
Anybody can make a high-quality product for a high price, or a poor-quality product for a low price.
IKEA follows a different approach, they have developed methods that are both cost-efficient and innovative.
Before designing the product… they decide the price tag.
Their designers begins with designing of the product after keep the price in mind.
The IKEA Group has 31 distribution centres in 16 different countries, supplying goods to IKEA stores.
It has about 45 trading service offices in 31 countries.
They have very close relationships with their 1,350 suppliers in 50 countries.
IKEA’S SMART SECRET
Is IKEA – a Non- profit organization. ?
You must be having a lot of questions by now, like if IKEA is a non profit organization then –
How do they manage their running cost?
Where all the money goes away?
Where does all this money earned is utilised?
You will get all your answer right away as you continue reading.
I would say a big YES,
IKEA has a little known secret: the company is a non-profit
They grew with a vision that states ‘to create a better everyday life for the as many people as possible. And on a mission to offer a wide range of home furnishing products at a price so low that as many people will be able to afford them.’
Beside the vision and mission, the main motive of showing itself a non profit organization could be seem as business driven.
IKEA employs about 135,000 people. Because of tax rules for non-profits, IKEA pays about 33 times less taxes than their for-profit competitors.
There is one more big hole in this whole IKEA non profit organization.
Money is not trapped inside Ikea’s foundation.
The Ikea trademark and the concept is owned by another private company named Inter Ikea Systems.
So, to operate Ikea stores and use the brand name, the non profit Ikea have to make payments each year to the private company – Inter Ikea Systems.
This clearly means, money is paid directly from IKEA profits to the owners of this private company to license the trademark.
The beneficiaries or we can say owners of this private company are not publicly recorded, but it’s not hard to speculate that the Kamprad family is on the receiving end of this loop hole.
HISTORY OF IKEA- STARTING AND GROWTH
Lets talk about the exciting history timeline of IKEA.
From the of how it is started to the story of how it evolved exponentially.
It all started in 1926 when founder Ingvar Kamprad is born in Småland in southern Sweden.
In the year 1948 – Furniture was introduced into the IKEA range.
Local manufacturers produced the furniture for IKEA in the forests close to Ingvar Kamprad’s home.
In the year 1956 – IKEA came up with the idea of designing furniture for flat packs. It started focusing on self-assembling furniture models.
In the year 1980s – IKEA expands dramatically into new markets such
as USA, Italy, France and the UK.
In the year 1984,
Ikea family was introduced new club for the customers was launched.
Today, Ikea family is in 16 countries (over 167 stores) and has about 15 million members. This number will rise in future because of IKEA’s successful business model.
Marketing Strategy of IKEA
Have a look at this Video on 7 P’s of Marketing.
Products of IKEA
- Children’s IKEA
- Bathroom storage
- Beds & mattresses
- Clothes storage
- IKEA FAMILY products
- Kitchen cabinets & appliances
- Small storage
- Sofas & armchairs
- Storage furniture
- Swedish food
- Textiles & rugs
- Tools & hardware
FINANCIAL FACTS AND FIGURES
Categories – Consumer Electronics, Furniture, Retail, Shopping, Smart Home.
Headquarters – European Union (EU)
Founded Date – 1943
Founders – Ingvar Kamprad
No. of Employees – 10001 +
Legal Name – IKEA BV
Website – www.ikea.com/
LinkedIn – www.linkedin.com/company/ikea-group/
Twitter – https://twitter.com/IKEAUSA
Till now IKEA have only 1 acquisition.
It acquired TaskRabbit on Sep 28, 2017
Mobile app and its downloads, IKEA business model got success from various of it’s mobile application.
IKEA has many mobile apps. But the most popular app is IKEA STORE.
The app is having almost 9,60,333 monthly downloads.
Website and its monthly traffic
IKEA is ranked 166 among websites globally.
And having almost 146,040,680 monthly visitors.
IKEA is the lead investor in 4 companies. Those are –
XL HYBRIDS – IKEA announced its investment in this company on October 12, 2017
MATSMART – IKEA announced its investment in Matsmart on Jan 23rd, 2018
TRAEMAND – IKEA announced its investment in Traemand on Dec 19, 2018
LIVSPACE – IKEA announced its investment in Livspace on Dec 19, 2018
MANAGEMENT AND THE CORE TEAM
CEO – Jesper Brodin
CFO – Alistair Davidson
FOUNDER – Ingvar Kamprad
CORPORATE FINANCE & TAX HEAD – Krister Mattsson
DIGITAL HEAD – Christian Moehring
E-COMMERCE HEAD, SOUTHEAST ASIA – Koen Besteman
UK MARKETING PROCUREMENT HEAD – Maria Malpartida
INNOVATION HEAD – Jens Heitland
SWOT ANALYSIS OF IKEA CASE STUDY
-VISION – ‘to create a better everyday life for many people’
-Economies of scale
-Difficulty to control standards across locations.
– Solutions for a sustainable life at home
-Developing social responsibility
-The recession slows down consumer spending
– More competitors entering the low price household and furnishings markets
IKEA KEY VALUES
They are very strict to their values.
They firmly believe that every individual has something valuable to offer.
Lets look at some of there core values –
1. Cost – Consciousness
There first priority is to make their product affordable to as many people as possible. They challenge themselves constantly to make product more affordable without compromising on quality.
2. Renew and Improve
They always challenge themselves to try something new and to find a better way out.
3. Caring for People and Planet
They believe in caring for people as well as for the environment.
They act as a force for a positive change.
In 2006, Ikea first displayed interest in the Indian market but back then the Indian laws allowed only 51 per cent foreign ownership.
With the government of India relaxing the norms for foreign direct investment (FDI) in single-brand retail, IKEA announced in October their intention to open stores in India.
IKEA opened its first store in India on Aug 9, 2018.
It took IKEA 12 long years to enter the Indian market.
The first store in India was opened in Hyderabad.
Hyderabad, the southern Indian city gave it a roaring welcome.
So far, more than 3 million customers have visited IKEA Hyderabad store and about 8 million have visited IKEA’s India website
In the year 2016, Ikea purchased land in Mumbai and said that it planned to open stores in Bengaluru and Delhi too.
After Hyderabad, in 2019 IKEA has launched its first online store in Mumbai which is offering more than 7,500 products.
It will provide delivery to most of the locations in Mumbai and will have a delivery time of four to seven days, subject to availability and distance.
In India, IKEA currently has more than 55+ suppliers.
Also, have more than 45,000 direct employees and 400,000 people in the extended supply chain.
The company aims to have 25 outlets across the country by 2025. The next store is slated to open in Mumbai in 2019, followed by Bangalore and Gurgaon, on the outskirts of Delhi.
IKEA Case Study has many chapters awaiting to be added!
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