IKEA

Question 1

Ikea is a family firm

Answer 1

true

Question 2

Kamprad’s vision

Answer 2

broke the rules, turned problems into solutions, and creative solutions

Question 3

furniture market in the 1950s was booming

Answer 3

true

Question 4

manufacturers and retailers were cartelized

Answer 4

true

Question 5

Ikea’s strategy

Answer 5

• target: young couples, low to middle-income group
• product range: simple, contemporary lines, in a durable and inexpensive manner, using unconventional materials and designs
• broke away from cartel (high capacity utilization: low prices and high quality–> thin margins)
• stores in suburbs (friendly ambience, non-threatening to lower middle class, anticipated use of automobiles, self-service, cash-and-carry to trimp on distribution costs)
• unconventional promotion (good store layout, product display, CATALOGS, few in-store salesperson )

Question 6

Internationalization

Answer 6

in 1970s, Swedish market was stagnating
arguments against it:
- furniture industry appears a regional business
-regional tastes vary widely
- furniture is heavy and bulky, transport costs would limit the market
- tastes may change over time and a local firm can react more quickly

Question 7

Did IKEA integrate backwards?

Answer 7

no, but it used its size to gain a strong bargaining position against suppliers, to get low prices, design control and deliveries on schedule
–> retained almost total control over this part of the value chain

Question 8

IKEA: economies of scale/scope?

Answer 8

scale due to its size

Question 9

Explain IKEA’s delivery channels

Answer 9

they were very complex (dispersed), but the large throughput across its delivery channels reduced the fixed cost load of distribution

Question 10

IKEA’s management

Answer 10

yin-yang system of loose systems but tight control:

• creativity/standardization
• rigid systems/management by running around
• atmosphere informal and relaxed/no security behind status
• complicated rules paralyse/ detail is retail

Question 11

Kamprad’s role

Answer 11

• ideals such as quality of everyday life, democratization of society
• principles: simplicity, frugality, attention to detail, willingness to experiment with new ideas
• maintaining contact with operations staff
• tax evasion (charitable foundation, Switzerland)