Process of Establishment

What began as a small store …

…. become one of the most successful businesses today, with 349 stores in 43
countries.
Process of Establishment

Ingvar Kamprad Elmtaryd Agunnaryd

Process of Establishment

Ingvar started selling furniture…

… keep the costs low!

Philosophy of the Company-
What factors account for the success of IKEA?

Strategy :
Product differentiation and cost leadership

 more than 9,000 different products

 This vision, "to create a better everyday life for the many people,"
reflects this strategy in an effective manner!

…wide range of well-designed, functional home furnishing products at low

prices that as many people as possible will be able to afford.
Philosophy of the Company –
How to become a cost leader?

Constantly trying to lower production and distributive costs

• Flat-pack – reduces packaging costs

• Furniture assembled by consumer – reduces transportation cost

• High volume production – economies of scale

Philosophy of the Company –
Ikea is not just a store

 Ikea customers typically spend more time in the stores

 Ikea distinguishes itself from the rest of the competitors

….Shopping in Ikea is an experience!

 Philosophy of the Company –
Ikea, the healthy way of life

IKEA is aware of the important effects of social responsibility

• minimize any negative impact on the environment

• renewable and recyclable materials

• lower emission of CO2

Org Chart of IKEA
Subsidiaries
Actually IKEA doesn’t have that much subsidiaries, maybe the reason for this,
can be the pureness of Småland whoever knows…
Corporate Structure

 Because they are not quoted to stock exchange IKEA’s corporate structure
is emerges from union of so many global corporation, but the ruling Holding
is located on Netherlands
Managerial Context

 Accountability of employees in IKEA can be described as following: Store

employees-Store Manager-Service Offices-Headquarters
 IKEA has a strong Organizational culture, for that reason it is hard to see
contradictious people in the organization, there is a strong hierarchy
related with profession.
Code Of Ethics

 IKEA is in an everlasting war with some unethical issues. Some of this issues
are listed below:
 Child Labor Issue
 Environmental Polution Issue
 Fair Wages to Employees of Suppliers.
 And Finally a Vital one, Safety in work area
Child Labor Issue

 IKEA strictly controls if there is a child worker in their suppliers facilities or not,
IKEA is famous with its anti-child labor act in retailing business.
Environmental Polution

 IKEA is controling its suppliers relations with nature. If a supplier of IKEA is not
interested with preventing environmental polution, IKEA has rights to
terminate its contract with this supplier.
Employee Issues

 Fair wage and safe working conditions should be provided for employees
by the suppliers of IKEA if they want to work with IKEA.
Planning In IKEA

 Downside you are seeing King Arthur and the knights of the round table.
The thing with the round table is, everyone has the same statue in the roud
table so they can reach their voice to the king easily. IKEA has a planning
practice like this, everyone has right to say his or her own opinion and this
thoughts would be regarded as important resource regardless of empty
talks.
Working Environment

 There is no room system in the IKEA Headquarters so everyone works side by

side.
 Here is a picture from Phoenix Office of IKEA:
Motivation of Employees

 Since there is a promotion based system in IKEA, it is not so hard to motivate

employees. IKEA is also making a profit share with its employees and that is
huge motivator for employees.
Competitive Advantages

 IKEA is a giant company who sits on the throne of world furniture retailing
industry, for that reason they have so much competetive advantages,
some of them can be listed as;
 R&D
 Economies of Scale
 Unique Designs
 Rooted History
 Excellent Service
 Social Responsibility
R&D

 Research and Development in IKEA is crucially important, nowadays IKEA

launched a R&D Center at Orla, Denmark.
 Since IKEA selling more than 1 million piece of product in a day small
decreases in costs means big profits for company, so R&D process is so
important and primary for them.
Economies of Scale

 IKEA has an incredible purchasing power, for that reason IKEA can offer the
quality furniture for so low prices.
Unique Designs

 IKEA has one of the best furniture designers in the world, with the help of this
designers IKEA can give whatever they need to its customers.
 And also the IKEA style and culture should not be missed out.
Self Assembling

 You should self assemble a product you’ve bought from IKEA, at first glance
it can be regarded as a negative thing but we think it gives the feeling of
accomplishment to human being, and for that reason it is an advantage.
Rooted History

 IKEA is a brand that has a glorious history. They are in the furniture business
since 1941.
 This history provides so much data about the furniture industry to company,
and with the blend of this data with experience, IKEA got the first seat in
furniture retailing industry in 2007.
Social Responsibility

 Social Responsibility is the most important thing for the sustainibility of a

business.
 IKEA has its own charity organization; IKEA Foundation for children in
poverty.
 IKEA is also doing project based social responsibility like sending 500.000
blankets to Pakistani Eartquake in 2006
 In 2009 UNICEF announced that IKEA Foundation has become the biggest
partner of agency.
Social Responsibility(Continuing)

 IKEA is also selling soft toys for the benefit of children, and also giving free
gift soft toys to children as a social responsibility. It is so easy to make a child
happy, and they are making this.
Smaland(Play Ground) and Swedish
Meatballs
 This places are also a competitive advantages for IKEA.
 They are making people to enjoy the delicious food for reasonable prices when
shopping.
 IKEA also has a playing ground called Smaland(hometown of IKEA) that has the
atmosphere of a Swedish forest. Parents can give up their childrens to Smaland
for free and enjoy the shopping knowing their child is happy and safe.
 This secondary things made up an evolutionary concept like IKEA, and this
makes IKEA shops special.
Financial Commentary

 Since IKEA not quoted to stock exchange we cannot have so much

detailed information about the business of IKEA but they are announcing
some figures to public.
 In the light of this figures, we can say that IKEA has a robust financial
position, some numbers are listed below:
Sales Income(2000): 9 billion Euros
Sales Income(2014): 28 billion Euros
Owner’s Equity(2000): 2.1 billion Euros
Owner’s Equity(2014): 30 billion Euros
After the millenium IKEA did so much to achieve to this point, and they are
at a perfect financial position now.
Risks and Threats in Business

 Actually there is not so much to worry for IKEA at this point cause their
situation is stable.
 Giant competitors could want to join this market, if IKEA fails to protect its
uniqueness and cheap price, this competitors can be a problem for them.
 Another risk for IKEA can be the change in trends and type of buyers.
Final Conclusions

 IKEA is the leader company in terms of charity donations and recycling, this
makes them a lovely brand in the eye of the customer.
 IKEA is one of the first companies starts to share its profit with its employees
and this profit sharing idea is putting the company to a good place on
employees eye.
 They are finely managing every situation and there is not that much
predictable risks for them , because of this they are in a really stable
situation.
THANK YOU FOR LISTENING US!

 Yağız ELVER
 Viktoria Fröhlich
 Gözde Karakuş