IKEA is a privately-held, international home products retailer that sells flat pack furniture, accessories,
and bathroom and kitchen items in their retail stores around the world. The company, which
pioneered flat-pack design furniture at affordable prices, is now the world's largest furniture retailer.
IKEA was founded in 1943 by 17-year-old Ingvar Kamprad in Sweden and it is owned by a Dutchregistered foundation controlled by the Kamprad family. The company which was originated in
Småland, Sweden, distributes its products through its retail outlets. As of August 2009, the chain has
301 stores in 37 countries, most of them in Europe, North America, Asia and Australia.
The IKEA Concept began when Ingvar Kamprad, an
entrepreneur from the Småland province in southern Sweden,
had an innovative idea. In Småland, although the soil is thin
and poor, the people have a reputation for working hard, living
frugally and making the most out of limited resources. So
when Ingvar started his furniture business in the late 1940s,
he applied the lessons he learned in Småland to the home
furnishings market. Ingvar's innovative idea was to offer home
furnishing products of good function and design at prices
much lower than competitors by using simple cost-cutting
solutions that did not affect the quality of products. Ingvar
used every opportunity to reduce costs, and he scraped and
saved in every way possible - except on ideas and quality. The name IKEA comes from the initials of
Ingvar Kamprad, I and K, plus the first letters of Elmtaryd and Agunnaryd, which are the names of the
farm and village where he grew up.
Despite its Swedish roots, IKEA is owned and operated by a complicated array of not-for-profit
for-profit corporations. The IKEA corporate structure is divided
divided into two main parts: operations and
franchising. Most of IKEA's operations, including the management of the majority of its stores, the
design and manufacture of its furniture, and purchasing and supply functions are overseen by INGKA
Holding, a private, for-profit
profit Dutch company. Of the IKEA stores in 36 countries, 235 are run by the
INGKA Holding.. The remaining 30 stores are run by franchisees outside of the INGKA Holding.
INGKA Holding is not an independent company, but is wholly owned by the Stichting
Foundation, which Kamprad established in 1982 in the Netherlands as a tax-exempt,
tax exempt, not-for-profit
foundation. The Ingka Foundation is controlled by a five-member
five member executive committee that is chaired
by Kamprad and includes his wife and attorney.
hile most IKEA stores operate under the direct purview of Ingka Holding and the Ingka Foundation,
the IKEA trademark and concept is owned by an entirely separate Dutch company, Inter IKEA
Systems. Every IKEA store, including those run by Ingka Holding, pays
pays a franchise fee of 3% of the
revenue to Inter IKEA Systems. The ownership of Inter IKEA Systems is exceedingly complicated
and, ultimately, uncertain. Inter IKEA Systems is owned by Inter IKEA Holding, a company registered
in Luxembourg. Inter IKEA Holding,
ng, in turn, belongs to an identically named company in the
Netherlands Antilles that is run by a trust company based in Curaçao. The owners of this trust
company are unknown (IKEA refuses to identify them) but are assumed to be members of the
In Australia, IKEA is operated by two companies. Stores located on the East Coast including
Queensland, New South Wales, and Victoria are owned by INGKA Holding. Stores elsewhere in the
country including South Australia and Western Australia are owned by Cebas Pty Ltd. Like
elsewhere, all stores are operated under a franchise agreement with Inter IKEA Systems.
The IKEA vision, business idea and market positioning statement provide a framework for all IKEA
marketing communication worldwide.
The IKEA vision is "To create a better everyday life for the many
people." To meet this vision IKEA provides many well-designed,
functional products for the home. It prices its products low so that as
many people as possible can afford to buy them.
However, in creating low prices IKEA is not willing to sacrifice its
principles. ‘Low price but not at any price’ is what IKEA says. This
means it wants its business to be sustainable. IKEA supplies goods
and services to individuals in a way that has an overall beneficial effect
on people and the environment. Customers all over the world have
responded positively to IKEA’s approach.
The business idea is "To offer a wide range of well designed, functional home furnishing products at
prices so low that as many people as possible will be able to afford them."
The market positioning statement is "Your partner
ner in better living. We do our part, you do yours.
Together we save money."
The IKEA Concept is based on offering a wide range of well designed, functional home furnishing
products at prices so low that as many people as possible will be able to afford them. Rather than
selling expensive home furnishings that only a few can buy, the IKEA Concept makes it possible to
serve the many by providing low-priced products that contribute to helping more people live a better
life at home. The IKEA Concept guides the way IKEA products are designed, manufactured,
transported, sold and assembled. All of these factors contribute to transforming the IKEA Concept into
Fundamental activities such as eating, sleeping, storing items, socialising and so on create a demand
for furniture and practical products that solve essential human needs. The IKEA product range meets
these needs by offering a wide range of well-designed, functional home furnishing products at prices
so low that as many people as possible will be able to afford them. The IKEA range includes products
for every part of the home.
1. Design- While most retailers use design to justify a higher price, IKEA designers work in
exactly the opposite way. Instead they use design to secure the lowest possible price. IKEA
designers design every IKEA product starting with a functional need and a price. Then they
use their vast knowledge of innovative, low-cost manufacturing processes to create functional
products, often co-ordinated in style. Then large volumes are purchased to push prices down
even further. Most IKEA products are also designed to be transported in flat packs and
assembled at the customer's home. This lowers the price by minimising transportation and
storage costs. In this way, the IKEA Concept uses design to ensure that IKEA products can
be purchased and enjoyed by as many people as possible.
2. Function- The many people have many needs. They live with kids. They need more storage.
They have to make the most out of a small space. So IKEA designers are always seeking
new ways to improve people's lives - without emptying their wallets. But how can good design
and function be combined with good quality, all at a low price? It starts with focusing on
what's important. Will an expensive finish on the back of a shelf or under a table-top improve
the function? Absolutely not. So IKEA designers do not do it, because a product is of no use
to the customer if it is not affordable.
3. Low Price- Low price is a prerequisite for the IKEA Concept to realise the IKEA vision - "to
create a better everyday life for the many people". As the IKEA Concept aims to serve "the
many people", the IKEA product range needs extremely low price levels. IKEA designers do
their part to keep prices low by using production capabilities from other areas in unique and
previously unimagined ways - like having a shirt factory produce furniture upholstery. Or using
leftover materials from the production of one product to create an entirely new one. IKEA
customers also contribute to keeping prices low. They select and pick up the products
themselves, transport them home and then assemble them themselves. And they can ...
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