Sunday, 7 August 2011


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Question 1

• The tradition to hand down furniture from generation to generation was giving way to young householders looking for new yet inexpensive furniture.

• Between 15 and 146 furniture prices went up by 41% faster then other household goods. IKEA took advantage of it with high quality furniture and lower prices.

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• IKEA never gave up selling despite the constant barriers put down by the traditional retailers in Sweden.

• IKEA took under consideration the impact of automobiles on shopping habits, and gave priority to ample parking space. They also positioned their outlets outside the big cities so the rent was cheaper then the down town places.

• Their basic practices like self service, informative catalog, explanatory tickets on furniture, the knock down kits and the cash and carry concept helped them be the industry low price leader.

• They focused on young buyers who were looking to furnish their first apartments.

• Using a warehouse for the customer benefit.

• IKEA made it’s problems for an advantage (banning of order taking, cartel refuse to sell) for �finding better solutions like using independent furniture makers at a lower price.


• In the early 70’s growth in the Swedish furniture business was stagnating so in order to expend IKEA had to turn to new markets and the closest was Europe. After gaining the economies of scale it could penetrate the biggest market in the world � USA.

• Ingvar vision of expending (it’s our duty to expend)

• The challenges IKEA faced were many

o First they were in a different ball park, if in Sweden they knew the furniture the Swedes want in other markets like Germany and Switzerland the furniture was from a traditional design.

o They couldn’t be sure that their basic practices would work in all the countries.

o As the company expends world wide it is hard to maintain the culture cause different people in different places have a different set of norms. In addition the organizational structure should be different in places like USA where people were waiting for their assighnments.

o How to maintain the same standards in different countries with different needs.

o Should they adapt the furniture for every country (USA shelves for TV while in Europe for books).

o Risk capital investment in every new branch in a new country.

o East Europe countries don’t allow money transfers so they had to export furniture instead on the account of money.

o Economies and political reforms in the east Europe block.

• IKEA over came the challenges by

Challenge solution

Importing furniture from east Europe instead of sharing dividends and capital repayments

Opening only one store in each country, and if its successful follow with further expansion.

Reforms in organizational structure during the years in order to fit to the world wide expansion.

The pioneering spirit of a core group allows the international expansion to succeed. This way the culture is maintained

Responsibilities shifting frequently and careers progressed rapidly.

Building the exact same stores in each and every country. Standard in store display areas down to last centimeter of layout design.

Adapting 0% - 0% of the furniture design for each country.

IKEA ambassadors spreading the company’s philosophy and values and acting as rule models.


• Reforms in organizational structure. 70’s expansion group + operations group…

• 80’s reorganization into 4 geographical regions with purchasing distribution and design centrally controlled.

• Pioneering group..

• Self management of workers

• Developing long term relationships with suppliers.

• Strategy from the first article (IKEA answer).

Question 4

End of page ..

Question 5

• Competitors can manufacture in the far east (cost leadership chapter 4)

• Creating a new brand for upper middle class…merge acquisition.

• Selling through the internet.

• Business furnishing in new offices.

• Spare parts.

• Consulting.

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