The Internationalisation of IKEA

1
The Internationalisation of IKEA

• Kim Houston
• Catherine Blair
• Laura Carson
• Mary McNicholl

2
Introduction to Ikea

• Founded in 1943
• The Ikea logo is blue and yellow due to its
  heritage
• The Swedish lifestyle is reflected in the Ikea
  product range

3
The Ikea Concept is

• Its to create a better everyday life for many
  people.We shall achieve this through the business
  idea, which 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

4
...

• Ikea asks customers to work as a partner
• So that together Ikea can create a better life
  for everyone.

5
...

• The Ikea group has 154 stores in 22 countries
• Last year a total of 268million people visited
  the Ikea groups stores worldwide.

6
Operating Strategy

• Ikea does not have its own manufacturing
  facilities
• uses sub-contracted manufacturers all over the
  world
• Ikea shoppers are pro-sumers
• Customers have to assemble products themselves
• Ikea provides catalogues, tape measures, shopping
  lists, pencils.

7
How the Ikea Group Works

• Work at Ikea is organized to match the needs of
  the customers to the potential of the suppliers
  in the best possible way.
• Ikea co-workers all over the world contribute

8
Group Support Functions

• Finance and Treasury
• PR Communications
• Social Environmental Affairs
• Property

• Risk Management
• Legal Affairs
• Human Resources
• Retail Development
• Logistics

9
Ikeas Culture

• Ingvar Kamprad believes
• Most things still remain to be done - a glorious
  future! Time is your most important asset!
• Ikea is built upon this philosophy all the way
  from the design teams to suppliers and the
  customer

10
Ikeas Culture Continued

• The aim of Ikea is to eliminate excessive levels
  of management with a very flat organization.
• Bureaucracy is fought at all levels
• Kamprad believes that Simplicity and common
  sense should characterize planning and strategic
  direction
• Culture emphasizes efficiency and low cost

11
Why Leave the Domestic Market?

• Reactive or Proactive approach to
  internationalization?
• Ikea demonstrates a proactive approach
• The importance of their own opportunities
  available to them in other markets to exploit
  those opportunities rather than the negative
  factors which existed in their own markets
  (Alexander, 1997)
• Ikeas first store opened in Sweden in 1953
• Ikeas second store opened in Oslo, Norway in 1963

12
Where is IKEA?

• Australia 5
• Austria 5
• Belgium 4
• Canada 11
• China 2
• Czech Republic 3
• Denmark 4
• Italy 8
• Netherlands 10
• Norway 5
• Poland 7
• Russia 2

• Slovakia 1
• Spain 5
• Finland 2
• France 13
• Germany 31
• Hungary 2
• Sweden 13
• Switzerland 6
• UK 11
• USA - 16

13
IKEAS Policy

• Conservative Policy
• Establish supplier links before opening
• Strategic risk reducing approach

14
Format

• The organisation allowed rapid growth
• Expansion group
• Construction group
• Initially had a very flat management style
• Open management characterises Ikea

15
How?

• Fully Owned Subsidiaries
• Stable markets which are deemed identical to the
  home market
• Set up by expansion team
• This is used in Europe and N America

16
Franchising

• Unknown, high risk markets
• Expansion group is involved
• Carries basic items
• They are compared to overall corporate
  performance
• Fees are paid to IKEA
• Able to maintain centralised control

17
Time Line

• 1958 Almhult
• 1963 Norway
• 1965 Stockholm
• 1969 Denmark
• 1973 Zurich Switzerland
• 1974 Munich Germany
• 1975 Australia
• 1976 Canada
• 1977 Austria
• 1979 Netherlands
• 1981 - France

• 1984 Belgium
• 1985 USA
• 1987 UK
• 1989 Italy
• 1990 Hungary Poland
• 1991 Czech Republic United Arab Emirates
• 1996 Spain
• 1998 China
• 2000 - Russia

18
Switzerland

• This was their first store outside Sweden
• Ignored the fact that furniture here was of
  traditional design
• Attracted 650,000 visitors in first year

19
Germany Oct 74 - 2003

• Constituted the largest market for furniture
• Large store in Zurich
• 1974 opened near Munich
• IKEA differentiated themselves by offering
  immediate delivery
• 37,000 visitors in first 3 days
• Legal proceedings against IKEA

20
...

• Began to be acknowledged
• 10 new stores in the next 5 years
• 50 share in the cash and carry segment

21
Canada March 76 - 2003

• In 1979 bought a problem franchise in Canada
• He turned it into a lucrative business within
  three years
• Continued to grow within Canada

22
America June 85 - 2003

• Had enormous potential
• Imitators appeared e.g. Stor
• Management decided to accelerate its expansion
  plans
• 1990 began to struggle
• Now going from success to success

23
Management Change

• In 1986 appointed Andres Moberg as president
• Before this the company had been managed
  informally
• Impacted on management style
• Formal budget and planning process

24
Corporate Plan

• Was developed for three years
• Aims -
• Finding low priced materials
• Matching products to capabilities
• Developing long term relationships with suppliers

25
Continued

• Combination of low cost standardisation,
  technology and quality
• IKEA Rail 2001
• The catalogue is now produced in 34 languages

26
Further Expansion

• 1987 entered the UK
• 1989 entered Italy
• Plans to build a presence in Russia and East
  Europe
• 1st East Europe outlet was in Budapest- Joint
  Venture

27
Further Expansion continued

• 1988 Ikea Poland built a 25M warehouse and
  retail centre
• Established a joint venture with a woodworking
  factory
• Office in Vienna coordinated the activities in
  Eastern Europe

28
Facts and Figures

• The turnover for the year 1/09/2001 31/08/2002
  was 12bn Euro
• Turnover per region
• Middle East, Australia, Asia 4
• North America 19
• Europe 77

29
Top Five Sales Countries

• Germany
• UK
• USA
• France
• Sweden

30
Future

• Japan has been announced as the next venture
• Want to open two stores in Tokyo
• Focus on the US is on existing markets
• New stores and relocations
• New distribution centres
• Somerville
• No plans for Ireland at the moment

31
Conclusion

• Ikea at first did not recognise the need to adapt
  to culture
• Needed to decide how far they could push their
  common concept in other countries
• Ikea does not manufacture its own products but
  works with a complex network of suppliers
• Success is based on the idea of keeping the cost
  between manufacturers and consumers down