The story of the IKEA Group, the world’s largest furniture retailer, is well known. This highly successful company, based in Älmhult, Sweden, operates 220 stores in 33 countries and has annual sales of 14.8 billion. It has emerged as a global player in one of the most fragmented industries in the world. IKEA has been studied and used as an example by prominent business authors such as Michael Porter, Gary Hamel and Philip Kotler.1
In general, IKEA’s success is attributed to the fact that the company has redefined a number of organizational practices in the furniture business.2 Its use of global product sourcing and customer self-service results in low costs. IKEA has a tendency to choose the cheapest suppliers, and customers pick up, transport and assemble most furniture purchases from IKEA themselves. A portion of IKEA’s savings from low-cost components and customer self-service is then passed on to customers in the form of low prices. In addition, well-designed furniture and an unusual shopping experience result in consumers’ perceiving that they receive superior value for money spent. Although IKEA’s products are simple, most of them benefit from high-quality Scandinavian design. IKEA’s huge stores provide plenty of amenities as well, such as coffee shops, restaurants and even child-care facilities.
Although much has been written about IKEA, one topic has remained virtually unexplored.... To read the complete article, login or sign-up using the form below.
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