IKEA, founded in Sweden in 1943, will be celebrating its 70th birthday this year. Of course, it will also be toasting the fact that it is the world’s biggest furniture manufacturer. So, what is IKEA’s secret recipe?
Anders Dahlvig, IKEA’s previous CEO, who worked for IKEA from 1999 to 2009, wrote in his book “The Ikea Edge” that there are three main points to follow:
1. “A business model wherein the product range and price are the main differentiators between you and the competition”
For IKEA, flat-pack furniture has equalled flat-rate prices. This is certainly the major selling point for the business, but surely it is also IKEA’s range of distinctive designs that separates it from other rivals like Tesco and Argos.
IKEA is stylishly Scandinavian: from its Swedish meatballs to its product names. Beds, closets, and hall furniture have Norwegian place names; whereas children's items are named after mammals, birds, and adjectives.
The product names provide a unique in-joke for Scandinavians and allow for increased flexibility. However, it seems that not everybody is laughing; a Danish researcher from the University of Copenhagen claimed that more expensive items were given Swedish names whereas the Danes were demoted to doormats and rugs.
2. “A vision with a social ambition combined with a strong value base”
IKEA’s efforts to improve society and be an ethical and eco-friendly company are well-known. In 2010 it was named one of the ‘World’s Most Ethical Companies’ for the fourth year running. Both in the store and behind the scenes, IKEA has implemented many policies to help the environment, from rental bikes with trailers in Copenhagen to limiting the amount of formaldehyde used in its products.
Nevertheless, even highly successful companies sometimes have skeletons in the closet (or perhaps the “Elgå” in IKEA’s case). The most infamous recent example occurred when IKEA admitted to having profited from forced labour in East Germany during the 1970s and 1980s.
Unfortunately, despite the awards, the accusations of dubious moral values surrounding the company continue. The Economist’s article “Flat-pack accounting” succinctly summed up IKEA’s alleged attitude to paying tax: “Clearly, the Kamprad family pays the same meticulous attention to tax avoidance as IKEA does to low prices in its stores.”
3. “Market leadership and a balanced global portfolio of markets that defines the company’s short-and–long-term growth ambitions”
IKEA is the market leader for flat-pack furniture with stores in 36 countries. So how have they achieved their growth ambitions?
Where necessary, as IKEA has grown, it has altered its store’s menus in order to fit in with each different country’s culture. For example, the cafés in Saudi Arabia and the United Arab Emirates serve chicken shawarma and beef hot dogs.
Controversially, in 2012 IKEA decided to alter its Saudi Arabian catalogue by airbrushing out all the female models, leaving only ‘fathers’ and ‘sons’ posing with the furniture. Transcreating the catalogue was not a popular decision for the Swedish people, who pride themselves on their excellent reputation for being at the forefront of women’s rights. However, is this decision purely financial or indeed a culturally sensitive one? Perhaps, if you want to be global, you have to be flexible.
What can IKEA bring to the table (or Störnas)?
No company is perfect. Nevertheless, we think that IKEA products are good value for money, ethical, unique and culturally sensitive.
Do you think that IKEA has a good balance of ethics and profit?