The IKEA Case Study reportIntroductionThis report is based on a case study of IKEA, an international furniture retailer. It goes to point out the challenges of international purchasing, the potential risks anticipated, the possible solutions of identified international purchasing challenges and their recommendations. IKEA an international furniture retailer was started in the 1930s by Ingvar Kamprad. The word IKEA is derived from a combination of initials from family names and Swedish family farm namely; Ingvar Kamprad, Emtayd and Agunnard. Ingvar Kamprad founded IKEA at the age of 17 where it started as a mail order company.
He initially used the family kitchen as an office while selling fountain pens, binders, cigarette lighters that he had bought form local shopkeepers. His turning point came when he added furniture to his newsletter in 1948. In 1951, Kamprad opened a display store for clients to view the products before purchasing them. The display store was such a success that IKEA stopped accepting mail orders. He adopted the modern IKEA concept of using a catalogue to lure people to visit an exhibition so that they can see the interior for themselves, touch the furniture and make orders.
In 1953, he introduced another IKEA feature that would cut costs of transport and storage. This was the self-assembled furniture concept that saw IKEA produce packages for clients to purchase and put together by themselves at home. This enabled Kamprad to reduce his prices thus gaining a large customer following of young post war householders who wanted well designed affordable furniture. Between 1053 and 1955, IKEA sales had doubled from SEC 3 million to SEC 6 million. From Domestic to InternationalAs the sales grew locally, the need to meet demand for furniture sources grew thus IKEA had to look for other sources of material supply from abroad.
Kamprad sourced for contractors from Poland, an eastern bloc communist country at that time. This move provided supplies at low costs thus enabling him to further reduce his prices. Thus IKEA concept of supporting long-term relationships with suppliers grew. This created a mutual dependency between IKEA and its supplies thus ensuring quality output and reliability. In 1963, IKEA expansion program entered Oslo, in Norway.
Two years later they self-financed a store in Stockholm with a suburban showroom which had ample parking. This made savings on home delivery and assembling costs. IKEA ventured into Sweden in 1973 and in 1974 went into its largest market, Germany. In every new store IKEA used the same concept of introducing a catalogue and advertising (offbeat) thus financing each entry with previous successes. IKEA grew developing solid concepts along the way. Large suburban stores with furniture in packages that clients could carry home and re-assemble became the norm of the day.
Customer exposures to product range was made easy when a design and set-up were predetermined by the company, Some of the set-up designs included the introduction of living room interior designs, children playground, low cost restaurant and Swedish grocery shop. This led to the expansion of IKEA from a retail furniture company to one that had a range of furnishing products including textiles, kitchen utensil, mugs and carpets, plants flooring material and so forth.