- March 19, 2013
- Posted by: essay
- Category: Term paper writing
In this paper we consider the history of a great businessman, who founded a network of European megamarkets of furniture IKEA. Ingvar Kamprad is the well-known Swedish businessman, the founder of IKEA and one of the richest men in the world.
IKEA is one of the largest and most famous furniture producers in the world, many entrepreneurs are studying its history of success. The main secret of the company’s achievements lies in competent leadership of its founder Ingvar Kamprad, who is an example of really talented entrepreneur. His biography and history of business is very instructive and interesting from business point of view, as it can present many useful ideas and approaches for entrepreneurs.
IKEA: the story of the famous European businessman
The company history began in 1926, when was born its founder Ingvar Kamprad in a small Swedish town Elmhult. In his family there were entrepreneurs, though not very successful: his grandfather and grandmother were engaged in trade, which was the cause of large credit debts. Ingvar himself from childhood showed an interest in the commodity-money relations, for example at the age of about 5 years the future founder of IKEA was selling matches. At school age he tried a lot of activities: trading in fish, seeds, cranberries, and even Christmas cards. It is likely that this was his real school of entrepreneurship. After all, the Ingvar Kamprad had no higher education, he never studied business, did not read some business books, and all he knew was based solely on personal experience and attentiveness.
In 1943 he founded the first and the main company IKEA, which traded in pen (the furniture business appeared only 5 years later, and first Ingvar imported pen from France). The name IKEA is, of course, an abbreviation: the first two letters are initials of the Kamprad, the third letter indicates the name of the Ingvar’s father, while the fourth indicates the parish, which attended the young Swede. So, in 1943 was founded the company IKEA. Sales have gone up rapidly, and within 2 years Kamprad began to advertise in local newspapers.
In the late 40’s Ingvar Kamprad turned his attention to an interesting point of local life: a Swedish furniture cost a lot of money and that’s why for many people it was a luxury, or a big purchase. He decided to fix it by opening a furniture store IKEA. To start entrepreneur figured out where to buy the very simple (cheap) furniture in the country: IKEA started to get the cheapest seats, coffee tables. Moreover, Kamprad gave every thing its name, that at that time was a novelty; such a course to some extent allowed to allocate IKEA furniture from competitors. In addition, the public quickly learnt about news cheap furniture store. Thanks to a reasonably good sales Ingvar got enough cash to open own factory.
In 1951 Ingvar Kamprad acquired a small plant in Sweden, where he began to produce more cheap furniture, that was a nonsense in a country where furniture was an expensive commodity. It was virtually worthless for competitors to engage in a price war with IKEA, so the national association of furniture retailers began to dominate local suppliers, employees, including those from IKEA (using their power, they managed to persuade them to cease cooperation with the young company). This could be a severe problem to Kamprad, and maybe for another businessman that story would have a sad ending. But for Ingvar (like any other successful businessman) any major problem was an occasion to seek new opportunities and develop. Frustrated with this situation in his country Ingvar began buying most of the furniture parts in Poland, that allowed to reduce costs, even though that required shipping of details. At the end the problem with local suppliers has led to the fact that IKEA has become the largest furniture manufacturer in the world.
The next step Kamprad aimed at minimizing costs and lowering product prices for consumers was refusal to deliver the furniture, that had to be delivered by the buyers themselves. But for this company had to change their product dramatically, making it sectional, and assembling of furniture from IKEA always was very easy. To this idea Ingvar Kamprad came through one of the strongest features of his character – the propensity to observation. According to the legend a Swede saw how one of the draftsmen of the company put the desktop into the trunk of his car. After this point, the founder of IKEA knew exactly how to solve the problem with the delivery of furniture. Generally, observation was one of the strongest character traits of Kamprad. Many of the ideas used by IKEA, have been introduced after Ingvar heard something on the street, or saw in the shop.
Thus, since 1947 IKEA began selling furniture, and after 4 years they released their first print catalog with products, which today became legendary. Then they were dropped in mailboxes in Sweden, and today millions of customers around the world get such editions. An important rule which was then set by Ingvar Kamprad, was that the prices listed in catalog had to be stable throughout the year. Of course, they can be lowered, but the goods presented in the catalog should not be higher, so as not to mislead consumers. An important point in history was the visit of Kamprad in the U.S., where he met famous shops Cash & Carry, located in the suburbs. It is such a system he has chosen for his shops, as he felt that the future of transport was in cars and for people it would not be difficult to get to the suburbs to buy furniture at low prices. At the same time, stores had to be built in as huge warehouses with self-service and work of consultants. First in Stockholm, then in his hometown Kamprad opened the first trading rooms IKEA. And with the 1963 IKEA went to the overseas market, starting its expansion from Norway.
What is the reason for the success of the company? How the Swedish furniture manufacturer has managed to conquer the world? Firstly, the company originally played on a strategy of low prices, giving a middle class exactly what he had expected, IKEA met its needs. Secondly, Kamprad was one of the first Europeans to have adopted the approach of American Cash & Carry, located in the suburbs. Finally, IKEA proposed a number of additional services that met local needs (for example, coffee shops, which helped people come to after a long journey, or rent a bike for a special delivery of furniture).
In conclusion we can say that it is ideas, approaches and strategies of Kampad as the entrepreneur have become keys to the success of his business for over 50 years worldwide. The history of IKEA is an example of competent management of a talented entrepreneur, that is useful to study.
“FAQ”¯. IKEA.com. Web. 5 Apr 2011
“Ingvar Kamprad and IKEA”¯. Harvard Business School Publishing, Boston, 1996
“IKEA history – how it all began”¯. www.ikea.com. Web. 5 Apr 2011
Kamprad I. Leading By Design: The Ikea Story. Collins; First Edition edition, 1999. Print