IKEA's Innovative Human Resource Management Practices and Work Culture


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Case Details:

Case Code : HROB066
Case Length : 15 Pages
Period : 1953 - 2005
Pub Date : 2005
Teaching Note : Available
Organization : IKEA
Industry : Furniture Retailing
Countries : Sweden

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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IKEA was one of the largest furniture manufacturers and retailers in the world and was well known for its stylish and innovative furniture designs. Almost all IKEA's products could be dismantled and packed in flat packages, making it easy to transport them. In the early 2000s, IKEA was one of the largest privately held companies in the world.

It was rumored that Ingvar Kamprad (Kamprad), IKEA's founder, was the richest man in the world, beating even Bill Gates, the founder of Microsoft. (This however, could not be confirmed, as IKEA was a private company and so was not required to disclose its financials).

Calculating the true value of IKEA was made more difficult by its complicated ownership structure consisting of several holding companies and subsidiaries (Refer Exhibit I for IKEA's ownership structure). IKEA expanded using the franchisee model.

Background

Kamprad was a born businessman. As a young boy, he started a business selling matches to neighbors on his bicycle. He bought the matches cheaply in bulk and sold them at low prices, making a tidy profit. He reinvested his profit in the business and soon diversified into selling a variety of articles including Christmas decorations, stationery items, fish, and seeds.

In 1943, when Kamprad was 17, he formed IKEA (an acronym made up of his initials and the first letters of Elmtaryd and Agunnaryd, the farm and village where he grew up), using the money he received as a gift from his father for doing well in school.

IKEA4 sold an assortment of goods from pens and pencils to watches, jewelry, picture frames, wallets, and stockings. By 1945, business had increased so much that it was no longer possible to make individual sales calls. Kamprad, therefore, set up a mail order catalogue and shipped orders using the local milk van.

In 1947, furniture was introduced for the first time in IKEA's product line in the form of armchairs. Craftsmen from around Kamprad's village made the furniture using wood from a nearby forest.

IKEA's furniture became very popular and the line was extended to include more products. By 1951, furniture sales had increased so much that Kamprad decided to discontinue all other products and specialize exclusively in low priced furniture. In the same year, the first IKEA furniture catalogue was published.

IKEA opened its first furniture showroom in 1953. The showroom allowed customers to see, touch, and feel the items they were buying, so that they could assure themselves of the quality of the items. The showroom was the result of an intense price war that IKEA was engaged in with its main competitor at that time...

Excerpts >>

4] In the background note, 'IKEA' refers to the original Swedish company. However, in the rest of the case study, it refers to IKEANorth America.

  

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