IKEA is an acronym for the initials of its founder, Ingvar Kamprad, his farm Elmtaryd, and his county, Agunnaryd, in Smaland, South Sweden. In 1943, when only 17 years of age, Kamprad began his career by selling fish and Christmas magazines. Within a few years, he had developed his enterprise into a mail-order business that sold many things including furniture.
Consumer Prices High – Competition Out
In Sweden, during the post-war boom, the traditional practice of handing down custom-made furniture from generation to generation was giving way to modernizing households that wanted new, affordable furniture. However, while demand for new furniture was growing, so too were the monopolies of Swedish furniture manufacturers that kept consumer prices high and the smaller furniture companies out of the market.
Kamprad’s End Run
Much to the chagrin of Kamprad’s competition, in 1950, his newly created furniture company started participating in Sweden’s annual furniture trade fair. But, by 1951 the furniture monopolies prohibited Kamprad from selling his furniture at the annual fair. To get around this limitation Kamprad would display his furniture at these fairs and take orders for sales that he fulfilled afterward. But the cartels continued to squeeze Kamprad’s business to the point that he was banned from displaying and taking orders for his furniture at the furniture fair. In follow up, the cartels then pressured furniture stores around Sweden to not carry Kamprad’s products.
The First IKEA Store
In 1953 Ingvar open his first furniture store. His sales started at Skr 3 million annually (approximately $500,000 CDN) and eventually reached SKr 40 million annually (approximately $6 million CDN) which was 80 times larger than what the average furniture store in Sweden was making in the early 1950s.
Kamprad grew the IKEA chain one store at a time by expanding first in Sweden then later branching out into Continental Europe. Once firmly in the European market, IKEA truly became a global company. By 2018, there were 446 IKEA stores in 52 countries.
IKEA’s Culture & Strategy
What motivated Kamprad was not the bottom line. Rather, Kamprad was a modest man who was driven to make life better for people. He was legendary for pulling into an IKEA store unannounced in a rented car. Once inside the IKEA store, Kamprad would roll up his sleeves and work alongside the cashiers all day long. While bagging up customer purchases, Kamprad would listen to what the customers were saying about his products. He would take this customer feedback to his managers and ask them to make decisions based on customer feedback as a regular business practice.
A big part of Kamprad’s success was his core belief that the frontline workers needed open lines of communication with their managers. IKEA’s frontline staff are only allowed to address their managers by first name only. The use of first names from frontline staff to managers was considered a radical management practice back in the 1950s in Europe. The more casual approach to organizational hierarchy helped IKEA maintain an environment that supported its workers from the C-Suite to the frontline staff. Kamprad also believed there was great value in making a mistake then learning from it. Ingvar Kamprad once famously said, “Making mistakes is the privilege of the active. It is always the mediocre people who are negative, who spend their time proving that they were not wrong.”
Elaine Allan, BA, MBA
Technology & Business Blogger
Vancouver, BC, Canada