IKEA: The story of a successful business model

IKEA, the most famous furniture store in the world, has a story that stretches back over seven decades. It all began in the forests in the south of Sweden in 1943, when its founder, Ingvar Kamprad, was aged just 17. The name comes from his initials and that of Elmtaryd and Agunnaryd, the farm and village where he grew up, respectively.

Just a boy, Ingvar sold matches to his neighbors and realized that by buying them in bulk, he would make more profits, even if he sold them cheaply. It was then that he began to understand many aspects of business, such as distribution. He understood that the key to success was getting the product from the factory to the customer in the fastest and cheapest way.

IKEA launched as a furniture store, where its creator studied and analyzed the design, their self-assembly, the advertising, the use of a catalog of products, and an exhibition space to see and try them out, as a means of reaching the greatest number of people possible. However, the path to success was not without its difficulties.

In early 1951, IKEA was at a crossroads. Competition in the sales sector had grown to the point that it was unbearable. The same was true for furniture; complaints piled up, the reputation of the mail order industry was deteriorating, and it seemed that IKEA wouldn’t be able to survive the circumstances. The root of the problem was that customers couldn’t see products with their own eyes, but had to rely on the description in the advert or catalog.

The company was faced with a decisive question. The answer would secure, or not, its survival. It had to find a new way to retain consumer trust and continue making money. It was in this attempt to overcome the vicious circle of “low price, lower quality,” that the idea of a permanent exhibition of IKEA furniture arose. A space to which people could go and see the furniture for themselves, and compare the quality with the prices.

In its business philosophy, this became a golden rule: problems must be seen as possibilities. New problems generated new and exciting opportunities. Unable to buy the same furniture as others, the company was forced to design its own products, which meant it took on its own style. Meanwhile, the need to guarantee deliveries to fulfill the promises made to its customers resulted in the expansion into new markets.

One of the keys to IKEA’s success lies in its low prices, based on its cost-saving policy. The study of flat-packed furniture began when one f the first collaborators of the company took the legs off a LÖVET table so that it could fit in a car and not be damaged during transportation. With the flat-pack, not only was this secured, but delivery trucks could be filled with many more products, lowering costs across the production process, with these savings translating to lower sales prices. Following this discovery, flat-packed, self-assembly furniture became the key concept of IKEA.

IKEA has a wealth of tricks and secrets to teach us through its business model and the personal story of its founder. One example is the decision to keep the firm off the stock exchange. While the stock market awards priority to the net value of stocks and shares, a foundation-owned business group can opt for the future and sustained growth. By not being publicly listed, the firm has freedom of decision and the power to build its own future. What constitutes the magic and the drive is the growth in itself.

Another secret, as important as the first, is the loyalty to its origins and the sense of pride in its history. As the company becomes increasingly global, the more love it shows for its Swedish heritage. Diligence, energy, savings, creativity, modesty, and the pleasure of joint success are corporate virtues to which its employees remain faithful. Another aspect IKEA can teach us is the capacity to innovate, and this involves taking care of even the smallest details.

Over time, the company has become an increasingly attractive employment opportunity, especially for young people and particularly, women. The brand has established itself as one of the top ten worldwide. The figures speak for themselves, confirming the IKEA miracle, the momentum of which never ceases to amaze.

The new generation is faced with the double task of defending and furthering the original recipe, loyal to the spirit of Ingvar Kamprad. It must be open to the incorporation of the unexpected, of new ideas that can emerge in the local context of any part of the world, or as a consequence of technological developments.