Some brands are so powerful in their categories, so innovative in their thinking and design and so well marketed they have become synonymous with our everyday lives; quite simply, they have become iconic.
Apple’s iPad or iPhone are good examples, as is Nike and their sporting equipment and Amazon and their online retail platform. And when you think of flat pack or ‘build it yourself’ furniture, the only name that comes to mind is IKEA.
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But its not only about product or brand awareness. The hallmark of many of the successful businesses we've studied has been their strong business model, the unique organizational cultures shaped by visionary leadership, an agility in responding to change, and the unwavering commitment to long-term goals and IKEA, the furniture business founded by Ingvar Kamprad, is a prime example of these successful business traits.
Kamprad saw the opportunity to provide well designed furniture at affordable prices to the general public and created a business model that democratized luxury. From the start, his goal was to offer prices much lower than competitors, achieved through unconventional methods such as large showrooms outside cities, sourcing from low-cost locations, flat-packing for distribution savings, self-service and assembly to reduce production costs, and a focus on high volume for economies of scale.
Like many successful companies, including Nike, Disney, Hershey, FedEx, and Amazon, IKEA encountered obstacles in its early days that threatened its success. One of these challenges was the resistance from existing furniture retailers to Ikea's low-priced products, which led to suppliers boycotting the company.
This forced Kamprad to look for suppliers in communist Poland, where he discovered significant cost savings. Another issue was that the company's original mail-order model faced competition from low-quality products offered by other firms, which eroded customer trust.
To overcome this, Kamprad opened a showroom to display Ikea's products, setting the stage for the development of its worldwide store network. Through these challenges, IKEA was able to turn obstacles into opportunities.
Kamprad's frugal nature and focus on cost control allowed for low prices and drove growth through increased volume and economies of scale. His long-term commitment to providing furniture at accessible prices for a wider audience enabled the business to expand globally and attain substantial long-term value, even at the cost of near-term dilution to earnings, which may not have been feasible under public ownership.
Kamprad embodies the qualities of a true ‘business fanatic’ admired by Buffett and Munger. Decades ago, he restructured the business, transferring a significant portion of ownership to a charitable foundation. He was a visionary leader who never stopped striving to improve the business, always with an eye towards ensuring its longevity beyond his lifetime.
Though he has passed, his legacy lives on in the spirit of IKEA, which remains committed to delivering quality furniture at accessible prices to all, as he envisioned from the beginning.
A few years ago, I was astounded by the timeless relevance of Ingvar's 1976 "Testament of a Furniture Dealer." Recently, I had the pleasure of meeting a former country head of IKEA who recommended two books: "Leading by Design - The Ikea Story" by Ingvar Kamprad and Bertil Torekul, and "The IKEA Edge" by Anders Dahlvig.
I've used these sources to shed light on the key qualitative attributes that have driven IKEA’s exceptional success as one of the world's leading companies.
Democratising Luxury
“Ikea was intended to make the kind of quality products afforded by the rich available to everyone else.” Anders Dahlvig
“The product range – our identity. We shall offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.” Ingvar Kamprad
“What keeps me going is the feeling that in a wider sense I am participating in a gigantic project of democratisation, though a different one from what is normally talked about.” Ingvar Kamprad
“Expressed a trifle solemnly, our business philosophy contributes to the democratising process. It makes good, handsome, and cheap everyday articles available to a great many people at a price they can afford.” Ingvar Kamprad
“Ikea spared no efforts to decrease the buying costs of the products. However, unlike many companies, it reinvested these improvements in lower prices to the customer, and did not primarily use them in improving margins. This is a very different business model compared to most other retail companies.
Herein, we see one of the basic elements of the Ikea model. The company focused on developing its customer base, even if it meant, in the short term, sacrificing its profit margins.” Anders Dahlvig
Low Prices & Quality
“‘Delivering prices so low that the many people will be able to afford them.’ This is the most fundamental statement that exists in Ikea's business model. Low prices take priority over everything else. Low prices are the very foundation of the vision and business idea.” Anders Dahlvig
“It is the many people whom we aim to serve. The first rule is to maintain an extremely low level of prices. But they must be low prices with a meaning. We must not compromise either functionality or technical quality.” Ingvar Kamprad
“No effort must be spared to ensure our prices are perceived to be low. There shall always be a substantial price difference compared to our competitors, and we shall always have the best value-for-money offers for every function. Every product area must include ‘breath-taking offers.’” Ingvar Kamprad
“Low price is written into our business idea as an essential condition for our success. Anyone can tell you that it’s impossible to have a low price, good quality and good profitability if you don’t have low costs. So cost-consciousness has to permeate everything we do, almost to the point of that kind of exaggerated meanness that some may call ‘penny-pinching.’” Ingvar Kamprad
“The company's focus is on decreasing sales prices to customers and making products affordable to more and more people. Lower sales prices deliver higher sales volume.” Anders Dahlvig
“The internal goal is to always have prices at least 20 percent below the competition on comparable products, and often even more than that. For instance, between 1999 and 2009, we strove to reduce prices by 20 percent.” Anders Dahlvig
“To be able to compete on prices and maintain a profitable business, retailers must be better than the competition at operating efficient stores.” Anders Dahlvig
“Ingvar took self-assembly as his starting point in the actual manufacturing process and changing this and that there, cutting away a millimetre here, a centimetre there, all with the aim of saving material and keeping the price down.” Bertil Torekull
“From Kamprad comes the same perpetually driving question: How can we make it a little cheaper? What do you think? Of course we can.” Bertil Torekull
“One of IKEA’s basic principles is that of ‘the substantial price difference.’” Bertil Torekull
“Throughout its history, IKEA has shown that it is focused on customer need for quality furniture that does what the consumer wants it to do.” Anders Dahlvig
Competitive Advantage & Long Term Focus
“The aim of our effort to build up financial resources is to reach a good result in the long term. You know what it takes to do that: we must offer the lowest prices, and we must combine them with good quality. If we charge too much, we will not be able to offer the lowest prices. If we charge too little, we will not be able to build up resources.
A wonderful problem! It forces us to develop products more economically, to purchase more efficiently and to be constantly stubborn in cost savings of all kinds. That is our secret. That is the foundation of our success.” Ingvar Kamprad
“Innovations in the retail industry are often easy to copy, and potential differentiation is short lived. Substantial success can only be achieved only when a retailer has a unique product range and is in control of the whole value chain.” Anders Dahlvig
“By doing things differently, companies can establish a unique position in the market, one on which they can thrive for a long time.” Anders Dahlvig
“The Swedish range expression is one of the company's important competitive advantages.” Anders Dahlvig
“Why do customers choose Ikea over other retailers? What are the customer needs that Ikea satisfies?
- Design, function, and quality at low prices
- Unique (Scandinavian) design
- Inspiration, ideas, and complete solutions
- Everything in one place
- ‘A day out,’ the shopping experience
These five success criteria come across as very basic solutions to customer needs. You may well say that they are similar to those of most companies. The difference, in my opinion, is that Ikea is much better at delivering on these customer needs than are other retailers.
The company's business model represents a blueprint for how they are executed. Most competitors focus on one or at most two of these customer needs. The real strength of Ikea lies in the combination of all five.” Anders Dahlvig
“Cost-consciousness must be a part of every priority. Having said that, our vision is a long-term vision, and it can only be achieved with strong profitability on a long-term basis. This means we must be prepared to accept a lower level of profit, in the short term, if this puts us in a stronger long-term position.
So when the economy slows down, we will continue to invest in our concept, sticking to the investment programs in our stores, sticking to our training programs and our pricing targets.” Anders Dahlvig
Differentiation
“The product range is at the core of any retail company. Being able to differentiate in range and price versus the competition is more important than any other aspect of retailing. Location, services, store standards, etc., are all important, but they are secondary to having an attractive product offering.
Range differentiation is a major challenge in many retail sectors, such as food, DIY, or electronics, where the major brands are developed and owned by other companies further back in the value chain. Ikea controls the entire value chain including the product range, a factor that puts it in a good position.” Anders Dahlvig
“To be really successful in global expansion, you need to offer something unique, something the local competition cannot match.” Anders Dahlvig
“Differentiation in product range and price is key to superior profitability. When the product range is controlled by other companies as is commonly the case in the fast-moving consumer goods sector (FMCG)-retail companies have a problem.
Retail sectors where this is a dilemma include the food sector, the DIY sector, and the electronics sector. In these sectors, the range is pretty much the same among different retailers, and competing on price is almost impossible.
The brand owners are interested in keeping stable prices, and the retailers have a hard time competing on price… When all other components are the same, size seems to make difference to profitability.” Anders Dahlvig
“‘No-brand’ retailers have a much bigger challenge [trying to compete] since they need to increase the level of own brands and ideally move to 100 percent. This is not just a matter of ‘fixing’ some products. It means a total transformation of the company.” Anders Dahlvig
Financial Resilience
“Ikea has a very conservative financing policy - earn your money before you spend it. Growth is important, but you should take good care of your customers before you add new ones (i.e., new stores and markets). Development comes from listening to and learning from your customers, not from a quick-fix copy of what the competition is doing.” Anders Dahlvig
“With a liquidity of 20 percent and a solvency of 50 percent, both IKEA and Ingvar Kamprad reveal themselves. For thus have the laws been since the birth of IKEA: A good cash reserve always must be ensured, all property must be owned, all expansion must be self-financed.”
Acquisitions
“All growth so far has been organic. Ikea has been reluctant to grow through acquisition and merger with other companies. With a strong culture and specific needs in terms of store size and location, it is very difficult to find a suitable company to acquire. I think it is fair to say that Ikea is not in a hurry. This may seem like a contradiction, given the track record of fast growth over many years.” Anders Dahlvig
Growth and Profitability
“Growing sales in existing stores is the most cost-efficient way to grow the company. Second to that is to build new stores in existing markets. The most expensive option is to open in new markets.” Anders Dahlvig
“Ikea thrives on growth. Its history is all about growth. And I believe opening new stores is the engine of most retailing.” Anders Dahlvig
“If we had taken ten kronor for that mug, and not five, then we would, of course, have ‘earned’ more on each mug - perhaps one and a half kronor - and had a better ‘gross profit margin.’ But we would have sold only half a million of them instead of almost twelve million, on which we now earn one kronor each.” Ingvar Kamprad
“Big sales volumes create buying price advantages.” Anders Dahlvig
Don’t Fear Mistakes
“Only while sleeping one makes no mistakes. Making mistakes is the privilege of the active – of those who can correct their mistakes and put them right. Our objectives require us to constantly practise making decisions and taking responsibility, to constantly overcome our fear of making mistakes. The fear of making mistakes is the root of bureaucracy and the enemy of development.” Ingvar Kamprad
“No one has had as many fiascos as I’ve had. Only those who are asleep make no mistakes.” Ingvar Kamprad
“In IKEA’s business philosophy, the whole matter should be inscribed as a golden rule: regard every problem as a possibility. New problems create a dizzying chance.” Ingvar Kamprad
Delegate & Empower
“Accepting and delegating responsibility - In an expanding company there is neither the time nor the resources to work out precise descriptions of all the different areas of responsibility and draw up the boundaries between them – especially as there is always going to be a lot of new, unoccupied positions. This means that we must always be willing to accept and to delegate responsibility.” Ingvar Kamprad
“We often must have the courage to promote people who show potential even before they have any documented experience. We encourage those who have the desire and the courage to take responsibility when given a relatively free hand.
We could give many examples of young co-workers who have taken responsibility and reached a position which would never have been possible in any other company.” Ingvar Kamprad
“The framework is sacrosanct, but within it is freedom, and a wealth of innovation is allowed to explode.” Ingvar Kamprad
Value Employees
“The companies whose staff see their job as merely a meal ticket – they are the companies which have problems. No one can be happy or do a good job unless they like the place where they work. After all, it’s there that they spend most of their waking hours.
Feeling appreciated and motivated leads to good results. Many surveys have shown that co-workers tend not to regard things like salary, working hours and a company car as the most important things.
For them, interesting tasks, the feeling that their efforts are appreciated by managers and co-workers alike; the pleasure of being part of a successful team; and a sense of “belonging” and togetherness, both at work as well as outside work, are far more important criteria.” Ingvar Kamprad
“What is fundamental in leadership? Love. Deep down is a genuine sense of caring.” Ingvar Kamprad
“That the Ikea brand is bigger than the company’s actual size is shown by the fact that in 2007 Ikea was ranked only number 37 in sales among all retail companies. However, in terms of brand recognition, the ranking was number 38 among all global brands and first among retail companies.” Anders Dahlvig
Culture
“The company culture is the glue that keeps the organisation together, that makes the company different from all others. It is, quite simply, the soul of the company. To keep it strong, therefore, it has to be integral to everything you do.” Anders Dahlvig
“Companies that build a strong company culture that is adapted to their business have a powerful marketplace advantage.” Anders Dahlvig
Tone from the Top
“The leaders of the company must be living examples of the values; Ikea’s culture must be reflected in everything they do. This is something they can never delegate away or compromise on.” Anders Dahlvig
“All elements of what today is called the Ikea culture are in fact the values and characteristics of Kamprad himself.” Anders Dahlvig
“Kamprad’s unpretentiousness became the example, and later on it never paid to have any special pretensions. Those who tried did not survive long and left of their own accord.” Bertil Torekull
Promote from Within
“The founder is still there after 65 years, and during those decades the company has had only three CEOs, all internal promotions.” Anders Dahlvig
“Ikea promotes the highest levels of management internally, which ensures stability and understanding of the criteria for success.” Anders Dahlvig
Walk the Floor
“Understanding the details of all levels of the business is an important part of kea's values. Managers must have experience on the shop floor and spend time in the stores and at the suppliers.
Ikea promotes this through so called anti-bureaucratic weeks, during which corporate managers are encouraged to take time out from their regular work and spend time working in the stores in order to better understand the realities of the customers and employees.” Anders Dahlvig
Hiring
“Recruit the Right People. How high you set the bar when recruiting will determine how successful you will be. Lower demands equal lower results; higher demands bring higher results. When in doubt, do not recruit, even if you are under pressure to fill a vacancy. Most of the time, your gut feeling is correct. External recruitment, in most cases, should be a last resort.” Anders Dahlvig
“Staffing a company with the best people is key to achieving the best business results.” Anders Dahlvig
“A cornerstone of the company’s practices became the culture of promoting people on potential rather than experience.” Anders Dahlvig
“The company uses ‘value based recruitment’ in all parts of the company. Candidates must be suitable not only from a standpoint of technical competence, but also whether they share the company's values.” Anders Dahlvig
“Seventy-five percent of Ike employees work in the stores. The most important task of the store is to attract, develop, and retain good people.” Anders Dahlvig
“Ikea’s policy regarding the salaries the company pays is to position itself in the middle of the market. The salaries Ikea offers its employees must be fair, but they must not be the main reason for choosing to work for the company.” Anders Dahlvig
Ownership
“We want managers and co-workers who understand all aspects of Ikea’s operations; people who can think about their function, but are able to think like owners too.” Anders Dahlvig
Headquarters
“The store managers and buyers are the heroes of the company.” Anders Dahlvig
“In total, global staff functions, including finance, HR, marketing, sales, restaurants, property, legal, and so forth had around 260 people in 2008. The company had about 125,000 employees.” Ander Dahlvig
“We want a lean, effective, highly competent Service Office organisation with a passion to give the best possible service to the stores.” Anders Dahlvig
Encourage Ideas
“We encourage our co-workers to come up with unconventional ideas and to dare to try them out. Of course, this has to happen under controlled conditions within the framework of our concept, and it is certainly no excuse for foolhardiness. After all, you only need to invent the wheel once.” Ingvar Kamprad
“IKEA encourages everyone to come up with new and better approaches, giving all employees the opportunity to be part of development and change.” Anders Dahlvig
Obliquity
“For those who are motivated by profits and through profits by the creation of their own wealth, we must make the case that this objective is best achieved through being a good company because good companies attract good people who can then deliver the profits.” Anders Dahlvig
“Companies should seek to deliver value in a broader sense than merely returning value to shareholders. They have a larger social mission beyond profit.” Anders Dahlvig
Purpose
“Most people feel motivated and happy if work has a bigger meaning beyond power, wealth, and other inflated statements.” Anders Dahlvig
“Most people want more from their lives than just to earn their keep, provide for their family, and live for the moment. With a greater purpose than just making money, companies can provide a larger meaning in work and life for their many employees, which is something many people look for.” Anders Dahlvig
“Studies show that people who work for IKEA believe that they really are working for a better society and therefore like working for IKEA. They believe that in their daily lives they are contributing to a better world.” Ingvar Kamprad
Humility & Frugality
“We do not need fancy cars, posh titles, tailor-made uniforms or other status symbols. We rely on our own strength and our own will.” Ingvar Kamprad
“We must be willing to accept criticism and act upon it without delay. Listen to customers, suppliers and others around you.” Ingvar Kamprad
“Simple habits, simple actions and a healthy aversion to status symbols are a part of the IKEA culture, but we must never forget to show respect for each other.” Ingvar Kamprad
“At Ikea, people greet each other with first names. Managers and employees on all levels conduct business travel in the same way - there's none of the division between first-class and coach that one sees at many organizations.
Managers and employees eat together in the staff canteen. Everyone adopts the same informal and common dress code. The company tries to eliminate all status symbols and create a trustful relationship between employees and managers.” Anders Dahlvig
“I have always said that I believe that the biggest threat to Ikea is Ikea itself. Some worry that some new technological innovation will come along and change the game of home furnishing retailing in a way that would jeopardize Ikea. However, I think this isunlikely. Competitors so far have shown little sign of innovation, and people will, I assume, need home furnishings in the future. The big threat is from within.”
“I think Ikea needs a real challenge from a global competitor in order to better itself. As we all know, lack of competition can be a powerful sleeping pill.” Anders Dahlvig
“The founder’s own ability to embody the company motto, his frugal habits, and his notorious inclination to travel standard class even as a billionaire have contributed to an aura of legend and progress, but also of modesty and ordinary humanity.” Bertil Torekull
“Not allowing himself to be arrogant, Kamprad puts himself last in line for food at certain functions, although others urge him to go first. He simply can’t.” Bertil Torekull
“The tales of the simplicity and thrift of the billionaire are more than just myths - they are reality. His total lack of external finery, grand clothes and habits, smart watches, or luxury car have become so much a part of the image of himself and the company.” Bertil Torekull
“Kamprad is always the same. Never boast, always show humility, take nothing for granted, always think about and prepare for bad times ahead, never let anything go to your head - deep down in the marrow of his bones is the conviction that success is the worst enemy of success.” Bertil Torekull
Keep it Simple
“Keep it simple! Complicated systems and rules are a form of paralysis.” Ingvar Kamprad
“Simplicity is a fine tradition among us. Simple routines mean greater impact. Simplicity in our behaviour gives us strength. Simplicity and humbleness characterise us in our relations with each other, with our suppliers and with our customers.” Ingvar Kamprad
Consistency
“Another important factor for Ikea's success that at first glance may seem to be in conflict with differentiation is consistency. Companies frequently change the core components of their business such as their range or their target customer groups. This may, of course, be necessary when you are in trouble, but it does not help in building a strong brand identity.“ Anders Dahlvig
Local Decision Making
“Make decisions on a local level wherever possible.” Ingvar Kamprad
“Ikea’s philosophy has been to recruit and invest in local people.” Anders Dahlvig
“Local responsibility is always important. In the retail world, store management has an enormous impact on performance. The difference between a good and a bad store manager can mean a difference in store profitability of 100 percent or more. Good people will stay motivated in the stores if they feel that they are fully in charge of their operations.” Anders Dahlvig
“All business is local, they say.” Ingvar Kamprad
Small Teams
“Don’t forget: a small team with a lot of decision-making power can deliver a knock-out punch to sluggish bureaucracy.” Ingvar Kamprad
Maintain Focus
“Concentration – important to our success. The general who divides his resources will invariably be defeated. Even a multitalented athlete has problems. For us too, it is a matter of concentration – focusing our resources.
We can never do everything, everywhere, all at the same time. Our range cannot be allowed to overflow. We will never be able to satisfy all tastes anyway. We must concentrate on our own profile. We can never promote the whole of our range at once.
We must concentrate. We cannot conquer every market at once. We must concentrate for maximum impact, often with small means.” Ingvar Kamprad
“In 2010, Ikea stores had more than 600 million visitors. Almost anything could probably be put into the stores and it would sell well, at least initially. And there have been many proposals to add products to the company's mix. However, the company has not let itself be tempted to stray off track; only home furnishing products are allowed into the stores.
This is the area Ikea knows well and where it can create competitive prices. This way the company stays focused on delivering on its vision and business idea and maintains a clear brand profile.” Anders Dahlvig
“Ikea is better at building long-term advantages and creating stronger growth when prioritising and focusing on fewer areas. History has shown many times that this strategy pays off.” Anders Dahlvig
Continuous Improvement
“Most things still remain to be done. A glorious future! The feeling of having finished something is an effective sleeping pill. A person who retires feeling that he has done his bit will quickly wither away. A company which feels that it has reached its goal will quickly stagnate and lose its vitality.
Happiness is not reaching your goal. Happiness is being on the way. It is our wonderful fate to be just at the beginning. In all areas. We will move ahead only by constantly asking ourselves how what we are doing today can be done better tomorrow. The positive joy of discovery must be our inspiration in the future too.” Ingvar Kamprad
“We have already found satisfactory solutions for most of what we have to do, But that doesn’t stop us questioning every single one of our production methods and techniques, nor constantly asking ourselves: “Why?”, “Why not?”, or “Is there another way of doing this?” Ingvar Kamprad
“We have already learned that success can be a dangerous thing. It can easily lead to stagnation and death. Once we’ve accomplished one thing, we need to remember that there is still plenty left to do.” Ingvar Kamprad
Change
“Dynamism has to live on, the company has to change all the time, be supplied with new cells or die.” Ingvar Kamprad
Customer Psychology
“Ikea integrates the customer even into the sales process. I think that when customers feel that they are in charge of an activity, they often perceive it as better service even if it means more work for them.” Anders Dahlvig
“The restaurants are viewed as part of the communication mix rather than as a profit centre. This is one of the secrets to the very low prices in the restaurants and food shops. The restaurants are there to sell more home furnishings by encouraging people to remain in the store for a longer time.” Anders Dahlvig
“By providing a children’s ballroom, a restaurant, and different family activities, Ikea tries to create something more than just another shop - the company offers the family a fun day out.” Anders Dahlvig
“The bistro is situated beyond the exit checkout. Sometimes called ‘the calming-down department’ - when the customer has paid up after a wearying trip around the store and is exhausted, he or she is offered something that ‘makes up for it all,’ a cup of coffee and an almond cake, for instance, or a hotdog, for next to nothing.” Bertil Torekull
No Master Plan
“The company’s growth was not strictly planned but proceeded by taking advantage of opportunities as they presented themselves.” Anders Dahlvig
“In the early days of simple operations, improvisations, times of joy and sudden impulses we were feeling our way along, failing, trying again, and succeeding.” Ingvar Kamprad
Tailwind
“In thirty years, employment in agriculture was reduced by 75 percent, and the suburbs grew as if sprouting out of the ground outside cities. During the first twenty years after the end of the war, one million new apartments were built… townspeople need to furnish their homes as cheaply as possible.” Bertil Torekull
A Family Culture
“Kamprad quite literally sees his company as a kind of family and himself as the father.” Bertil Torekull
“The firm as family became Ingvar’s greatest pride. In the name of family, the Ikea spirit was created... At heart he regards his employees as children, siblings, and other relatives, although their numbers now are approaching forty thousand.” Bertil Torekull
“When Kamrpad speaks of IKEA, the phrases together, family, belong to each other, and fellowship arise again and again. They are never missing. IKEA is first and foremost a family.” Bertil Torekull
Environmental Considerations
“Not only is maintaining environmental standards a cost (and, as such, a potential threat to profitability and shareholder value), but in fact environmental work can contribute to increased profitability, more motivated workers, and a long-term strengthened position in a market. A strong environmental stand, in other words, represents a potential market advantage.” Anders Dahlvig
“In most cases, what is good for the environment means using fewer resources; using fewer resources most often results in lower costs, which Ikea has been able to pass along to our customers.” Anders Dahlvig
Unconventional
“Daring to be different is one of the most important criteria behind the IKEA success. It’s the thinking behind some of the most significant aspects of our business idea. Here are some examples: while other furniture retailers were selling manufacturers’ designs we started to make our own designs.
While furniture dealers set up shop in the centre of town, IKEA was building large stores out of town. While others turned to furniture factories to help them make tables, IKEA got them made by door manufacturers. Whereas others sell their furniture assembled, IKEA lets customers assemble it themselves.” Ingvar Kamprad
“By always asking why we are doing this or that, we can find new paths. By refusing to accept a pattern simply because it is well established, we make progress. We dare to do things differently! Not just in large matters, but in solving small everyday problems too. It is no coincidence that our buyers go to a window factory for table legs and a shirt factory for cushions. It is quite simply the answer to the question ‘why?’” Ingvar Kamprad
“The Ikea mantra is that people have more time than money. In other words, the company rewards its customers for their involvement in the distribution of the company's products. The more your customers do, the less they pay. The entire sales system is based on integrating the customer in the distribution process.
The customers not only choose, pick, and pay for the products they want, they transport and assemble these products themselves. By using this system, Ikea can keeps its costs low and thus reduce its prices even more.” Anders Dahlvig
“The steered customer flow is one important principle of the store.” Anders Dahlvig
“Self-service is now Ikea’s selling model and has remained so. Self-service, numerous checkouts in the exit area, and a decrease in order sales provided a formidable boost to profitability and turnover. The customer took over what was perhaps the weightiest element in all furniture sales: deliver and unpacking.” Bertil Torekull
Win-Win
“Nursing the supplier is one of Kamprad’s hobbyhorse principles - one he still imparts to his staff.” Bertil Torekull
“It never pays to work negatively.” Ingvar Kamprad
“As I often say: the best deal is when neither buyer nor seller lose, but both gain.” Ingvar Kamprad
Own the Property
“When making a new store investment decision, you can be sure that land prices will never be cheaper in the future. You can be equally sure that getting a retail license will never get easier. I think it is wise to buy as much land as you possibly can and build bigger (with a retail license) than you initially think you need to in order to ensure flexibility for the future.” Anders Dahlvig
“Owning the property perhaps slows the pace of growth, but provides security. No landlord can come in ten years’ time and raise the rent by 20 percent.” Ingvar Kamprad
Fanatics
“Most of the job remains to be done. Let us continue to be a group of positive fanatics who stubbornly and persistently refuse to accept the impossible, the negative. What we want to do, we can do and will do together. A glorious future!” Ingvar Kamprad
“A demon in me says I have so much to do … I am never satisfied. Something tells me what I’m doing at the moment has to be done better tomorrow.” Ingvar Kamprad
“Ingvar loves it, always wants to lie as close to it as possible, and never tires of improving it, never wants to go home from work… The day he is free of IKEA, life for him will no longer be worth living.” Bertil Torekull
“I would hardly wish for the next generation to be as tied to their work as I am.” Ingvar Kamprad
Private Ownership & Founder
“Ikea is not a listed company and can work from a more long-term perspective.” Anders Dahlvig
“The most likely scenario when entering most emerging markets is many years of low or no profitability and a high level of risk before you can harvest. This is probably less appealing to investors and management in many publicly owned companies who are looking for superior returns in the shorter term.” Anders Dahlvig
“I see many advantages of strong owner control. In such companies, it's more likely that the business will have a longer-term perspective and be willing to take more risks.” Anders Dahlvig
“The existence of a present, dedicated, and knowledgeable founder and owner is a considerable advantage. The founder is crucial to establishing the strong heritage and values that give the company a soul by which loyalty and motivation among the employees can more easily be created. No employed CEO will stay long enough to be able to take on that role.” Anders Dahlvig
“Since Ikea is a private company, it need not concern itself with maximizing shareholder value in the short term. This policy gives Ikea greater security and the ability to control its own destiny.” Anders Dahlvig
“There is very little pressure to pay dividends to the owner (the Ikea Foundation) if the capital is needed to expand the business. For me as CEO, for our management, and for our employees, it was always very comforting to know that the profits stayed within the firm and were reinvested into the business.” Anders Dahlvig
“Today everyone has been converted to the conviction that going public would do more harm than good to IKEA in the long run. The perils of quotation on the stock exchange are exposure to the media and demands for constantly increased profit and expansion, regardless of the business cycle of competition and vision.
Public companies like to distribute one-third of their annual profit to their shareholders, money that disappears out of the companies and works against building up reserves, something IKEA needs in order ‘to take bold decisions.’” Bertil Torekull
“North American sales director, Kent Nordin, comments, ‘No stock exchange company would ever have accepted the weak development we reported in the beginning [when entering the US]. But since long-range timing and patience is an IKEA credo, we had time to rethink and build a partly new base for survival.” Bertil Torekull
“It would take 22 years before IKEA North America could report that all the region’s twenty stores were in the black.” Bertil Torekull
Summary
Ingvar Kamprad wasn't the first to bring luxury to the masses. He followed in the footsteps of Vanderbilt (steamships), Ford (automobiles), Hershey (chocolates), and McDonalds (eating out). Since Ikea's creation, Southwest Airlines have democratized the skies and Zara and Uniqlo have done the same in fashion.
Ikea's business model has proven to be a formidable force in the furniture industry, democratizing luxury by providing access to high-quality, stylish furniture at an affordable price. With its ability to overcome challenges, utilize and share economies of scale, and maintain a long-term focus, Ikea serves as a valuable guide for unconventional success.
The insights of Ingvar Kamprad, Bertil Torekul, and Anders Dahlvig provide valuable lessons for aspiring entrepreneurs and investors.
So the next time you're putting together a bookshelf with an Allen key, remember the man who made it all possible and give a nod to the furniture king, Ingvar Kamprad.
Sources:
‘The Ikea Edge: Building Global Growth and Social Good at the World's Most Iconic Home Store,’ Anthony D. Fitzgerald, Kogan Page, 2020.
‘Leading by Design: The Ikea Story,’ Ingvar Kamprad and Bertil Torekull,’ HarperBusiness, 1999.
‘Testament of a Furniture Dealer,’ Ingvar Kamprad, IKEA AB, 1976.
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Article by Investment Masters Class
