Business Management Case Study of IKEA

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Introduction

In the period of the developing economy and the prevalence of young population after the end of the Second World War, a Swedish entrepreneur Ingvar Kamprad used the general growing demand for furniture and other household items to start his own business. The future founder of IKEA started producing and selling furniture in his locality first, and later shifted his business to the international market. The opening of the first shop in Almhult started the world spreading of the business. The entrepreneur managed to achieve success by defining the social problem and offering his goods at lower prices in the national and later international markets, thus facilitating cooperative social responsibility within the company.

Price Formation

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The monetary policy of the company is simple but understandable and applicable to the society. Ingvar Kamprad aimed at creating quality furniture at low prices. As a result, consumers respected and appreciated the brand. The company’s monetary policy had developed with time and began to include transportation costs as well. Disassembled parts helped to reduce transportation costs to 80% with “flat pack” for consumers (Petterson n.d., pp. 8-9). Since the opening of the first shop in 1958, IKEA became a leading seller of furniture in Sweden. In 1965, IKEA’s branch office was established in Stockholm. The growth of the company might be explained by consumer behaviour and character of purchases, namely thoughtful and saving buying. Up to the 1970s, the comany opened other seven shops and satisfied the demand of the Scandinavian market.

The combination of quality and prices of its goods helped IKEA to achieve its leading positions. At the same time, the national success and public trust allowed it to enter the international market. Even though the company adhered to the same policy in various countries, the organization had different experience in diverse markets. Thus, the concentration on consumer needs in the process of price formation helped the firm to become the most preferable one in the market of furniture and other household items.

IKEA’S Design and Structure

IKEA not only created its own pricing policy but also influenced the prices of other suppliers. Due to the reduction of prices in 1990 and 2004, IKEA managed to greatly increase the number of the items they sold and, consequently, their profits. At the same time, the design and structure of the company’s shops plays a significant role in increasing its sales and profits as well. Self-service and rich choice allow the company to sell more and lower the costs of shop maintenance. As a result, the company does not have to raise prices due to additional expenditures. Besides the design of its shops, IKEA’s co-workers with good communication skills also help to increase the firm’s reputation, boost sales, and conduct successful merchandise delivery. Thus, the brand works not only on its products but also representatives. In addition, social multipliers are present in the company’s activities sincee IKEA is socially responsible for its customer needs and production of special products. As a result, cooperative social responsibility defines its inner policy.

In the course of its existence, IKEA’s policy has also changed and developed. Nowadays, not only Scandinavians can work for the company. However, the majority of the people with the roots other than Scandinavian who had worked for the company felt prejudice against them in terms of professional growth. Moreover, the established and developed policy of the brand becomes vulnerable when it comes to cutting the costs of unchecked goods, which negatively influences the business flow (like in the case of Hong Kong shelves in Australia). Negative advertising experience stopped the spreading of the brand in the Australian and Asian regions (Petterson n.d., p. 13). Thus, the promotion of goods within the socially and environmentally unsafe background led to the worse development of the brand.

Conclusion

IKEA is one of the most successful and developed brands in the world market nowadays. The company sells furniture made of quality and safe materials. Its main target customers are the members of the middle class. As a high quality furniture producer, IKEA faces high expectations from the society. Since the founder of IKEA follows the cooperative social responsibility model, the company strives to satisfy the high demand for quality goods, services, and employment. However, a case of negative advertising led to the reduction of the speed of the company’s expansion.

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