IKEA: A Multi-Decade Study of Global Growth and Strategy

Company Overview

Founded in 1943 by Ingvar Kamprad in Sweden, IKEA began as a mail-order business selling small items before expanding into furniture. The company's core mission is to offer a wide range of home furnishing items of good design and function at prices so low that the majority of people can afford them. This philosophy has driven IKEA's global success and market leadership.

Key Business Strategies

IKEA's success is built on several innovative strategies:

• Cost Leadership: Achieved through disintermediation, efficient sourcing, customer participation in transport and assembly (the "IKEA effect"), flat-packing for reduced costs, owning real estate, and in-house product design. This allows IKEA to offer significantly lower prices than competitors.
• Customer Focus: Targeting young, first-time home buyers with trendy, functional, and affordable products.
• Store Experience: Utilizing a maze-like, guided store layout to encourage exploration and purchases, supported by informative catalogs and integrated cafeterias to enhance customer dwell time and satisfaction.

Growth and Global Reach

IKEA has experienced substantial growth since its inception. From its first showroom in 1953 and store in 1958, the company has expanded globally. By fiscal year 2024, IKEA reported global sales of over €45 billion (approximately $50 billion), achieving a 17% CAGR over nearly seven decades. It operates 476 retail stores in 63 markets, with Germany and the United States being its largest markets.

Company Culture and Philosophy

The company culture is deeply influenced by its founder, Ingvar Kamprad, emphasizing cost-consciousness, hands-on experience, and internal promotions. IKEA maintains a conservative financing approach, primarily borrowing for property construction, and has seen significant growth in its equity-to-asset ratio over the years.