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IKEA: Business Details, Marketing Strategies And Analysis

Company information:

Company name     IKEA
Founded                 1944
Founder(s)               Ingvar Kamprad
Sector                      Retail
Location                  Älmhult, Sweden
Website                   www.ikea.com, www.inter.ikea.com

Fundamentals and financials:

Market cup                         $32.72 billion
Revenue                              €35.074 billion
Operating income             €4.499 billion
Employees                          183000
Total accets                        €53.967 billion
Total equity                        €38.907 billion
Net income                         €4.200 billion
Company management: Peter Agnefjäll (Chairman and CEO of INGKA Holding), Torbjörn Lööf (Chairman and CEO of the Inter IKEA Group)

Whenever you’re trying to think of a well-established furniture company, chances are you’re thinking of IKEA, a multinational corporation that was founded in 1943, by then 17-year-old Ingvar Kamprad. The company went through a substantial growth spurt over the years, and it’s currently headquartered in Delft, Netherlands.

Their primary product – self-assembly furniture. Eco-friendly simplicity and modernist furniture designs define this company. It has garnered a considerable number of followers just for those reasons.

Let’s get right into the details of note; they can be found below.

Financial Data

IKEA is technically a non-profit organization, but that doesn’t prevent it from showcasing annual revenue numbers as big as €35 billion. Cost of sales was estimated at €19 billion, making the gross profit figure a presentable €16 billion. Since this is a privately owned (or family-owned) company, no stocks are publicly traded.
Net profit of €4.2 billion the company showcased in 2016 was a 19.6% improvement over the performance showed in 2015. Total assets also increased to €54 billion.

Europe is by far the most profitable region with 69% of total sales. North and South Americas only account for 18% of sales, by comparison. On a related note, USA and Germany are tied for the number one spot of countries ranked by sales.

No IKEA furniture is ever pre-assembled and there is a practical reason for that. This is done to save shipping costs and to “not transport and store air,” as Kamprad himself puts it. This level of efficiency carries over to everything done by the company.

Marketing

Marketing reach of this business is astounding. Over 783 million people have visited retail stores and over 2.1 billion people have visited IKEA’s website.

A large bulk of company’s marketing expenses (about ?) is funneled into the annual catalog. This catalog can be attributed with the majority of their success, since it not only showcases the product line but also provides suggestions, furniture placement ideas and other associated perks. It does all it needs to do. It’s practical, informative and invokes a certain degree of creative thought in customers.

On top of that, products themselves have oddly specific naming conventions. Each type of merchandise gets an internal code name, and guidelines for those vary a lot: Swedish, Danish and Finnish words get used along with specific male/female names, places, etc.

Structure & Operations

Little is known about the organizational structure, save for the fact that it’s quite complicated and may be difficult, yet fascinating to decipher. Both for-profit and non-profit departments have a say in the way corporation conducts business as a whole and a recent restructuring change managed to remove one management layer.

IKEA PS 2017 LIVE IT collection (YouTube)

The number of employees (or “co-workers,” rather) is 183 thousand people, who are working in 400 stores spread across 49 countries all over the world. IKEA Group manages storefronts under franchising agreements and directly oversees 340 stores in 29 countries.

Analysis

Just like any other major business, an enormous amount of risks needs to be considered before venturing out to other markets and locations. Since IKEA’s expansion is limited in countries which are already saturated with IKEA stores, the company is reliant on those developing countries with a substantial number of young adults in search of household furniture. Discover strengths, weakness, opportunities, and threats with this list of associated reading.

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