IKEA Growth and Sustainability - Essay Example

Download file to see previous pages He opened the chain’s first store in Almhult, Sweden in 1953. Located in the Smaland region, one of the poorest regions in the country where the young Kamprad developed his characteristic Spartan work ethic and austere management style typical of the province. The company is intimately infused with the personality of Kamprad; the very name is derived from the initials of his name (I and K), and the first letter of the farm Elmtaryd and the village Agunnaryd where Kamprad was raised (IKEA website, 2011).
Ikea’s products are characterised by self-assembly, which means that the customer purchases the product components with instruction on how it is to be assembled. The broken-down product is sold in flat packs that save on space and are easy to transport in the customer’s van or car, without the need for delivery service. The core strategy of the company is the creation of furniture of high value in terms of workmanship and aesthetics, at the lowest possible cost to the customer. Its overriding philosophy remains unchanged from Kamprad’s initial vision, that people of all walks of life are entitled to affordable and beautiful furniture. The company constantly explores emerging efficiencies in its value chain, allowing it to realize an average 2-3% reduction in its prices for each year over the last 10 years (Thomas White Global Investing, 2011).
The company’s growth from the time it was established has been consistent and steady. Annual turnover has risen from the equivalent of about 1 million euro in 1954 to 13.6 billion in 2004 (see diagram below). Even through the recent economic recession from 2007 to the present, the group’s sales turnover improved from 17.7 billion euros in 2006 to 23.8 billion euros in 2010, with a yearly positive increment. Visitors to Ikea stores through the years have increased from a mere 50,000 in 1954 to 401 million in 2004, to a recent 699 million in 2010, again with constant positive year-on-year growth. The growth in visitors is driven by a continuous growth in the number of Ikea stores worldwide. In 1954 there was the lone Ikea store opened by Kamprad, and by 2004 the total stores numbered 201. Ikea store continued opening while others were closing, from 237 in 2006 to 316 in 2010 (Ikea Website, 2011). Ikea turnover history. (Source: Boscor & Bratucu, 2009:55) Concerning its sustainability, Ikea has adopted several initiatives which promise to enhance the company’s operations to a level of minimal waste and maximum productivity. According to green design advocate Inhabitat (2011), Ikea has committed to use 100% renewable energy, banned the sale of incandescent bulbs, and promises to use only sustainable cotton. The company has also been reported to install charging stations for electric vehicles at its US stores, and in Sweden it has built a company-owned wind farm to power 17 of its stores. Undoubtedly, the company’s growth and sustainability are synergistically intertwined, such that one cannot prosper without the other. This study shall thus analyse the drivers of growth and sustainability of the Ikea Group using Bolman and Deal’ ...Download file to see next pagesRead More