Position of IKEA in the UK - Essay Example

? IKEA Table of Contents Introduction 3 Company History 4 IKEA Stores/ Branches 6 Position of IKEA in the UK 6 Employees at IKEA 7 Sales 8 Conclusion9 References 10 Introduction IKEA has been a pioneer in the home furnishing business. It was a common concept that beautifully designed furniture or rather home furnishings were only meant for few people who could afford them. IKEA, from the very start took a different path and was successful in changing this concept. They decided to respond to the needs of the people with regard to home furnishing across the globe. People with different choices, dreams, tastes, needs, aspirations and budgets wanted to modify their home and develop them to make their everyday life better. IKEA helped people make their everyday life superior by offering a wide variety of products in home furnishing in their stores. IKEA is known to offer home furnishings that are designed well combined with great utility, quality and affordable prices so that it suits the pocket of the masses (Funding Universe, n.d). Company History Ingvar Kamprad is the founder of IKEA who started his career in business at a quite young age. He used to sell matches independently to his neighbours, that he would purchase in bulk and made profit out of it. Gradually his business started growing and he expanded it further by selling seeds, fish, decorative for Christmas and even ball pens and pencils which wondered many, back in the year 1935. From his younger days, he had been quite adept in employing his resources. At the age of 17, on the completion of his school, he was monetarily rewarded by his father. With that sum of money Ingvar Kamprad founded IKEA. IKEA was derived from the initials of his first name and last name which is ‘I’ & ‘K’ and ‘E’ and ‘A’ was taken in a similar way from the name of the village and the farm named Elmtaryd Agunnaryd where he had grown up and was born. IKEA did not start out by selling furniture but instead it sold watches, wallets, pens, jewellery and other things that he bought at a low price and resold it for profit. The year 1948 marked the addition of furniture in its product line. Initially the furniture was manufactured locally and it was received positively by the customers. It was only in the year 1951 when Ingvar Kamprad focused on furniture and withdrew all the other products from its product line. In the same year, the first catalogue of furniture was published and then later in order to make its presence felt in the competition, the first showroom of furniture was opened in a village named Almhult. In response to such scenario, the other manufacturers and furniture stores pressurised the suppliers which led to the boycott of IKEA. This made IKEA to come to a critical decision of designing their individual line of furniture in 1955. This decision of designing their own furniture allowed IKEA to offer the products at low prices and improving the functions which ultimately made the company successful. The idea of flat-packed furniture came to Ingvar Kamprad when one of his employees sought a table to take home but which he could not fit in his car. He then thought of removing the legs of the table and then reassembled it back at home. IKEA started testing the flat pack furniture concept which proved beneficial for the company as it lowered the costs of labour, need of storage space, transportation and also reduced costs related to transport damage. The Lovet table was the first flat pack furniture product that was designed. The flat pack furniture range has gained a wide popularity across the globe as it not only cuts down on a lot of costs but also because the furniture is fashionably designed and the designs fit in efficiently and beautifully in the households. IKEA even has furniture that are made of sustainable resources making them environment friendly choice as well (IKEA Fans, n.d). Source: (IKEA, 2010). IKEA Stores/ Branches The first store of IKEA in Almhult had an area of 6700 square meters and had the biggest display of furniture in entire Scandinavia. Apart from Sweden, the first store of IKEA was inaugurated in Norway near Oslo followed by a flagship circular store with an area as large as 45,800 square meters in Stockholm which took its inspiration from the museum named Guggenheim situated in the city of New York. Although the store was successful but it still faced problems in serving its customers because of overfilling capacity. This eventually triggered the concept of open warehouse which is now a key feature in the structures of the IKEA stores. The store in Switzerland near Zurich was the first one to be opened outside Scandinavia in the year 1973 followed by an active growth with a Munich store in Germany in the year 1974. Even today Germany happens to be the largest market of IKEA. IKEA entered the Australian market in 1975 and debuted in Canada in 1976 making it the store in the second continent in just two years (IKEA Fans, n.d). IKEA hit the US market in the year 1985 with the first store and entered the UK in the year 1987. The first store opened in Warrington. The IKEA group owns as many as 276 stores in around 25 different nations and the rest 37 stores in 16 countries are operated and owned by franchisees that are not a part of the IKEA Group. IKEA has to its credit 10 megastores across the UK (IKEA, 2010); (Guardian, 2000). Position of IKEA in the UK In a survey it has been found that of all the furniture purchased in Britain, one-tenth of the portion is bought from IKEA. The presence of IKEA is quite strong all over Europe with the estimation of one in every ten babies born in Europe was conceived in an IKEA made bed. The survey reflects the popularity of IKEA in the UK. According to the Mintel analysts, who specialises in retail, IKEA has a market share of 9.6 percent despite the dip caused in this business because of the slowdown of the housing market. IKEA’s claim to popularity is because of the low and affordable prices. The intention behind IKEA’s advertising is to raise awareness of its products in the UK and drive people to visit the stores and create traffic. Despite being in controversies because of their advertising campaigns in television in the UK, IKEA has been successful in raising its awareness and letting people know that they are different from the other furnishing brands. IKEA also has a magazine that is at one’s disposal across the stores in Europe. It also mails the magazine to 150,000 holders of the Home Card of IKEA. It contains product news, ideas and tips for home. It features the lifestyle of its customers and the way they live. IKEA has restaurants that provide an eating place to the customers while they shop. In the UK stores, they have three different ways of offering food. Meals of Swedish heritage are served in the main restaurant. They also have bistro areas that sell local snacks such as hot dogs in the UK which also adds to its popularity (The Telegraph, 2011); (IKEA, 2010). Employees at IKEA IKEA has around 11 stores in the UK with employee strength of 6,500 (BBC News, 2002). IKEA does not only focus on filling jobs but they believe in partnering with people. IKEA looks forward to recruit people with values similar to them (IKEA, 2010). The company does not believe in restricting their employees. Each employee is listened to in order to identify ones capabilities, needs and ambitions. IKEA is said to have an extremely supportive and pleasant management. Employee benefits are offered even to part-time workers (Glassdoor, 2011). In 2008, 9,500 staffs in the UK received an employee benefit package that included a handset for free and free calls of worth ?5 (Creative Benefits, 2008). Flexibility is valued highly by the management of human resource at IKEA. The company is known for its constant effort to accommodate and honour the different needs of its employees. It even offered parental benefits to the staff. The employees are entitled to a discount of 15% on IKEA merchandise and are eligible to buy anything at IKEA’s restaurants at highly subsidized rates. The company’s benefits included reimbursement of tuition fees for graduate as well as undergraduate courses for each individual employee irrespective of the amount of hours they worked. Employees at IKEA are encouraged to take up courses that would prove beneficial in the retail sector along with emphasis on language study. The most distinctive feature about IKEA is that even the part-time workers are eligible for the benefits of the company (Pearce & Et. Al., 2008). The company even provides Retirement Benefits Scheme to its employees (Usdaw Online, 2011). Sales The UK contributes around 7% in the total sales of IKEA. It is among the top five countries that contribute majorly to the sales of the company. The total sales of IKEA for last year amounted to 23.1 Billion Euro (IKEA, 2010). The revenue figure in 2008 was 21,534 Million Euro and 21,846 Million Euro in 2009. Thus, it can be seen that there was an increase in the revenue in 2009. The total sales of IKEA increased by 7.7% in the year 2010 compared to 2009. IKEA is reported to have assembled profits of around ?2.2bn in 2009 and increase in the figure of sales by 7% to around ?20bn in 2010. The profits in the UK fell in 2009 to ?17m. It can be said from the above figures that it has recovered well from there. It has been just two occasions when IKEA has published its sales and profit figures because the company does not believe in publishing numbers (Guardian, 2010). Conclusion The furniture industry was the only industry that did not surrender itself to globalisation before 1960. The transport costs of furniture were quite high. IKEA was the first one to adapt to globalisation in the furniture sector. IKEA shipped their furniture economically as they were unassembled. The other way of lowering the costs was that as the furniture was kept unassembled so the customers carried their furniture home and got it assembled themselves. The furniture manufacturing industry in the UK is quite a substantial one. It contributes nearly ?8.3 billion to the GDP of the country. IKEA took the lead in the market of home furnishings in the UK at 2009 end by increasing the market share to 6%. Therefore, from the above study, it can be concluded that IKEA is keeping no stones unturned to become the biggest seller in the home furnishing industry in the UK (BFC, n.d). References BBC News, 2002. How IKEA Won Over The Brits. News. [Online] Available at: http://news.bbc.co.uk/2/hi/business/2037864.stm [Accessed June 30, 2011]. BFC, No Date. Introduction. About the Furniture Industry. [Online] Available at: http://www.britishfurnitureconfederation.org.uk/about_furniture_industry.php [Accessed June 30, 2011]. Creative Benefits, 2008. Employee Benefits For IKEA Staff With New Phone Deal. Home. [Online] Available at: http://www.creativebenefits.co.uk/news/employee-benefits-IKEA-staff-new-phone-deal/1426/ [Accessed June 30, 2011]. Funding Universe, No Date. Company Perspectives. Company History. [Online] Available at: http://www.fundinguniverse.com/company-histories/IKEA-International-AS-Company- History.html [Accessed June 30, 2011]. Glassdoor, 2011. Pros. Reviews. [Online] Available at: http://www.glassdoor.com/Reviews/Employee-Review-IKEA-RVW274805.htm [Accessed June 30, 2011]. Guardian, 2000. The Guardian. News. [Online] Available at: http://www.guardian.co.uk/g2/story/0,3604,336379,00.html [Accessed June 30, 2011]. Guardian, 2010. IKEA Opens Up Its Books And Reveals 11% Profits Rise. News. [Online] Available at: http://www.guardian.co.uk/business/2010/oct/01/ikea-profits-increase [Accessed June 30, 2011]. IKEA Fans, No Date. IKEA History. Home. [Online] Available at: http://www.IKEAfans.com/IKEA/IKEA-history/IKEA-history.html [Accessed June 30, 2011]. IKEA, 2010. Yearly Summary FY09 Comments FY09 &FY10 IKEA® Group. Welcome inside. [Online] Available at: http://www.IKEA.com/ms/en_GB/pdf/Welcome_Inside_2010.pdf [Accessed June 30, 2011]. IKEA Fans, No Date. IKEA History. Home. [Online] Available at: http://www.IKEAfans.com/IKEA/IKEA-history/IKEA-history.html [Accessed June 30, 2011]. IKEA, 2010. Student Info. New. [Online] Available at: http://www.IKEA.com/ms/en_GB/about_IKEA/press_room/student_info.html [Accessed June 30, 2011]. IKEA, 2010. IKEA Values. New. [Online] Available at: http://www.IKEA.com/ms/en_US/jobs/join_us/IKEA_values/index.html [Accessed June 30, 2011]. Pearce, J. A. & Et. Al., 2008. Strategic Management: Formulation, Implementation and Control. Tata McGraw-Hill. The Telegraph, 2011. Retail and Consumer. Fianance. [Online] Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8047531/Tenth-of-all-furniture-bought-in-Britain-is-from-IKEA.html [Accessed June 30, 2011]. Usdaw Online, 2011. IKEA (UK) Ltd Retirement Benefits Scheme. Home. [Online] Available at: http://usdaw.aptsolutions.net/pensions/pensions_finder/1235382043_6057.html [Accessed June 30, 2011]. Read More