ikea case study

Table of Contents

Ikea target audience, ikea marketing channels, ikea marketing strategy, ikea marketing strategy 2024: a case study.

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Ikea serves the unique functional needs of each target audience, with special attention to 16-34-year-old adults. It has solutions for:

• Single people not living at home
• Newly married couples
• Families with the youngest child under six
• Older married couples with dependent children
• No children families
• Labor force
• Professionals 

Thus, it uses the following types of product positioning :

• Mono-segment positioning. It appeals to the needs and wants of a single customer segment that is cost-conscious and prefers value for money.
• Adaptive positioning. It believes in periodically repositioning products and services to adapt to changes in customer preferences. Its Swedish furniture chain considers the dynamic nature of customer preferences. For instance, its latest products reflect increasing minimalism on the global scale. 

Ikea utilizes the power of the following marketing channels: 

• Mobile Application
• WebEngage: Email, SMS, and Whatsapp Marketing
• Social Media
• Telecalling
• Commercials

The Ikea marketing strategy contributes majorly to its success because it's original, imaginative, and distinctive while maintaining a transparent value proposition.

A Creative, Consistent Brand Theme

From the Swedish national colors on its buildings to rich meatballs in its store cafeterias, Ikea's marketing strategy reflects its cultural heritage proudly. It infuses all elements of their identity with a sense of self-assuredness that maintains their identity in the market of stiff competition. 

Emphasizing Affordability and Sustainability 

Understanding that a simple tiered strategy won't encourage repeat business, Ikea extends customization, flexibility, and mix-and-match furniture modules. It effectively combines the elements of affordability and sustainability in its marketing strategy to ensure success.

While the furniture options don't pledge a lifelong guarantee, the products are built to last. Even its reusable shopping bags reflect its commitment to sustainability.

Sponsorship and Influencers 

IKEA-sponsored comedic series Easy to Assemble. Its innovative content marketing was way different from a furniture product demo. Incorporating sponsored digital marketing campaigns and social media influencers have boosted the Ikea marketing strategy. 

Ikea’s Easy to Assemble Series

Exceptional In-store Experience

Ikea brilliantly displays products employing the best lighting systems to generate more sales. It strategically arranges best-matched items in mock rooms to encourage impulse purchases and inspire decor. The company also extends excellent customer service to provide a memorable experience and incite customers to come back for more.

Ikea’s Store Decor for Inspiration

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Website and Mobile Application Marketing

Ikea ensures an optimal mobile website's speed, button displays and gesture controls on its website and mobile app to retain and attract individuals to the site. It carefully invests in its UI/UX , enquiry-based chatbot, and regular updates on new offers, discounts, and promotions. 

One of the most successful marketing moves includes downloading its 3D modeling app to envision a dream home. It's one of its most successful marketing moves that allows IKEA to upsell its low-demand items by creating a desire in its customers to revamp the room.

Ikea’s Website With Engaging Content

Ikea's SEO (Search Engine Optimization)

Ikea's marketing strategy aims at enhancing the site's visibility for relevant searches to attract the attention of new and existing customers. It includes the right product-specific keywords and Google advertisements to further augment its organic ranking .  

Ikea Ranking for Bookcases on Google’s First Page

Ikea's SMM (Social Media Marketing)

Ikea's handles are very active on digital marketing platforms like Facebook, Instagram , Twitter, and Youtube . Their digital presence is impressive, with more than 30 Million likes on Facebook, 1 Million followers on Instagram, 5.3k followers on Twitter, and 41.2k subscribers on YouTube.

Ikea’s Instagram Profile

Its Instagram bio links to its website. The website also has links to its various social media posts. Its 'view shop' and 'call' options for product catalog and direct assistance, respectively, are a testament to a well-crafted Ikea marketing strategy.   

Ikea’s Youtube Advertisements 

IKEA also conducts free online workshops that lure lots of enthusiastic customers, resulting in gaining leads.

Ikea’s Online Workshop Ad

Content Marketing

Ikea relies on its content marketing strategy to create a distinguished presence amongst furniture brands. Its commercials, print ads, social media, and website stands out with attention-grabbing content. It combines innovation and humor to present the brand's core values and inspire people. 

Ikea’s Captivating Commercial 

Ikea Marketing Strategy bears testimony to a well-thought and structured marketing venture. Sign-up for our Digital Marketing Specialist and learn more about marketing case studies published by Harvard Business. You will be taught by experts from facebook and Purdue University. Sign-up for the course TODAY!

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Inside IKEA’s Digital Transformation

• Thomas Stackpole

A Q&A with Barbara Martin Coppola, IKEA Retail’s chief digital officer.

How does going digital change a legacy retail brand? According to Barbara Martin Coppola, CDO at IKEA Retail, it’s a challenge of remaining fundamentally the same company while doing almost everything differently. In this Q&A, Martin Coppola talks about how working in tech for 20 years prepared her for this challenge, why giving customers control over their data is good business, and how to stay focused on the core mission when you’re changing everything else.

What does it mean for one of the world’s most recognizable retail brands to go digital? For almost 80 years, IKEA has been in the very analogue business of selling its distinct brand of home goods to people. Three years ago, IKEA Retail (Ingka Group) hired Barbara Martin Coppola — a veteran of Google, Samsung, and Texas Instruments — to guide the company through a digital transformation and help it enter the next era of its history. HBR spoke with Martin Coppola about the particular challenge of transformation at a legacy company, how to sustain your culture when you’re changing almost everything, and how her 20 years in the tech industry prepared her for this task.

• Thomas Stackpole is a senior editor at Harvard Business Review.

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IKEA Case Study: IKEA’s Genius Business Strategy

This article is an excerpt from the Shortform summary of "Understanding Michael Porter" by Joan Magretta. Shortform has the world's best summaries of books you should be reading.

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Are you looking for an IKEA case study according to Michael Porter’s Five Forces?

Porter’s IKEA case study shows one company’s success in fitting together business activities, business strategy, and operations. His analysis shows how the activities connect to create a uniquely competitive business.

IKEA’s Fit Between Activities

Good strategies depend on the connection among many things. Fit means the value or cost of one activity is affected by the way other activities are performed – in other words, “synergy.” If the activities fit together, they each meaningfully contribute to the company’s increased value or lower cost, and they work strongly together. The IKEA case analysis below is one example of fit between different activities.

This is a clear departure from the (mistaken) idea of the one core competence. If strategy truly is based on one core competence, then it becomes relatively easy to replicate. More often, industries compete fiercely to control the one key “resource” – distribution channels, product portfolios – thus driving up cost. In reality, strong strategies are built on many unique activities that fit together to deliver the unique value proposition . Later, you’ll see how fit works well in the IKEA case study, despite certain trade-offs.

Fit arises in 3 ways . Keep this in mind when you read the IKEA case analysis:

• Example: many of Southwest’s activities are directionally pointed toward lowering cost and increasing convenience.
• When activities are inconsistent, they cancel each other out.
• Netflix’s large catalogue gives more chances to collect data points to make better recommendations.
• IKEA’s room displays substitute for sales associates, thus lowering cost.
• Dell will preload software onto PCs, substituting for the customer’s IT department.

Fit discourages rivals in a few ways:

• With a large range of activities, it becomes unclear which of the company’s activities are most valuable to replicate.
• As a simplistic example, say there are 5 activities that give a company a competitive advantage. If the chance of replicating one activity is 90%, then the chance of replicating all of them is 0.9^5, or 62%.
• An activity that fits one value chain can punish a different value chain, if it lacks synergies with the other activities or contradicts them.
• Activities with fit make it easier to see where the weak link in the chain is (think about this in the IKEA case analysis later).

The IKEA Case Study

Let’s examine a masterpiece of strategy in IKEA using the IKEA case study analysis. Their mission is to deliver stylish furniture at low prices. Their activities show clear trade-offs and strong fit:

• Assembling furniture yourself also seems to increase your enjoyment of it, maybe because of endowment effect. 
• Compact boxes reduce freight shipping costs from the manufacturer.
• This means time from buying to having furniture in your house is much faster than shipped furniture.
• IKEA stores are huge warehouses in large suburban locations with highway access. With large parking lots and loading zones, they allow customers to self-service and deliver their own furniture.
• IKEA showrooms have minimal staff, with the entire inventory laid out for buyers to peruse.
• IKEA cafeterias are self-service and customers are encouraged to bus their own trays.
• IKEA designs its own products, allowing trade-offs in styling and cost.
• Furniture has few customization options, allowing production in bulk and bargaining at scale.
• A narrower catalogue also allows IKEA to keep its warehouses fully stocked, instead of requiring shipping.

Many of these activities fit together and reinforce each other to provide low-priced furniture. The furniture’s self-assembled design reduces manufacturing costs, storage costs, shipping costs from manufacturer, and shipping costs to customers. In turn, IKEA’s locations make the furniture’s self-assembled design even more effective. 

Note how each activity is distinctly a trade-off : you either have furniture disassembled or not. You either have salespeople on the showroom floor or not. This is one of the aspects covered in the IKEA case study analysis.

Many traditional furniture retailers practice the inverse of IKEA’s value chain. If they tried to adopt one of IKEA’s activities, they’d find it less compatible with their own value chain, and so they’d gain very little of IKEA’s competitive advantage.

Note too that, in making these tradeoffs, IKEA is deliberately alienating customer groups – those who want furniture ordered seamlessly to their homes, who want nice salespeople to guide them through options, who want unique and fancifully designed furniture. The IKEA case study analysis shows how trade-offs can sometimes have big strategic payoffs.

Activity System Map

To visualize the strength of fit between activities, place the activities on a map.

• Start by placing the key components of the value proposition.
• Make a list of the activities most responsible for competitive advantage
• Add each activity to the map. Draw lines wherever there is fit: when the activity contributes to value proposition, or when two activities affect each other

Here’s an example for IKEA:

A densely interconnected activity map is a good sign. A sparsely connected map shows weak strategy.

The activity map isn’t useful just for description of your current strategy. It can also be used for ideation for new strategies:

• Can you improve fit between activities? 
• Can you find ways for an activity to substitute for another?
• Can you find new activities or enhancements to what you already do?
• Are there new products or features you can offer because of your activity map, that rivals will find difficult to emulate?

Porter’s IKEA case study is an example of a competitive business in a particular area of an industry. Porter’s IKEA case study shows business activities and strategy intersecting successfully.

———End of Preview———

Like what you just read read the rest of the world's best summary of joan magretta's "understanding michael porter" at shortform ..

Here's what you'll find in our full Understanding Michael Porter summary :

• How Porter's famous Five Forces help you analyze every industry
• How IKEA, Southwest Airlines, and Zara have ironclad, defensible strategies
• Why the best companies reject opportunities to focus on what they know
• ← 5 Simple Steps: How to Do an Industry Analysis
• Likeability Lies: You’re Being Fooled by Charm and Charisma →

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Deconstructing The Global Furniture Giant – Absolute Business Model of Ikea Explained

By Aditya Shastri

Quick Read   Explore the IKEA business model in this comprehensive case study. Understand how IKEA’s innovative approach to affordable, stylish furniture drives its global success and market leadership.

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Imagine treasure hunts where the prize is your dream living room – that’s IKEA. Their stores inspire with room layouts showcasing furniture’s potential. The secret? Flat-pack designs that disassemble for easy transport, saving on storage and letting you be your own furniture-building hero.

Efficiency is key. IKEA sources materials globally in bulk to keep costs low. Plus, their multi-use designs appeal to a wider audience. Those checkout impulse buys (hello, cinnamon buns!) add up too!

Sustainability matters at IKEA. They use recycled materials and promote energy-efficient appliances. They also prioritise good working conditions. This approach is a core part of IKEA’s business model, focusing on affordability and sustainability.

Want to dive deeper in this IKEA’s business model case study, just like we did in the SWOT analysis of Wikipedia ? Let’s begin our journey of understanding IKEA from its inception.

Source: Google

Starting small in 1943 with a young Ingvar Kamprad at the helm, IKEA began by selling affordable household items like pens and wallets. Their mission? To make well-designed furniture accessible to everyone.

They hit a home run with flat-pack furniture in the 1960s, making it easier to transport and assemble these stylish pieces yourself. Today, IKEA is a global giant with over 450 stores, keeping Ingvar’s dream alive by offering good design and functionality at low prices.

They’re also champions of sustainability and keeping their environmental impact low. Even though they started in Sweden, IKEA has become a multinational brand, bringing their signature style and affordability to countries around the world. Their stores are known for their unique layout, complete with room displays that inspire customers to create their dream living spaces.

The success of IKEA’s business model lies in this combination of affordability, sustainability, and innovative design. So next time you’re looking for stylish furniture that’s easy on the wallet and the planet, consider a trip to IKEA.

IKEA Case Study: What’s New With IKEA?

Examining IKEA’s business model reveals numerous innovative strategies and developments aimed at maintaining their market leadership. Here’s what was buzzing around IKEA recently:

• New sustainable materials: IKEA is introducing new sustainable materials into its products, such as recycled plastic, bamboo, and cork.
• More affordable options: IKEA is committed to making its products more affordable for everyone, and is introducing new affordable product lines in 2023.
• More online and omnichannel shopping options: IKEA is expanding its online and omnichannel shopping options, making it easier for customers to shop for IKEA products however they want.
• New product collaborations: IKEA is partnering with new designers and brands to create new and innovative products.
• New focus on home improvement: IKEA is expanding its focus on home improvement, and is introducing new products and services to help customers make their homes more stylish and functional.
• New focus on sustainability: IKEA is committed to sustainability, and is working to reduce its environmental impact and operate more sustainably.
• New stores: IKEA is opening new stores in new markets around the world.
• New digital services: IKEA is developing new digital services to make it easier for customers to shop for and use IKEA products.
• New focus on customer experience: IKEA is focused on improving the customer experience, both in stores and online.
• New focus on inclusion and diversity: IKEA is committed to creating a more inclusive and diverse environment for its customers and employees.
• New focus on social responsibility: IKEA is committed to making a positive social impact, and is working to support its communities and employees.

Understanding IKEA’s business model is essential to appreciating how these initiatives align with their mission of affordability, sustainability, and innovation.

Let’s now understand the target audience of IKEA better with the help of a buyer persona.

IKEA Case Study:Buyer Persona of IKEA

A buyer persona generally refers to the detailed information of an ideal customer of a company. When it comes to IKEA, people from India use it the most. This buyer persona will help you understand the attributes of a regular IKEA user.

Buyer’s Persona

Minneapolis, Minnesota

Profession:

Interior Designer

• Affordable Home Furnishings
• DIY and Creativity
• Sustainability
• Functional Design

Interest & Hobbies

• Interior Design

Pain Points

• Assembly Challenges
• Limited Customization
• Store Crowds
• Product Availability

Social Media Presence

From the table above we can conclude that an ideal IKEA User is motivated by affordable home furnishings, DIY creativity, sustainability, and functional design, with interests in interior design, gardening, reading, and cooking.

Buyer personas are a powerful tool used by countless companies to refine their marketing strategies. Explore our library of digital marketing case studies to see how various companies leverage buyer personas. You’ll discover the wide range of buyer personas employed across different industries, providing valuable insights you can apply to your own marketing efforts.

The marketing strategy of UNIQLO is a fabulous example of this. Their approach is sure to spark your interest – and perhaps even inspire your own marketing tactics.

Business Model of IKEA

Ikea case study: market share & market analysis.

IKEA holds a dominant position in the global home furnishings market, with an estimated market share of around 12% in 2023 (source: Statista). The business model of IKEA leverages its extensive supply chain, economies of scale, and efficient logistics to maintain competitive pricing. Market analysis reveals a growing demand for affordable and sustainable home furnishings, trends that IKEA continues to meet with its product offerings. The company’s ability to adapt to changing consumer preferences and invest in digital transformation ensures its continued market leadership.

IKEA Case Study: Product Offerings

IKEA’s product offerings include a wide range of home furnishings and accessories, from furniture and kitchenware to textiles and lighting. The brand is known for its flat-pack furniture, which reduces shipping costs and allows customers to easily transport and assemble products. This business model of IKEA focuses on offering services like home delivery, assembly, and interior design consultations. The introduction of smart home products and sustainable materials reflects IKEA’s commitment to innovation and environmental responsibility.

IKEA Business Model: Target Audience

Source: ikea.com

Young adults, families, and urban dwellers who prioritise affordability, style, and functionality in their home furnishings form the core customer base of IKEA’s business model. These customers are typically budget-conscious but still value good design and quality.

IKEA offers a wide variety of furniture catering to diverse tastes and lifestyles. This includes modern minimalist pieces, traditional styles, and rustic options. IKEA furniture allows for customisation and multi-use, making it appealing to a wider range of needs.

Demographic segmentation is a key pillar of the business model of IKEA. This allows them to tailor their marketing and product offerings to specific customer groups. One important segment IKEA targets is young, cost-conscious individuals like students or young professionals. These customers, typically with incomes between $15,000 and $50,000, are likely furnishing their first apartments or homes and prioritise affordability.

In essence, IKEA uses demographic segmentation to understand their diverse customer base and tailors its offerings accordingly. This allows them to attract a broad audience seeking stylish and functional furniture at accessible prices.

IKEA Business Model: Funding & Investors

IKEA is a privately held company, primarily owned by the Stichting INGKA Foundation, which was established by Ingvar Kamprad. The company has not required external funding rounds due to its strong financial performance and reinvestment strategy. IKEA’s revenue model is reinvested into the business for expansion, innovation, and sustainability initiatives. This self-sustaining financial model supports IKEA’s long-term growth and stability.

IKEA Business Model: Revenue Model

The IKEA revenue model is based on direct sales of home furnishings and accessories through its retail stores, online platform, and catalogues. In 2022, IKEA reported revenue of €44.6 billion (source: Inter IKEA Group). The company’s affordable pricing strategy, combined with its high-volume sales, ensures substantial revenue. Additional revenue streams include food sales in IKEA restaurants and service fees for home delivery and assembly. The diversified revenue model of IKEA ensures financial resilience and growth.

Business Model Of IKEA: Marketing Strategy

IKEA’s marketing strategy focuses on affordability, sustainability, and customer experience. The brand uses a mix of traditional advertising, digital marketing, and experiential marketing to reach its audience. IKEA’s iconic catalogues, engaging social media campaigns, and in-store experiences create strong brand loyalty. The company also leverages data analytics to personalise marketing efforts and improve customer engagement. Collaborations with designers and influencers enhance IKEA’s appeal and visibility.

Many companies, like IKEA, recognise the power of digital marketing to promote their brand and generate profits. It’s clear that digital marketing is shaping the future of marketing. Understanding its importance, YouTube, a major digital platform, emphasises the value of learning digital marketing skills.

If you believe that digital marketing should be approached strategically and deserves the utmost respect, pursuing a PG in Digital Marketing programme could be the perfect choice.

Business Model Of IKEA: Value Proposition

IKEA’s value proposition lies in offering well-designed, functional, and affordable home furnishings. The brand’s commitment to sustainability and innovation further enhances its appeal. IKEA’s flat-pack furniture and efficient supply chain reduce costs, which are passed on to customers. The IKEA shopping experience, from inspirational store layouts to comprehensive services, ensures high customer satisfaction. The value proposition of IKEA ensures a loyal customer base and strong market presence.

It refers to a competitive solution a company uses to make its products to gain a larger market space.

• DIY system Flatpack: This system is suitable for the present building size required anywhere.
• Using renewable energy sources: It helps to maintain an environmental/commercial balance.

Business Model OF IKEA:Operational Model

IKEA’s business plan includes an operational model which integrates a global supply chain, economies of scale, and efficient logistics. The company sources products from over 1,800 suppliers in more than 50 countries, ensuring quality and cost-effectiveness. IKEA’s flat-pack design reduces transportation and storage costs, enhancing operational efficiency. The company’s investment in digital transformation, including online sales and smart home solutions, ensures seamless operations and customer convenience.

IKEA Case Study: Strategic Alliances & Partnerships

IKEA forms strategic alliances with suppliers, designers, and technology partners to enhance its product offerings and operations. Partnerships with sustainable material suppliers support IKEA’s environmental goals. Collaborations with designers and brands, such as the Virgil Abloh collection, bring unique and limited-edition products to customers. Alliances with technology firms enable IKEA’s business to innovate in areas like smart home solutions and e-commerce.

IKEA Case Study:Technological Innovations

IKEA invests heavily in technology to enhance its products and customer experience. The company uses digital tools like the IKEA Place app for augmented reality furniture placement and the IKEA Home Planner for room design. Innovations in sustainable materials, such as recycled and renewable resources, reflect IKEA’s commitment to environmental responsibility. IKEA’s business plan is to focus on technological advancements ensuring continuous improvement and market differentiation.

However, technology is just one pea in a pod. Just like Uber leverages digital marketing to connect with riders and drivers, this powerful skill set can benefit anyone looking to stay ahead in today’s digital world. Enrolling in the best digital marketing course online can equip you with the knowledge and tools to create targeted campaigns, reach new audiences, and achieve your goals.

Unsure where to begin? Consider attending a free digital marketing certification masterclass . This can be a great way to explore the world of digital marketing and see if it aligns with your interests.

IKEA Business Model: Corporate Social Responsibility (CSR)

IKEA’s CSR initiatives focus on sustainability, community support, and social responsibility. IKEA’s business plan aims to become climate positive by 2030, reducing more greenhouse gas emissions than its value chain emits. IKEA promotes sustainable living through products like solar panels and energy-efficient lighting. Community initiatives include supporting refugees and providing disaster relief. The IKEA Foundation, funded by Stichting INGKA Foundation, supports global humanitarian projects and environmental initiatives.

Business Model of IKEA: Failed Campaigns of IKEA

IKEA more than often grabs attention with its unique marketing. But, there have been a few times when the campaign failed to connect with the audiences and gained backlash.

Here are a few examples of failed campaigns of IKEA:

• IKEA’s ‘Book of Love’ catalogue: In 2012, IKEA released a catalogue for Saudi Arabia that featured photos of women without headscarves. This caused a lot of controversy in the conservative country, and IKEA was forced to apologise and withdraw the catalogue.
• IKEA’s ‘This is How the Many Live’ campaign: In 2013, IKEA launched a campaign in the UK that featured photos of real people’s homes. The campaign was intended to be relatable, but many people found the photos to be depressing and unrealistic.
• IKEA’s ‘The Wonderful Everyday’ campaign: In 2016, IKEA launched a campaign that featured families from different backgrounds living together in harmony. The campaign was intended to be inclusive, but some people found it to be unrealistic and even offensive.
• IKEA’s ‘How to Live Small’ campaign: In 2019, IKEA launched a campaign that featured people living in small spaces. The campaign was intended to be aspirational, but some people found it to be insensitive to the challenges of living in poverty.
• IKEA’s ‘Life is Not an IKEA Catalog’ campaign: In 2020, IKEA launched a campaign that featured furniture being peed and vomited on. The campaign was intended to be humorous and relatable, but many people found it to be gross and distasteful.

IKEA Business Model: Brand’s Top Competitors Analysis

Just like other businesses, IKEA also has its fair share of competitors. While there are so many out there here are some of top competitors of IKEA

• Wayfair: Competes with IKEA in online home furnishings, offering a wide range of furniture and decor with a strong focus on e-commerce.
• Home Depot: Provides a broad selection of home improvement products and services, attracting DIY enthusiasts and professionals.
• Ashley Furniture: Known for its affordable and stylish furniture, competing with IKEA on price and design.
• West Elm: A subsidiary of Williams-Sonoma, offers modern and contemporary furniture, appealing to design-conscious consumers.
• Amazon: Competes in home furnishings through its vast marketplace, offering a wide range of products and convenient delivery options.

The IKEA business model exemplifies innovation, efficiency, and sustainability in the home furnishings industry. Its diverse product offerings, strategic partnerships, and technological advancements ensure sustained growth and market leadership. As IKEA continues to evolve, it remains a transformative force in global home furnishing.

As we wrap up our analysis of the impressive business model of IKEA it’s clear that staying up-to-date with the latest trends and techniques is key to success in the digital marketing world.

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FAQs About Business Model of IKEA

IKEA's business model focuses on providing affordable, well-designed home furnishings through a global supply chain and efficient logistics.

IKEA makes money through direct sales of home furnishings, accessories, food sales in its restaurants, and service fees for home delivery and assembly.

IKEA’s main products include furniture, kitchenware, textiles, lighting, and accessories for home furnishing.

IKEA’s top competitors include Wayfair, Home Depot, Ashley Furniture, West Elm, and Amazon.

IKEA uses technology for augmented reality furniture placement, room design planning, and innovations in sustainable materials.

IKEA's target audience includes young adults, families, and urban dwellers seeking affordable, stylish, and functional home furnishings.

IKEA holds approximately 12% of the global home furnishings market.

IKEA’s CSR initiatives focus on sustainability, climate positivity by 2030, supporting refugees, and global humanitarian projects.

IKEA’s value proposition is offering well-designed, functional, and affordable home furnishings with a commitment to sustainability and innovation.

IKEA markets its products through traditional advertising, digital marketing, iconic catalogues, social media campaigns, and in-store experiences.

Author's Note: My name is Aditya Shastri and I have written this case study with the help of my students from IIDE's online digital marketing courses in India . Practical assignments, case studies & simulations helped the students from this course present this analysis. Building on this practical approach, we are now introducing a new dimension for our online digital marketing course learners - the Campus Immersion Experience. If you found this case study helpful, please feel free to leave a comment below.

Aditya Shastri

Lead Trainer & Head of Learning & Development at IIDE

Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs...... [Read full bio]

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IKEA U.S. takes equity, diversity and inclusion to the next level

Furniture retailer builds ambitious new strategies into its business plan.

5-MINUTE READ

Call for change

A responsibility to build a better society.

For many years, the world’s largest furniture retailer, IKEA, has prioritized efforts to promote equity, diversity and inclusion (ED&I). For example, the company has partnered with social entrepreneurs, creating thousands of jobs for under-represented groups around the world, including a project with Syrian refugees to develop textile products for sale in IKEA stores. Additionally, through employee development and human resources programs across the globe, IKEA has successfully increased the percentage of women in leadership positions,  reaching 50% in 2020 .

Even with its existing achievements in ED&I, IKEA wanted to do more.

IKEA U.S. asked Accenture to help assess its current state of ED&I, define an ED&I vision, and develop a comprehensive plan to accelerate gains in this area. The aim was to implement an effective approach that the company could replicate in other countries. IKEA U.S. was particularly interested in setting and pursuing race and ethnicity goals as well as increasing the diversity of its leadership.

With increasing inequality due to climate change and other global challenges, we recognized that we have a responsibility to help build a society that provides equal opportunities for all.

STEPHANI “STEVIE” LEWIS / Chief Diversity Officer, IKEA U.S.

When tech meets human ingenuity

Improving maturity in ed&i.

We used our maturity model to characterize the current state of ED&I at IKEA U.S. This model measures the extent to which ED&I is embedded in a company in specific areas and identifies opportunities for improvement.

The team inputted the results of several activities into the model:

• Interviews with IKEA U.S. departments:  For instance, interviews with communications staff focused on understanding how ED&I values are embedded into the communication strategy.
• A survey of executives at IKEA U.S.  gathering insights into the current state of ED&I and their aspirations for the company.
• Focus groups with IKEA U.S. co-workers  to explore their experiences working at IKEA and gather their perspectives on the company’s ED&I maturity.

Using the model’s results and additional research on ED&I at eight other retailers, Accenture compared the ED&I maturity of IKEA U.S. with that group. We also compared human resources data for IKEA U.S. employees with U.S. Census data in various geographic areas, revealing the diversity gap between IKEA and local Census populations.

A valuable difference

A roadmap for greater equality.

We presented the results from our maturity assessment in a facilitated workshop with the IKEA U.S. ED&I staff and leadership team. The participants translated the results into a vision to guide action and several ED&I strategies, such as increasing underrepresented groups at all levels of the organization. They also developed 30 recommendations to be integrated into the 2023 business plan for IKEA U.S., such as determining ED&I performance indicators.

Since Accenture completed the project, the ED&I team has asked leaders at each U.S. store to implement ED&I initiatives that support the new vision and strategies while serving specific store needs. These include an Equity Council, an accountability group led by CEO Javier Quiñones, and a pilot program to support diverse talent with leadership training and mentorship. IKEA U.S. has also built a dashboard that tracks ED&I indicators at stores, allowing for progress reports to be shared with executives.

“We now have the data and the tools to take ED&I to the next level,” said Lewis.

Unpacking the digital transformation at IKEA

by Didier Bonnet , Michael R. Wade Published 15 February 2022 in Innovation • 8 min read

In an IbyIMD interview, Barbara Martin Coppola, Chief Digital Officer of IKEA Retail (Ingka Group), explains how she is helping to take the company, famous for its out-of-town stores and physical products, in a bold new direction.  

For nearly 80 years, IKEA has provided the world with its distinct style of ready-to-assemble home furniture, appliances, and accessories. IKEA is now one of the most recognized brands in the world, and its fame was built on quality physical products and analog distribution and business model. So, how does such a successful incumbent company stay relevant faced with the fast-changing realities of the digital economy?   

Four years ago, to accelerate its digital transition, IKEA hired Barbara Martin Coppola, a seasoned digital executive with global experience from Google to Samsung, with a remit to accelerate the digital transformation of IKEA.  

IMD Professors Didier Bonnet and Michael Wade asked Barbara how she faced the challenges of digitally transforming such an iconic global brand.   

What were the priorities of IKEA when you joined the company?  

When I joined IKEA, I was the first Chief Digital Officer in almost 80 years, the company was going through a deep self-reflection about its future directions. There were headwinds in the retail industry, consumers were changing their habits, the way they live their lives and their consumption patterns. Yet, when you think about IKEA, you think about those big flagship stores outside main cities, which is the model that, over the years, had served us well to grow the company. Now, with digital technology providing the opportunity to operate companies more efficiently and find new sources of growth with digital business models, IKEA had to embrace this digital wave quite urgently.   

In discussion with our CEO, we progressively realized that a digital transformation would mean changing deeply the way IKEA operated. But with one strong guiding principle. Every digital change was to be true to the values and the mission of IKEA. So, the remit was not to design a digital transformation “on the side” of the core business but to truly follow the firm core principles.  

“Now, with digital technology providing the opportunity to operate companies more efficiently and find new sources of growth with digital business models, IKEA had to embrace this digital wave quite urgently. ”

So, it was not about a digital strategy, but a strategy enabled by digital transformation?  

Absolutely. IKEA was very clear on its driving objectives, and the idea was that we needed digital to underpin and accelerate the execution of these objectives. On the surface, the driving objectives were not technology-driven, but fundamentally linked to our changing customers and our competitive position. The vision and mission were built around three core elements:  

• How do we become more accessible ? Given our traditional out-of-town locations.  
• How do we continue to be affordable ? Serving our wide base of customers from India to China, to Germany.  
• How do we become planet-positive ? Contributing to the sustainability of the world we operate in.  

I like to refer to these as the “Three Icebergs”, because the bulk of the digital work was to take place below the surface. Let me give you a tangible example. How do we become more accessible? When you start peeling the onion, it means that our customers have to be a click away from the brand, they have to be able to access a multitude of touchpoints even when they live within large cities. The consequences of doing that are profound as it means our inventory flows need to be different, it means the speed and agility which we operate the business have to be different, it means merchandising needs to be different and even the skills of the people delivering to customers need to change. This is exactly where digital needs to come to the fore.  

The change you describe implies you managed to execute your digital transformation across the natural silos in the organization?   

First, it needs a realization that the silos, particularly in terms of functions, needed to change themselves. To execute effectively, we also needed to build cross-functional teams bringing different expertise to tackle digital solutions end-to-end. It required a lot of human interactions, a lot of communication and a lot of stakeholder management. Second, it was about how we empowered those cross functional teams and give them the freedom to execute fast. We gave them decision rights to execute the change and produce the results. One thing I think we got right during the pandemic, is that we did not implement a heavy governance mechanism upfront with committees and layers of decision-making and approvals. We empowered the teams first and then formalized the governance later. And it was a business governance around three functions: Digital, Commercial and Operations. We had to remain pretty nimble, particularly during COVID, as the stores were closed, so empowering the front line and leading from behind was key to speedy execution.  

Discover IMD Program: Developing Digital Transformation Strategies

Digital and sustainability are the two major transformations facing businesses today, how do you reconcile the two  .

I see huge complementarity between the two transformations. It would be wrong to treat them separately. Digital is absolutely central to achieving our “Planet Positive” objective. Let me give you an example of how the two reinforce each other. One of the key sustainability goals of IKEA is to have a circular business model. One of the main implications is that we can follow the goods, trace the provenance of materials, monitor their usage and be able to get goods back for recycling. This is entirely based on digital product information, supply chain visibility and the data flows that underpin all these digital processes. You also need to digitally equip consumers through apps so they can see that information and be able to return an item to IKEA.   

We started a program last year where customers can sell products back to us for recycling. On Black Friday alone last year, we had 100,000 items sold back to us. And this is just the beginning, we plan to triple that number this year. We need to understand each component of the item to be able to recycle them effectively either by reusing materials or by reselling used items in the stores at a cheaper price – benefiting our affordability goal. Everyone benefits we save on goods and raw materials, we save on carbon impact, and we prolong the life of the products we make. I believe a lot of people will be happy with this. And it’s only possible because of our ongoing digital transformation.   

Our research shows that externally appointed CDOs often find it hard to navigate the complexity of large organizations, you seem to be a counter example?   

It’s a great question, you’re right, I’m only the second executive coming from outside IKEA in 78 years. And I’m not Swedish, I’m digital and I’m a woman. I think, first reporting directly to the CEO was an essential signal of the intent. Second, the CEO deserves a lot of credit for supporting me and putting in place the right conditions for the digital transformation to happen. I would also say that other executive team members were also extremely supportive, and that is a great help. 

I believe that what made a difference is that the whole executive team was aligned on the need to change. But, more importantly it was also about fitting into the values and the beliefs of the IKEA organization. To be honest, I was closely observed at the beginning, and I had to pass the “can we trust her” phase, way before any questions on my digital expertise. Once the confidence was established then we moved into the transformation execution. During this phase, we needed to bring proof points and early successes, so people went “oh, my god, this is working”. And started to believe in the power of digital to augment IKEA.    

If there’s one thing I have learned is that the human dynamics are essential to digital transformation success. How do we embed a digital mindset as a core component of the company’s leadership, and how do we bring the entire organization on the journey with us?  

Back to your question, I think it’s a lot about respecting what is and envisioning what could be. There is a sentence at IKEA that I really like and that capture that mindset: “Love the past and create the future.”  

This article is part of a series of “ Digital Leaders” interviews that IMD is conducting, to learn from real experiences from practitioners leading the digital transformation of large, global organizations.

Didier Bonnet

Professor of Strategy and Digital Transformation

Didier Bonnet is Professor of Strategy and Digital Transformation at IMD and program co-director for Digital Transformation in Practice (DTIP) and Leading Customer Centric Strategies (LCCS). He also teaches strategy and digital transformation in several open programs such as Leading Digital Business Transformation (LDBT), Digital Execution (DE) and Digital Transformation for Boards (DTB). He has more than 30 years’ experience in strategy development and business transformation for a range of global clients.

Michael R. Wade

TONOMUS Professor of Strategy and Digital

Michael R Wade is TONOMUS Professor of Strategy and Digital at IMD and Director of the TONOMUS Global Center for Digital and AI Transformation . He directs a number of open programs such as Leading Digital and AI Transformation , Digital Transformation for Boards , Leading Digital Execution , and the Digital Transformation Sprint . He has written 10 books, hundreds of articles, and hosted popular management podcasts including Mike & Amit Talk Tech . In 2021, he was inducted into the Swiss Digital Shapers Hall of Fame.

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• Assignments
• Assignment: Machine Learning

IKEA’s Leap Forward with Data and AI

IKEA using data and AI to achieve digital innovation and transformation

IKEA’s Digital Transformation

Before becoming the largest furniture retailer in the world, Ingvar Kamprad started IKEA as a mail-order sales business in Sweden 1943. IKEA is now a global conglomerate or a multi-industry and multi-sector business organization. The success of this organization can be attributed to specific business strategies and tactics that revolve around offering well-designed and functional products at affordable prices.

Currently, IKEA is in the middle of a transformation of its business model that made it successful on a global scale. Specifically, for many decades IKEA’s business strategy was primarily based on having giant out-of-town warehouses, where shoppers pick their own furniture and then build it at home. But now it is looking increasingly at city-center stores, online shopping, home delivery and assembly, and more radical ideas such as leasing furniture.

 Barbara Martin Coppola, CDO at IKEA Retail mentioned in Harvard Business Review:

Pathways to a Just Digital Future

“Digital transformation is not a goal in and of itself, and it is so much more than technology. We are transforming our business: We are exploring potential new offers to customers, new ways to bring our offers to customers, and new ways to operate our business. And in order to be successful, digital needs to be embedded in every aspect of IKEA. Digital is a way of working, making decisions, and managing the company.”

IKEA has been on the digital transformation journey and the supply chain has been part of it. Its online sales have boosted during lockdowns, and digital transformation has helped make the company sustainable. Artificial Intelligence-powered product recommendations and a more scientific approach to data have seen IKEA lift average order value (AOV) by 2% worldwide.

IKEA Utilizing Data + AI

1. Decision Making

The first step IKEA made was to radically improve its ability to get high-quality quantitative information to understand how its ‘ recommendation’ solutions affected personalization . IKEA did this through high volume A/B testing on customer behavior and after initial experimentation, IKEA had a few key learnings: first, the mix of both UX and algorithms are really important for a cohesive customer experience; and second, the quality of personalization cannot be measured in silos. Statistical significance could be attained by testing several groups of recommendations at once.

2. Data for Personalization

Utilization of qualitative and psychographic data to understand its customers better and delve deeper to develop personalized experiences for its customers distinguish IKEA from its competitors. The qualitative data helps IKEA to understand that when a customer buys a piece of furniture, for example a sofa, the customer is bound to make other changes — the domino effect, to ensure the matching of the couch with the room, like lamps, curtains, and pillow covers. Like many modern businesses, IKEA’s digital strategy relies on customer data. However, the company understands the concerns around it and thus launched the Customer Data Promise to help customers understand, provide control, and the ability to make decisions about their data – for psychographic data.

3. Smarter Demand Forecasting

Optimizing stock across various in-store and online channels requires real-time analysis of customers’ buying behavior to minimize the demand and supply gap. To that end, IKEA created an innovative Demand Sensing, an AI-based tool that optimizes stock levels to ensure the consistency of shopping experiences for its customers. To create projections and predict future demand more intelligently and effectively, the tool leverages up to 200 data sources for each product. The system considers various influencing elements, like festival purchasing preferences, the impact of seasonal changes on purchase patterns, and weather forecasts, among others. It can even detect an increase in in-store visits during the month.

4. AR and VR for Visualization

IKEA Kreativ  uses virtual and mixed-reality room design technology to let customers use the app to scan and design their space and bring products into their homes. Once the customer is happy with the design, they can add everything to their online cart and check out. Or, they can save everything to a shopping list and go to the store for pickup. IKEA Kreativ brings machine learning and 3D technology into something that is immediately applicable and helpful for customers. Both mobile and web applications connect to a scalable, containerized, cloud-based platform of microservices and AI pipelines, hosted by the Google Cloud Platform.

Results and Lessons

COVID influenced IKEA to commit to its digital transformation journey three years ago with a root and branch review of the company’s digital strategy, encompassing everything from back-office IT systems to how consumers experienced the buying process on their smart devices . IKEA visualizes key consumer data from around the world in real time, sharing insights across departments, markets, and nations. As a result, IKEA can be far more adaptable and proactive in its social efforts.

With more personalized and real-time recommendations with AI, IKEA was able to increase the number of relevant recommendations displayed on a page by +400%. Even though IKEA previously already had well-tuned recommendations of several types, with ‘Recommendations AI’ IKEA measured a +30% improvement in click-through rates as well. Average order value saw a +2% surge with numerous examples of how Recommendations AI could help customers find both attractive and directly complementary products, expanding the customer purchase from a single product to an entire home furnishing solution.

• Milne, R. (2019) “Inter Ikea’s Torbjorn Loof: making the vision clear”  Financial Times,  Available at:  https://www.ft.com/content/6b250c0a-2486-11e9-b329-c7e6ceb5ffdf
• https://hbr.org/2021/06/inside-ikeas-digital-transformation
• https://www.architectmagazine.com/technology/ikea-launches-augmented-reality-application
• https://www.pymnts.com/news/retail/2022/inflation-stokes-recession-fears-while-slamming-retail-earnings/
• https://digiday.com/marketing/ikeas-chief-digital-officer-on-how-its-using-ai-to-personalized-online-shopping-working-with-influencers/
• https://newatlas.com/around-the-home/ikea-kreativ-ai-room-design-app/
• https://biz.crast.net/ikeas-chief-digital-officer-explains-how-hes-using-ai-for-personalized-online-shopping-working-with-influencers/

Student comments on IKEA’s Leap Forward with Data and AI

I love this! Thank you for sharing Jiwon. It might be interesting to know if they have started to integrate online and offline experiences through data transformation. I am imagining a scenario like where a customer registers his/her visit to an offline store and scans the QR code of furniture that he or she is interested in (or even food order, which is impeccable for IKEA’s offline business!).

A very comprehensive blog post about Ikea’s business application of AI! The blog post focused more on the front-end AI applications and touched upon the back-stage digital operations as well. I wonder how interconnected the front and back ends are and what Ikea is thinking about as the next steps in the AI application!

Hi Jiwon, thank you for your Blog! It was intriguing to learn how IKEA is using artificial intelligence and data not only for their decision making and forecasting, but also to improve their customer experience. It also reminded me of the example of Starbucks. They are both collecting a lot of customer data to make seasonal changes and improve the experience compared to their competitors. I’m curious to see how the data collection is adapted to the local context and how IKEA is implementing all the new digital and technological aspects into their traditional business model step by step.

Thank you so much for this blogpost! It is impressive how IKEA was able to increase relevant recommendations by so much and how they make use of AI. I am wondering how far IKEA could take their strategy with using AI. I have some reservations, because I believe that many customers go to IKEA, because they love to walk around the store, only need one thing, and buy some candles and a hotdog on the way out. For IKEA, I think it would be necessary to focus on staying offline as well and focus on the warehouses as that is what at least in my head IKEA still stands for. On the other hand, I can see that using AI can improve the customer experience in other areas, for example if they are looking for anything specific.

Thank you for your blog! it’s really interesting to see that IKEA has introduced AR & VR technology to help customers to increase customer’s convenience. But I’m wondering how will the customer shopping behavior change after using AR & VR tech and its impact will be translated to the IKEA’s topline? Additionally, I’m curious to understand did IKEA make this move because of any existing competitive forces in the market, as I’m sure they aren’t the first mover in the furniture retail business to use the AR & VR tech. And really interested to see how this digital strategy pans out for IKEA.

This is an awesome post! I think like others here, I’m curious about how they can use the AI to actually improve their supply chain. I have often been frustrated after going really far outside the city to one of their stores to realize that they are out of stock of something and don’t know when it will be back in stock. It seems like some of their AI is gimicky but not actually addressing revenue-generating-issues that need to be addressed!

It’s always incredible to me when a store is able to find sources of data in person to be able to improve CX! I still think they’re a little behind the other furniture stores like Williams Sonoma etc. who have done several AR / VR acquisitions to help customers plan their homes and shopping better, but also think that might be because of their customer base / demographic. I also wonder how much they are integrated the in-store experience with more targeted email campaigns (something along the lines of ‘we saw you didn’t check out the bed you scanned twice and spent 10 minutes looking at, what were you looking for / here’s a discount, etc.)

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Exploring digitalisation at IKEA

International Journal of Retail & Distribution Management

ISSN : 0959-0552

Article publication date: 15 March 2022

Issue publication date: 19 December 2022

The paper aims to clarify how an incumbent retail organisation explores digitalisation for its existing business.

Design/methodology/approach

The paper draws from an in-depth case study of home-furnishing retail giant, IKEA conducted with semi-structured interviews, participant observations and document analyses.

In the exploration phase of digitalisation, three major activities – interpreting, interrelating and integrating – illuminate how the exploration process can be organised in practice.

Originality/value

Although digitalisation ranks amongst the most significant ongoing transformations in retail businesses, research on how incumbent retail organisations have engaged in exploring digitalisation in practice has remained scarce. The paper contributes insights into digitalisation processes in retail businesses that may also apply to other trends affecting the retail industry.

• Digitalisation
• Exploration

Hagberg, J. and Jonsson, A. (2022), "Exploring digitalisation at IKEA", International Journal of Retail & Distribution Management , Vol. 50 No. 13, pp. 59-76. https://doi.org/10.1108/IJRDM-12-2020-0510

Emerald Publishing Limited

Copyright © 2022, Johan Hagberg and Anna Jonsson

Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

1. Introduction

Digitalisation , defined as the “integration of digital technologies into everyday life by the digitization of everything that can be digitized” ( Hagberg et al. , 2016 , p. 696), ranks amongst the most significant ongoing transformations in business, one that has introduced new ways of doing business whilst challenging established ones ( Leeflang et al. , 2014 ). As such, digitalisation has been characterised as a disruptive change that tests industries, their accepted logics and even individual businesses (e.g. Verhoef et al. , 2015 ; Hänninen et al. , 2018 ).

In literature addressing retail, digitalisation has received increased attention from both consumers' and retailers' perspectives ( Frasquet et al. , 2021 ), including in terms of omni-channel strategies ( Verhoef et al. , 2015 ), business models ( Jocevski et al. , 2019 ), multi-sided platforms ( Hänninen et al. , 2019 ) and the reconfiguration of retail stores ( Hagberg et al. , 2017 ). Most recently, according to Hänninen et al. (2021) , such research has integrated far more discussion and theorising about digitalisation across the value chain. However, the organisational processes that catalyse the incorporation of digital technologies in retail businesses – in March's (1991) and Winter and Szulanski's (2001) terms, the exploration phase – have received less attention. Therefore, this paper focusses on that very phase – the early stage of digitalisation – to contribute insights into digitalisation in retail ( Hänninen et al. , 2021 ) whilst answering the call for research on “how firms adapt their business models in response to external threats and opportunities” ( Saebi et al. , 2017 , p. 567).

The paper aims to clarify how an incumbent retail organisation explores digitalisation for its existing business, even as potential disruptions, their meanings and their consequences remain uncertain. To that purpose, the paper builds upon an in-depth case study on IKEA, an established firm in today's dynamic retail sector, an environment in which digitalisation especially urges business actors to rethink their ways of doing business and attracting customers ( Hänninen et al. , 2018 ; Blom, 2019 ; Jocevski et al. , 2019 ). It draws upon first-hand experiences with, and insights into, how IKEA has explored digitalisation, even when the concept was relatively elusive and how it would affect IKEA's business. In describing IKEA's exploration phase and what digitalisation has meant for its business, the paper delineates three major activities of that exploratory process: (1) interpreting what digitalisation means, (2) interrelating digitalisation and the existing business and (3) integrating new ideas and solutions in light of digitalisation.

In what follows, we review literature on digitalisation in retail and research focussing on that process's exploration phase and development in businesses. Next, we describe the methodological considerations made for our case study on IKEA. After that, we present our findings in terms of three major activities that guide the exploration phase. We conclude the paper by discussing our findings in relation to the literature and addressing our research's limitations.

2. Literature review: exploring digitalisation in retail

Having significantly impacted retail in recent years, digitalisation has become an important topic in research on the industry ( Hänninen et al. , 2021 ), especially regarding specific applications of digital technology – for example, the use of smartphones in physical retail settings ( Fuentes et al. , 2017 ; Grewal et al. , 2018 ), augmented reality ( Scholz and Duffy, 2018 ; Caboni and Hagberg, 2019 ) and digital signage ( Dennis et al. , 2012 ; Jäger and Weber, 2020 ). Studies on specific technologies have been accompanied by broader frameworks for integrating various digital technologies into retail, not only by turns based upon their usage and retailers' objectives ( Wolpert and Roth, 2020 ), their social presence and consumers' convenience ( Grewal et al. , 2020 ) and their use in relation to shopping behaviour at various stages of the customer's journey ( Rosengren et al. , 2018 ; Blom, 2019 ; Roggeveen and Sethuraman, 2020 ), but also by general frameworks of what digitalisation implies for retail business overall ( Hagberg et al. , 2016 ). In such studies, digitalisation in retail has received sustained attention regarding several aspects of consumer behaviour ( Hure et al. , 2017 ; Pantano and Gandini, 2018 ), the retailer–consumer interface ( Hagberg et al. , 2016 ; Roggeveen and Sethuraman, 2020 ) and retailers' ways of doing business ( Verhoef et al. , 2015 ; Hänninen et al. , 2018 ). The processes in which incumbent retailers develop their businesses in light of digitalisation, however, have received far less attention.

Because digitalisation, understood as the integration of digital technologies, is arguably not a binary shift from one stage to another but an ongoing process without a clear beginning or end ( Hagberg et al. , 2016 ), its exploration in retail warrants a more processual perspective, particularly regarding its influence on how retail organisations alter their businesses (cf. Langley, 1999 ). Along with frameworks addressing how retail businesses can integrate digitalisation in various ways, the actual processes that may result in digital integration need to be explored and modelled. That need directs our attention to the exploratory processes through which retail businesses may approach digitalisation and, more specifically, to how digitalisation consequently influences established business models. Especially for the latter reason, we gave priority to incumbent retailers, whose business models and established ways of conducting business often confront such considerations.

Despite extensive research on what constitutes a business model, understandings differ about how to define, explore and leverage one. In fact, Teece (2018 , p. 41) has estimated that there are probably as many definitions of business model as there are models themselves. According to Ritter and Lettl (2018) , a business model, simply put, is a company's “way of doing business”. In this paper, considering how business models have been discussed in retail settings ( Sorescu et al. , 2011 , p. 4), we broadly understand a company's business model as representing “the firm's distinctive logic for value creation and appropriation”.

Although various external events may necessitate changes to ways of developing and operating businesses, digitalisation itself is not an event but an emergent, comprehensive and uncertain phenomenon. Indeed, digitalisation can span several external and internal aspects of businesses, as well as pose myriad implications for individual business models. To date, though scholars interested in digitalisation have examined different approaches to innovating business models, from making gradual, evolutionary adjustments to radically altering them ( Berends et al. , 2016 ; Inigo et al. , 2017 ; Snihur and Wiklund, 2019 ), how the exploration phase of digitalisation is understood and organised merits further investigation.

Following March's (1991 , p. 71) definition, exploration refers to searching for, innovating and experimenting with something novel. The concept as used by March (1991) is often considered in relation to exploitation, which refers to refinement, efficiency and implementation of “old” routines or certainties in an organisation. As noted by He and Wong (2004 , p. 481), researchers in strategic management, organisation theory and managerial economics have applied the two concepts in order to understand how innovations occur and how an organisation learn and develop dynamic capabilities to meet change. Previous studies either focus on the trade-off between exploration and exploitation or the balancing act between the two as discussed within literature focussing on ambidexterity and means for developing dynamic capabilities (e.g. Benner and Tushman, 2003 ; He and Wong, 2004 ; Vahlne and Jonsson, 2017 ). The two concepts have also been applied in processual research describing the evolution and development of an organisation. Winter and Szulanski (2001) use the two concepts when outlining their theory of replication as strategy and suggest a two-phase model where the organisation first enters the exploration phase “in which the business model is created or refined” (p. 731) and then move on to the exploitation phase. The argument that exploration and exploitation can be understood in terms of different phases of a process has been adopted also by researchers focussing on, for instance, retailers' internationalisation process ( Jonsson and Foss, 2011 ), the transition into retail omni-channel strategies ( Picot-Coupey et al. , 2016 ) and reverse knowledge flows within franchise organisations ( Friesl and Larty, 2018 ). Still, how the exploration phase is organised and how it can be understood remains to be further investigated. To the best of our knowledge, there is a dearth of research focussing specifically on the exploration phase and how it develops in practice. Whilst existing studies do explore the exploration phase, it is also discussed in relation to the exploitation phase with focus on the outcomes rather than the processual aspects of the phase as such. For this paper, we zoom in on and examine the exploration phase and how it can be understood in the context of retail digitalisation. In particular, when emergent trends such as digitalisation, a change process, challenge established business models, more comprehensively re-engaging the exploration phase can become essential.

3. Methodology

Investigating a complex phenomenon such as digitalisation, and given our aim, calls for a qualitative in-depth case study ( Eisenhardt, 1989 ). According to Dyer and Wilkins (1991 , pp. 615–617), case studies aim to “provide a rich description of the social scene”, “describe the context in which events occur” and thus offer opportunities for other researchers to see “phenomena in their own experience and research”. In that sense, rich, explorative case studies provide avenues for future research or, as more broadly conceived by Doz (2011 , p. 588), “offer the opportunity to help move the field forward and assist in providing its own theoretical grounding”.

Our in-depth case study focussed on IKEA, a global home-furnishing retail company, and its work with developing an understanding of digitalisation. IKEA is a particularly interesting case that has attracted practitioners seeking a benchmark in a hitherto successful business model (e.g. Jonsson and Elg, 2006 ; Edvardsson and Enquist, 2011 ; Burt et al. , 2016 ). IKEA has frequently been used as an empirical example in the business models literature (e.g. Hedman and Kalling, 2003 ; Sorescu et al. , 2011 ) and subject to in-depth case studies of the development of specific aspects related to the IKEA business model over time (see e.g. Salzer, 1994 ; Jonsson, 2007 ; Tarnovskaya et al. , 2008 ; Edvardsson and Enquist, 2011 ; Hellström and Nilsson, 2011 ; Burt et al. , 2016 , 2021 ). In addition, there are several studies of various aspects related to digitalisation, including store format development ( Hultman et al. , 2017 ) and comparison of IKEA's digital catalogue and website ( Garnier and Poncin, 2019 ). IKEA has also served as an in-depth case for studies of exploration in relation to exploitation and replication ( Jonsson and Foss, 2011 ; Vahlne and Jonsson, 2017 ). The present study adds to this literature through an in-depth case study of IKEA's digitalisation process in an early explorative phase.

In the ten months from September 2014 to June 2015, we observed IKEA's work on exploring digitalisation and the trend's potential impacts on various parts of the organisation's business model and participated in a project undertaken in support of such exploration. In that form of action research ( Patton, 1980 ), engaging in IKEA's internal exploratory work as researchers allowed us to understand digitalisation's implications by discussing them with representatives at IKEA, which, at the time, considered knowledge of those implications to be important because they, along with digitalisation itself, remained unknown. Using such methods enabled us to contrast findings from interviews with findings from observations and synthesise the results in light of theory ( Ghauri and Grönhaug, 2002 ). In particular, our case study revolved around two ongoing projects and the processes of working within them: IKEA's “E-Commerce Programme”, later named the “Multichannel Transformation Programme”, and a project designed as a pre-study addressing the future role of IKEA's physical stores and the challenges and opportunities that they face amid digitalisation.

We collected data with three overlapping methods: in-depth semi-structured interviews, participant observations and document analyses (for an overview, see Table 1 ). As for the first, we conducted 21 interviews with senior executives with different functions in different departments at IKEA as detailed in Table 1 . Using purposeful sampling, we interviewed IKEA managers and employees working with and/or preparing for the organisation's digitalisation about their experiences with and thoughts on the concept of digitalisation and its implications. The interviews combined retrospective questions about IKEA's business model with questions about current situations experienced by the interviewees and prospective enquiries about IKEA's future in relation to digitalisation. All interviews began with open-ended questions about digitalisation in general and digitalisation at IKEA in particular. As the interviews progressed, questions became more structured and delved into the future role of IKEA stores, the specific challenges that IKEA faces, whether they will affect the IKEA concept and if so, then how. All interviews were recorded and transcribed verbatim and translated into English in those cases the interviews were made in Swedish.

Meanwhile, participant observations involved three meetings – before, during and after data collection, respectively – with the project manager of the pre-study to discuss the overall project. Those meetings lasted 11 h and 36 min in all. We also engaged in both in-store observations and meetings, lasting 10 h in total, whilst visiting an IKEA store in the Altona borough of Hamburg, Germany that operates as a test store for new concepts (e.g. urban proximity, technical solutions and delivery solutions). The local managers who accompanied us during our in-store observations also met with us twice: once with five other store managers and once with five employees from different departments. We conducted both meetings as group interviews guided by the same questionnaire used in the individual interviews. During all observations, we took field notes for data about the employees' perspectives and what digitalisation meant in practice. That information was valuable when conducting interviews with IKEA managers responsible for strategic decision-making and for translating digitalisation into IKEA's business model. Last, we also collected documents and visual communication, both public and internal, for analysis. The internal documents contained information about the pre-study, the “E-Commerce Programme”, the “Multichannel Transformation Programme” and the movie “ Shop with Laura ” (see Table 1 ) and public documents included information about the IKEA history, vision and business idea statements. Documents were collected on the basis of their mentioning during the interviews or participant observation sessions. These constituted sources of detailed information preserved from the time in which they were written and less dependent on the informants' memories. Throughout data collection, we facilitated informants' validation of the data on several occasions (cf. Silverman, 2006 ), which afforded us the opportunity to discuss our observations and findings with the participants. Apart from our participant observations, we also hosted two internal workshops with the project manager of the pre-study to discuss our findings.

To analyse the data, we used systematic combining ( Dubois and Gadde, 2002 ) – i.e. alternated focus between our empirical material and theory – whilst developing our case study and the emerging framework. For integrity's sake, we triangulated the three major sources of data – participant observations, interviews and document analysis ( Silverman, 2006 ) – during all four steps of data analysis. First, we coded the transcripts with reference to keywords and phrases related to digitalisation and its consequences for the retail industry in general and IKEA in particular. In that step, we adopted an emic perspective that prioritised the perceptions and understandings of the informants ( McCracken, 1988 ). Second, following Langley's (1999) suggestion, we took a narrative approach to comprehending the process-related data, namely by drafting a general description of the process with illustrative quotations from material collected in the field ( Berends et al. , 2016 ). Third, whilst working abductively between the empirical material and our emerging analytical framework, we used theoretical coding ( Charmaz, 2014 ) to sort, integrate and organise the material to represent a three-phase process. In so doing, we gradually shifted to an etic perspective – i.e. from the informants' perspective to our own perspectives as observers of the empirical material. Fourth and finally, we reorganised the material and wrote a case narrative structured according to the three abovementioned activities as presented next.

4. Exploring digitalising: the IKEA way

In the past 70 years, IKEA has grown from a small, family owned company in Sweden into the world's largest retailer of home furnishings. Arguably, IKEA's rapid international expansion resulted from the three-phase development of a formula that has been replicated in all markets where IKEA has entered an expanded, where the first phase commenced by exploring IKEA's business idea and opening test stores in markets outside Sweden ( Jonsson and Foss, 2011 ).

IKEA's business idea builds upon two concepts – the idea concept and the concept in practice – that together define what, in theoretical terms, could be understood as IKEA's business model. Whereas the idea concept refers to IKEA's vision “to create a better everyday life for the many people”, its philosophy of co-creation (i.e. “We do our part, and you do yours”) and the central role of IKEA stores, the concept in practice refers to IKEA's practices of examining specific sets of variables whilst adjusting to local markets ( Jonsson and Foss, 2011 , p. 1,090). The two concepts are mutually dependent; if the concept in practice does not change, then the practices of the idea concept will eventually become irrelevant and not reach “the many people”.

In 2014, drawing from insights during its internationalisation, IKEA realised that digitalisation could be both a challenge and an opportunity amid its recently declining expansion. For decades, IKEA had experienced outstanding success in replicating its business model: an average yearly increase in sales of approximately 8–10%, the constant meeting of new sales targets and a steady rate of expansion, with 12–14 store openings per year. In 2013, however, IKEA's steady growth declined in some markets, as the rapid worldwide growth of e-commerce in retailing continued to challenge physical stores and change the competition. In response, the company decided to decelerate its international expansion in favour of exploring what digitalisation could mean for their established business model. At IKEA, it was, therefore, considered increasingly important to return to a state of exploration in which key variables describing the idea concept and the established concept in practice would be re-evaluated. Moreover, as increasingly more young employees at IKEA sought new, 21st-century ways of reaching “the many people” – i.e. current and potential customers – both IKEA's employees and customers began looking for digital solutions and new ways of working.

In the following sections, we recount how IKEA engaged in exploring digitalisation in the IKEA way and how it (re)imagined reaching “the many people” in the shifting retail landscape. The story begins when the intersection of digitalisation and IKEA's business model was becoming increasingly apparent but not yet regarded as a phenomenon that would require radical changes, and it ends six months later, when the exploration phase resulted in an understanding and approach that we term the re(in)innovation of IKEA's business idea. In particular, we discuss how IKEA interpreted, interrelated and integrated digitalisation with its established ways of doing business. Although we have structured our discussion in three subsections, each addressing one of those three activities, the activities should not be considered as occurring along a linear path but instead as three aspects of the exploration phase.

For an overview of the activities and related steps, please see Table 2 .

4.1 Interpreting digitalisation

In 2014, aware that IKEA retailers in the USA were witnessing a cannibalising effect on their physical stores because of e-commerce, IKEA took its first steps towards exploring digitalisation. IKEA realised that its E-Commerce Programme launched only a year prior, could not simply be rolled out as initially planned but needed to be informed by a discussion about what e-commerce and digitalisation would mean for sales in IKEA's physical stores. Although digitalisation was becoming a widely discussed concept in retail at the time, it had remained undefined, and it was unclear how, or even whether, it was distinct from e-commerce. Recognising that possibility, IKEA's global expansion manager initiated several internal projects to explore what digitalisation meant and how it might relate to IKEA's business idea.

E-commerce is how we do business electronically, so it's about selling: selling online. But digitalisation is much bigger than that […] It's about the whole company, because it involves, for example, online learning. I think that e-commerce is not just about selling; it's about fulfilment, the buying process. (Development Manager, E-Commerce Programme)

Digitalisation is broader than e-commerce. It's also more about how we approach customers: how we communicate and how we ensure that all of our customers have the same knowledge, whether they're buying things in the store or online. Digitalisation is something that happens in the store. It's how we provide all of the information to our customers: where the products come from, what they do and how you can use them. (Supply Manager, IKEA Supply AG, Logistics)

As that quotation suggests, despite references to what digitalisation might mean and what it truly is, its signification remained vague. Even so, it appears that digitalisation might have generally been understood as offering digital information to customers. Making sense of digitalisation thus involved distinguishing digitalisation from e-commerce to not only explain how the concepts differed but also make digitalisation manageable for and relevant to customers.

So, all of a sudden, the amount of information that we have about people and how they live, move, interact etc. is phenomenal. And it's in combination. It's not urbanisation only; it's urbanisation plus digitalisation that gives us the opportunities. It's an example of how combined trends can become very powerful. (Digital Business Manager, Inter IKEA Systems B.V.)

It is exponential because every new invention in the digital space is built on previous ones. So, it's a combined effect that creates exponential speed. So, ignoring it, as Kodak or Nokia did, will be very dangerous. On the contrary, it can be very powerful, like for Apple, Google, Facebook, etc.

For me, digitalisation is a moving target. Its content is changing all of the time. To some extent, we use a lot of digital technology already—it's just that it’s outdated, right—so we're changing how we digitalise instead of digitalising something that is not digital. (Global Retail Logistics Manager, Retail Logistics IKEA of Sweden)

Gradually, it became clear that digitalisation not only needed to be understood in the sense of selling goods online but would have broader implications for the company. As a case in point, when observing customers who had already developed new shopping behaviours – using mobile phones to search for products from both outside and inside stores, for example – IKEA realised that new mobile solutions had to be integrated with traditional retail logic. As a result, IKEA unveiled the “Future Role of the IKEA Store in a Multichannel Environment” project to emphasise the need to understand and combine related trends. The project was initiated to jumpstart a shift towards what IKEA called a “seamless customer journey”. Consisting of five sub-projects, the project prompted the redefinition of the E-Commerce Programme and later evolved into the Multichannel Transformation Programme.

Digitalisation means nothing, I would say. Because what we want is to secure a solution for when you, the customer, move between the store and the web. It might be a digital solution, but it can also be a physical solution, or something else. The only thing that's important is to solve some sort of need and to learn more about those needs. (Group Retail Manager, Global Retail Services IKEA Group)

The expansion manager also emphasised that instead of simply focussing on defining digitalisation, routines and skills need to be developed for facilitating “disruptive developments” and finding new solutions and ways of testing new ideas. Understanding how various activities were organised and integrated was also considered to be pivotal. The idea addressed in many interviews – namely, that digitalisation both enables and requires the integration of knowledge – was explained as enhancing the focus on customers and their experiences. That perspective marked a shift into the phase in which IKEA began actively exploring what digitalisation meant to its ways of doing business by revisiting the idea concept and the concept in practice.

Altogether, the first activity of the exploration phase, interpreting, refers to ways of understanding and making sense of digitalisation and the changes that it was considered to imply. The process can be described as encompassing three steps: differentiating (i.e. distinguishing and delimiting digitalisation from other concepts), combining (i.e. making connections between digitalisation and other trends and concepts) and concretising (i.e. defining digitalisation and making it actionable). Building upon lessons from that work, IKEA transitioned into the second activity of exploration where it began relating digitalisation more explicitly to IKEA way of doing business.

4.2 Interrelating digitalisation with established business ideas

Whilst interpreting digitalisation, informants increasingly reflected on what it would mean for IKEA's established business ideas. After all, the replication formula was being challenged by not only digitalisation but also urbanisation. Mounting criticism about globalisation and calls for de-growth were also seen as challenging the existing understanding of doing business – i.e. by selling furniture “to the many people” – and concerns for sustainability were identified as needing to be incorporated into understandings of digitalisation.

To ensure that all IKEA employees shared the same interpretation of digitalisation and how it relates to IKEA's established business model, it was considered to be necessary to visualise the future. To convince internal sceptics, it was considered to be especially important to also visualise how digitalisation could generate opportunities for sales and attract a broader customer base and thereby more fully reach “the many people”. It additionally required ideas about urbanisation, sustainability and ways of offering not only furniture but also services, both in terms of continuity and making it easier to shop. Some proposals even conceived collaborating with second-hand retailers or establishing an organisation that would create opportunities to sell recycled and/or used furniture.

We wanted to have a completely different kind of interaction with our customers: a completely different type of conversation, a completely different type of engagement. So, I made a video that I think is very entertaining. […] She [Laura, the protagonist] wants to decorate her children's room, and the videos show her journey until she's satisfied. (Web and Digital Manager, Web and Digital Retail Services)

To develop a “seamless” experience for customers, it was considered to be crucial to introduce multiple perspectives, which seemed to require visualising the journey of customers in order to ensure focus on their experiences. To that end, it was expressed that all perspectives in IKEA's value chain had to be considered, and a consensus was emerging that different perspectives needed to be integrated in order to realise digitalisation. It was also clear that integrating knowledge from various functions in order to avoid a silo mentality would require more effort.

Our model has been built on direct deliveries to our stores, where you [the customer] do your part, we do our part, and then we save money. We need to think about a completely different kind of integration in how we develop and how we lead the overall development. To make that happen, we're now investing billions in new infrastructure—large investments in IT—but that's not what will take us into the future . (Group Retail Manager, Global Retail Services IKEA Group)

It was necessary to look inwards and to involve different views and perspectives, both across different parts of the company and from the outside. The same informant underscored the importance of accessing different perspectives to also “integrate the outside perspective into our structure, so that we do not get too isolated and, in that way, also cultivate our own skills”. The involvement of different functions and external partners prompted discussions about what digitalisation meant in relation to the established retail logic of “You do your part, we do our part (and together we save money)”. As it became clear that digitalisation would inevitably affect IKEA's business model, the question of how that process would unfold increasingly became the topic of discussion.

In sum, the second activity of the exploration phase, interrelating, refers to assessing digitalisation in relation to established ways of doing business in three steps: visualising (i.e. what the future might look like), mapping (i.e. what functions, areas and parts of the business model will be involved) and evaluating (i.e. how digitalisation will affect the business model and current ways of doing business). Based upon insights from that work, IKEA advanced to putting lessons learnt into practice and began the third activity: integrating new knowledge with existing knowledge.

4.3 Integrating digitalisation into a business model

From the internal projects related to efforts of interpreting digitalisation and interrelating it to other trends, IKEA's managers concluded that its established business model needed an update and that the antidote, digitalisation, also offered an opportunity to fully realise the business idea of offering products and services to “the many people”. To that end, testing new ideas, learning from them and making any necessary adjustments were considered to be important tasks. Thus, to be able to integrate digitalisation with the business model, it was necessary to experiment with numerous ideas and solutions as was done at numerous IKEA locations. For example, at IKEA in Altona, new ideas and concepts were tested to see whether they could satisfy a more digital, urban segment of customers. The Altona store was not only constructed differently from the standard global store format, in terms of size and layout, but also to accommodate for trends in urbanisation. It had also been adapted to test new concepts in practice, including new logistics and distribution solutions, and the normal pathway through the IKEA store had been partly removed to attract customers passing by outside. In the United Kingdom, by comparison, as a result of exploring digitalisation and testing new digital solutions, IKEA had launched its first app.

Experiences from testing new ideas and solutions were transferred back to the IKEA Group and Inter IKEA Systems. Thus, an important step was reviewing and learning from those experiences followed by transferring them internally within the organisation. In relation to the Altona store, both IKEA's management team in Germany and the IKEA Group's management team followed the experiences closely. Beyond that, many employees from IKEA worldwide visited the UK and/or Altona stores simply out of curiosity.

That's the essence of IKEA. If you remove everything, then the core is what's left, and that's IKEA… [We] need to develop our concept, take it further and say, “This is how I see IKEA today”. We have to be on track and dare to test and create other formats… So, IKEA has to change; otherwise, it's the beginning of the end. (Group Retail Manager, Global Retail Services IKEA Group)

The concept manager also reflected on how those changes would affect the idea concept and the concept in practice, as well as the latter should not come at the former's expense: “I mean the concept, if we go back to it, and the vision… part of the recipe for success has been just doing things together, engaging people” (IKEA Concept Manager, Inter IKEA Systems B.V.). Thus, integrating digitalisation into IKEA's business also implied reconnecting with IKEA's roots and reflecting on the idea concept as “the core of the core”. After all, although IKEA was changing at the time and continues to change, it remains the same IKEA. In that sense, revising the business model appeared to be quite natural, for though it had always changed in one sense, in another sense it had also always remained intact. The conclusion was that to be able to sustain the idea concept, “the core of the core”, the concept in practice needed to change, which would imply searching for new formats and new solutions to further leverage IKEA's business. IKEA's managers realised that although the basic needs were the same, people had changed and were continuing to change, and the experiences of customers demanded far more focus. For those reasons, a new position, global customer experience manager, was created. The shift implied a return to the core of IKEA's concept and vision – “to provide products and services that are both cost-efficient and innovative” – and that digitalisation had forced IKEA to rethink its processes of achieving those ends. As another informant argued, the entire process of re-evaluating the way of doing business – i.e. the IKEA way – had alerted managers and employees not only to IKEA's strong vision and business model, but also its need to seize the opportunity to fully realise that vision and reach “the many people” both online and offline.

All of the work to prepare IKEA for the digital shift had prompted a return to the company's roots and the questioning of proven solutions, which is indeed one of IKEA's ten values, perhaps best be described as shifting from interpreting digitalisation and interrelating with IKEA's business model into integrating and turning it into practice. That integrative phase also precipitated how IKEA re(in)novated its business model. IKEA's approach of digitalisation could thus be understood as returning to the company's original idea; the understanding of the idea concept will never change, but the concept in practice has to be rethought and new ideas and practices tested and evaluated in order to continue to reach “the many people”. To that end, practising and testing new solutions were crucial strategies for IKEA, not to mention integral to the IKEA concept and its organisational culture.

In all, the third activity of the exploration phase, integrating, refers to the actual digitalisation of the business idea by steps of practising (i.e. developing and trying different solutions to test and learn from them), reviewing (i.e. sharing knowledge within the organisation to learn from practice) and revising (i.e. connecting and evaluating changes to the established business model in order to provide continuity).

5. Conclusion

This paper has sought to illuminate how an incumbent retail organisation approached digitalisation for its existing business at an early, exploratory phase when possible disruptions, their meanings and their consequences remained uncertain. To that aim, we have provided an account based upon our in-depth case study of IKEA and how the company explored digitalisation at an early stage. We have delineated the exploration phase as consisting of three chief activities – interpreting, interrelating and integrating – each of which we have detailed by identifying certain steps therein. Together, and with reference to IKEA's case, those aspects allow an understanding of the exploration phase.

Compared with previous studies on exploration and exploitation (e.g. March 1991 ; Winter and Szulanski, 2001 ) and specifically in the context of retailing ( Jonsson and Foss, 2011 ; Picot-Coupey et al. , 2016 ; Friesl and Larty, 2018 ), our paper contributes with insights on how the exploration phase is understood and organised in practice. The study further contributes to previous literature of IKEA's business model ( Hedman and Kalling, 2003 ; Sorescu et al. , 2011 ) and specific aspects of the IKEA business model (see e.g. Edvardsson and Enquist, 2011 ; Burt et al. , 2016 , 2021 ) by outlining the exploration phase in further detail. Although the activities of the exploration phase – interpreting, interrelating and integrating – stem from a specific case, we believe, following the potential of qualitative in-depth case studies ( Dyer and Wilkins, 1991 ; Doz, 2011 ), that they may provide value for analysing what digitalisation or any other current or future trend means to retail businesses apart from IKEA.

Because our study was performed at a relatively early phase of adapting the business model at IKEA, some of the outcomes of that process were beyond our study's time frame. However, conducting the study during the process afforded the advantage of revealing ambiguities, scepticism and reservations amongst employees and managers, all of which are important for understanding how retail businesses can be transformed in practice due to digitalisation. In hindsight, some of those uncertainties may be expected to fade or fall into oblivion once changes appear as a continuation of their antecedents and become institutionalised in the ordinary course of business, whether such a development occurs and, if so, then how it remains to be investigated. In any case, a key contribution of our study is the understanding of how an organisation such as IKEA, a global retail giant, organises its efforts to explore digitalisation in relation to its existing business. Still, as this study was conducted in a relatively early phase of the digital transformation, we believe that the findings may differ from later implementations when digitalisation has increasingly become a norm rather than an exception and retailers having increased abilities to learn from their and other's previous experiences. An important opportunity for further research would be to study more recent cases of exploration phases in relation to digitalisation as well as comparing incumbents and entrants as well as larger and smaller organisations.

Using a case study to develop an understanding of digitalisation in retail has advantages and disadvantages. On the one hand, it affords a more profound understanding of how retail businesses are transformed due to digitalisation in practice, as well as detailed insights into the practical work within the company (cf. Saebi et al. , 2017 ). On the other, however, it can be difficult to apply the results of case studies in forming a basis for scientific generalisation ( Yin, 2003 ). Although an analysis based upon a particular case can indeed provide an understanding of the practical process, that process is liable to differ between companies and between industries. In IKEA's case, as an organisation that many companies use as a benchmark due to its long-term success, no precedent construct existed for understanding how digitalisation in retail would look – for example, by relying on normative models – but instead surfaced as an emerging process. A better understanding of how a specific retailer has approached digitalisation complements current understandings of retail's digitalisation in general ( Hagberg et al. , 2016 ; Hänninen et al. , 2021 ). By extension, we believe that the suggested conceptual framework for understanding and organising the exploration phase could be a useful tool for retail managers to explore not only digitalisation, but also any other transformation and the consequences for their businesses.

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Acknowledgements

The authors contributed equally to this work. The paper is part of a research project with financial support from The Swedish Retail and Wholesale Development Council. The authors would like to thank Niklas Egels-Zandén for comments on an earlier draft of this paper, and also colleagues Catrin Lammgård and Malin Sundström who were also part of the research project. In addition, the authors would like to thank the people at IKEA who have contributed with their time and reflections, and in particular, the authors would like to appreciate Martin Hansson and Carole Bates for showing interest in this research and for inviting the authors to participate in the internal work of trying to interpret what retail digitalization means to IKEA.

Corresponding author

About the authors.

Johan Hagberg is professor of business administration specialising in marketing at the School of Business, Economics and Law, University of Gothenburg. His research revolves around the digitalization of retailing, consumption and markets.

Anna Jonsson is associate professor at Lund University, School of Economics and Management. Her research interests include learning and knowledge sharing in organizations and society. She has conducted research about various industries and organizations, including the retail industry.

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How IKEA became a household name with digitalization, consistency, and experience

Table of contents, in the beginning....

Just about 80 years after it was founded, IKEA has become one of the world’s top furniture companies. Today, it’s known as a place where shopping is truly an experience, not just a chore. Between the popular food courts and handsomely designed showrooms, IKEA is simply a fun place to spend an afternoon — and be productive at the same time. 

Of course, the company wouldn’t still be in business if it wasn’t able to provide great products as well. Throughout the years, IKEA has carved out a name for itself as a company that provides unique and high-quality furniture at a great price — some assembly required. As a result, it’s particularly popular among young and thrifty shoppers. 

Here’s what the company’s numbers look like at a glance:

• In 2020, IKEA’s brand value was $17.97 billion
• By 2020, it had opened 445 stores worldwide
• It was the leading retail furniture company in Europe by turnover in 2019 ( €16.9 billion generated )
• Nearly 220,000 employees in 2020
• Over 800 million customers visited an IKEA in the US despite the pandemic
• Stores in over 50 global markets

In this strategy study, we’re going to explain how IKEA became not only one of the world’s leading retail furniture brands, but a global cultural icon. From rural Sweden to the global marketplace, this is the story of IKEA’s rise.

The vast majority of people alive today have never lived in a world without IKEA. In fact, many of us have fond childhood memories of walking through one of its stores with our parents and enjoying some tasty Swedish meatballs before heading home.  

But IKEA didn’t appear spontaneously. It was brought into existence thanks to the hard labor and ingenuity of one man: Ingvar Kamprad. To understand IKEA’s success, we need to understand the man behind it.

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The founder's first steps

Ingvar Kamprad was born in 1926 in Angunarryd, a small town in the Småland province of southern Sweden. Heir to a poor family of farmers, Ingvar was surrounded by financial insecurity and quickly learned the value of money and hard work. 

From an early age, Kamprad exhibited an entrepreneurial spirit. By the time he turned six, he had already started his first business selling matches, buying them on the cheap in Stockholm and selling them at a profit in his hometown. Two years later, he moved into the vehicle business, selling bicycles to his neighbors. As he grew older, his enterprises moved into various different products, ranging from Christmas tree decorations to fish to seeds and beyond. 

When Kamprad turned 17, his father made good on a promise to provide him with money if he succeeded in his schoolwork. He used that money to found what we now know as IKEA.

Kamprad founded IKEA while sitting at his uncle Ernst’s kitchen table in 1943, deriving the name from his own (Ingvar Kamprad), his family farm’s (Elmtaryd), and his hometown’s (Angunarryd). 

At the start, IKEA was not a furniture business. Instead, Kamprad sold small household goods, such as pens and wallets, which customers ordered through a mail-in catalog and would receive via milk truck delivery. This catalog was an essential feature of Kamprad’s business, as his rural location made it difficult to conduct business any other way. 

It wouldn’t be until 1948, five years later, that Kamprad would get into the furniture business and begin shaping IKEA into what we know it as today.

Necessity breeds innovation

Although many people imagine that businesses always start out with their unique selling propositions fully formed, this could not be further from the truth. IKEA is a perfect example of a company that grew into its own, finding its way not through some clear vision at the outset but through many small “aha” moments that shaped it into its current form. In fact, many of the features that we recognize IKEA by today came completely in response to difficulties — they were creative solutions to the problems Kamprad faced. 

Right out of the gates, IKEA made a name for itself as a retailer with extremely low prices.  In 1951, it launched its first catalog, which offered low-cost, chic, and stylish furniture with the convenience of mail-order shopping.

As appealing as budget-friendly options may be, they also raised concerns: customers simply couldn’t believe that quality furniture could be had at such a bargain. As a result, they began to worry about IKEA’s quality. 

To solve this, Kamprad came up with a solution: set up a showroom. Now, customers could come into his store, look at the furniture themselves, and walk away with it. Problem solved. 

But this wasn’t the end of IKEA’s pricing struggles. Although the consumers had been pacified, the producers were still unhappy — but for an entirely different reason. In 1955, the producers that IKEA used started boycotting the business, claiming the prices were too low.  Instead of viewing this as an insurmountable problem, Kamprad took it as an opportunity to bring manufacturing in-house.

The last major innovation came as a bit of a happy accident one year later in 1956. One day, as Kamprad watched an employee load up a customer’s table into their car, he noticed something interesting: the employee had removed the table’s legs to help it fit. 

Then it hit him: if Kamprad sold his furniture disassembled, he could fit more of it into a single truckload, thus saving money on shipping costs. Instead of trying to fit fully-assembled tables together, leaving tons of empty space in the truck, he could pack everything flat. 

This “aha” moment gave IKEA what is perhaps its most recognizable feature — it became a retailer of furniture that required assembly at home, thus making it cheaper, easier to carry out of the store, more efficient for delivery, and rather fun to set up.  Although flatpack furniture already existed, it wasn’t yet popular in Sweden. This observation showed Kamprad an untapped market opportunity. 

By the time IKEA had pivoted to flat-packing, it had achieved several milestones: it now manufactured all its own products, it ran its own showrooms, and it provided high-quality, low-cost products that appealed to young people. At this point, IKEA had stepped into its modern skin.

Key takeaway #1: limitations boost creativity

IKEA didn’t emerge from Kamprad’s kitchen as a fully-formed entity. Quite the opposite: the first thirteen years of operations were an experimental period during which Kamprad sought out solutions to the problems that confronted him.

IKEA’s development wasn’t visionary but reactionary. Although Kamprad always envisioned IKEA as a company that sold high-quality, low-priced products with mass appeal, it was the sum of Kamprad’s clever solutions over time, such as shipping disassembled furniture to save on packing space, that shaped IKEA into what it is today. 

All great businesses are essentially solutions to difficult problems. When faced with a seemingly intractable issue, business leaders should view it as an opportunity for growth, not as a disruption to their normal operations. For all you know, that nagging problem could be what turns you into the world’s next IKEA.

IKEA goes global

From the beginning, international expansion has been a cornerstone of IKEA’s growth strategy. And if you think about it for a minute, it makes a lot of sense: Sweden is a small country with a population of only 10 million. That imposes a pretty low ceiling as far as business growth is concerned. 

Ingvar Kamprad knew that if he wanted to grow his company, he would need to go beyond Sweden’s borders. But unlike many other brands (Walmart and Home Depot, to name a few), he actually succeeded in his internationalization project. In 2018, IKEA had company-owned stores in 24 countries and franchises in many more. Currently, there are over 50 IKEA locations around the world, and the company is continuing to expand. 

Let’s take a look at what made IKEA’s globalization so successful.

Patience is a virtue: starting local

At the start, IKEA threaded lightly. Although international expansion was clearly a goal from the start, as indicated by Kamprad’s maxim “it is our duty to expand,” IKEA didn’t come out with guns blazing. Its first expansion efforts were within markets it already fully understood: its neighboring Scandinavian countries. 

The first international IKEA branches were in Norway (1963) and Denmark (1969). Just going by the dates alone, it’s clear that this was by no means a rapid expansion. Kamprad took things slow, making sure to firmly establish his business in the local market. 

By 1973, Kamprad was positioned well: he had opened up stores in all three Scandinavian countries, and he had captured 15% of the Swedish market share. He was ready for his next step. 

Going continental

In 1973, Kamprad decided to take IKEA beyond the borders of snowy Scandinavia and into the broader international market. 

At the time, the German-speaking countries had the largest furniture markets. And beyond that, they were fragmented: 67% of furniture companies had fewer than three employees and were in expensive locations, meaning that there was a gap in the market for non-boutique, affordable furniture. Kamprad believed that “if it works in Switzerland, it’ll work anywhere,” and chose the quiet country as his next stop on the continent.

Kamprad selected a small suburb outside of Zurich, called Spreitenbach, as his entry point. This small area accounted for 20% of the consumer purchasing power, so was a logical choice. To promote the new store, he circulated 500,000 catalogs filled with off-beat advertising. Within a year, he had 650,000 visitors. The store was a smashing success. 

A year later, Kamprad opened a store in Munich, West Germany, that attracted 37,000 visitors in just the first three days. Over the next five years, IKEA conquered a 50% share in the German cash-and-carry market. To this day, IKEAs biggest market is Germany, where it has 53 stores. 

Although there was opposition from more traditional furniture retailers (and even some court-mandated penalties), by this point it was becoming clear to everyone in the industry that IKEA had something special. The model was here to stay, and competitors needed to start taking notes. 

Learning from your mistakes: IKEA's "secret' formula

From 1973 onwards, IKEA began to expand at a much more rapid pace. But it hit a snag: in 1974, IKEA entered the Japanese market. Although it stayed around for 12 years before closing down, the entry was ultimately a failure. 

What went wrong? At the time, IKEA thought it could export its current business model wholesale without making any changes to fit the culture it was expanding into. Japan had a very service-oriented culture, and the people didn’t take well to the do-it-yourself attitude that IKEA was offering. But IKEA was also not a fit with the Japanese market on a much more literal level: its products simply weren’t compatible with the size of the average Japanese home. 

Luckily, IKEA was able to learn from its mistakes. After its Japanese fiasco, the company began tailoring its expansions to the market much more thoroughly. In its 1985 US expansion, for example, it ensured that its products matched up with the sizes that Americans would expect. In its recent 2018 entry into the Indian market, it made sure to set up customer service booths, where employees can help customers build their products — an important feature given that India, like Japan, does not have a strong DIY culture. 

In an almost literary redemption story, IKEA re-entered the Japanese market in 2006. Its newer stores implemented features that meshed better with Japanese culture, such as assembly assistance, delivery, and of course: products that were hand-selected to fit Japanese homes.

By all measures, IKEA’s return to Japan was a success (as of 2020, there were nine stores across the country) and gives clear proof that not only has the company learned from its mistakes, but it has developed a truly mature expansion strategy. 

Key takeaway #2: learn from your mistakes and the customer is always right

Some of IKEA’s initial expansion efforts failed because the company was a bit stubborn — Kamprad believed that what worked in Europe should translate directly into every market.

This was a huge mistake. Within twelve years, IKEA’s first expansion into a non-European market had failed. But this failure wasn’t without its lessons. 

Japan taught Kamprad that his products needed to fit the customer, not the other way around. While he didn’t upend IKEA entirely to fit into new markets, he did make small but necessary changes that would help the stores integrate better into different cultures. 

On a conceptual level, business leaders should realize that every mistake is a learning opportunity. Although Japan started out as a failure, without this mistake under Kamprad’s belt, he likely wouldn’t have been able to catch his missteps, and he may never have learned how to successfully expand into foreign markets. 

On a more concrete level, the key takeaway here is that the same market entry strategy won’t work across the board. 

Ikea growth strategy

There are a lot of reasons why IKEA was able to make the global impact that it has — a talented founder at the helm, a successful market entry strategy, and an ingenious business model are just a few. 

But there’s something else that has helped IKEA climb the ranks and become one of Sweden’s largest cultural and business exports: differentiation. IKEA’s differentiation strategy can be divided into three prongs: 

• Swedish Design and Influence
• Cost leadership
• Unique experience

The sum of these three parts is a company that offers a unique and appealing product at a low cost and with a unique shopping and assembly experience. Let’s take a look at how IKEA was able to build a name for itself and stand out from the crowd. 

Swedish design

Today, Swedish design has become synonymous with sleek, minimalist, and aesthetically appealing furniture and interiors. Of course, IKEA didn’t invent the style itself —  its pioneers were the likes of Bruno Mathsson and Astrid Sampe. But even though Ingvar Kamprad wasn’t the mastermind behind Swedish design, it’s undeniable that his company helped bring the style to a worldwide audience. 

However, like most parts of IKEA’s development, its design language didn’t come out of the womb fully formed. In the early days, IKEA’s furniture offerings were fairly conventional — a far cry from the eccentric shapes and unusual colors it would later employ. At that time, IKEA differentiated itself primarily from a cost leadership and convenience standpoint. 

That said, even in 1954, the beginnings of IKEA’s signature designs were taking form. That year, the Lovet table,  one of IKEA’s most well-known designs, was introduced. The wood table was crafted to look like a leaf, giving it an eye-catching and aesthetically pleasing appeal. It also happened to be the first of IKEA’s flatpack offerings. 

By the 1970s, IKEA had truly entered its own, offering furniture that looked unlike almost anything on the market — at least at the same price point. Many of the pieces released during that time are still popular today, such as the classic Poäng chair. 

Swedish flair

But looking at the design of the furniture itself doesn’t tell the whole story. IKEA built up a brand aesthetic that exudes Swedishness in everything from the names to its logo, which uses the Swedish flag’s colors. 

Take IKEA’s product names as an example. Although the company learned that it needs to alter its catalog a bit for every new market it enters, one thing stays the same in every country: the names. Outside of Scandinavia, practically no one can pronounce them, but that’s part of their appeal — strange and alien-looking names like Poäng, Ektorp, and Famnig are intriguing and stand out from competitor offerings. 

There’s a good reason for those exotic names. Apparently, Kamprad struggled with dyslexia and decided to name the furniture after Swedish towns and villages, humans, and other applicable Swedish names. 

Ektorp sofa is named after a village just outside Stockholm

IKEA’s shift to Swedish branding evolved as it expanded into foreign markets. This makes sense — the exotic appeal of the Swedish language doesn’t have the same effect in Sweden. This development can be seen especially clearly in its logo design.

Originally, the IKEA logo was quite bland. In 1951, it was nothing but a reddish stamp with the name “ikea” stamped in the middle:

In 1967, IKEA’s logo almost entered its final form: a circumscribed name in capital letters with a rectangle surrounding it. 

Finally, in 1983, as IKEA was making significant advantages in its globalization effort and close to opening its first US store, it hit on the right design: the familiar gold and yellow logo.

If you’ve ever seen a Swedish flag, it’s clear where the logo takes its inspiration from. With this move, IKEA made it clear that it was a Swedish company, and that foreign flair helped differentiate it.

But there were still a few final touches that needed to be added. In 1985, when IKEA opened its first US store, it also launched the iconic Swedish meatballs, aka Kottbullär. Although the IKEA restaurant had been a feature of the store from the beginning (Kamprad firmly believed that “it’s tough to do business with hungry stomachs”), it was at this point that the menu took an even more decidedly Swedish turn. 

Swedish food became so important to IKEA’s brand image that nowadays, the last thing you see as you exit the store are bottles of lingonberry jam and Kottbullär available for purchase. 

Cost leadership and the "IKEA effect"

From the very start, IKEA was envisioned as a brand that would provide budget-friendly products to the masses. Although those products changed over time from small household goods to furniture, the mission statement stayed the same. 

In the end, IKEA succeeded in its mission. Today, IKEA is the go-to brand for young people in need of cheap furniture for their first houses and apartments — and frugal people of all ages aren’t shy to walk through IKEA’s doors either. 

Flat-pack and modularity

So, how exactly was IKEA able to keep its costs so low? For the most part, it comes down to IKEA’s reliance on self-assembled and flat-packed products. In the early days, IKEA sold fully-assembled furniture. It wasn’t until 1954 that Kamprad got the idea to pivot to flat-packed goods. 

This change provided several advantages. Obviously, it made shipping and transportation costs lower — with flat-packed goods, more products can be loaded up into a single delivery truck. Along the same lines, it also saved money on the manufacturing end because IKEA could essentially “outsource” the assembly work to its customers. 

But there was another advantage that came from this move: modularity. By requiring customers to assemble their products, IKEA can manufacture modular pieces that fit several different furniture items. This means that production lines can be streamlined and made more efficient. 

Similarly, by removing the assembly from the picture, IKEA also needs to hire fewer service employees, which saves on employee compensation costs. Although IKEA has begun adding more service centers in markets that don’t have a mature DIY culture, these costs are minimal compared to the expense of fully-fledged service initiatives.

The IKEA effect

This unique business model has a surprising and somewhat paradoxical side effect, commonly referred to as the “IKEA Effect,” which allows IKEA to make its products appear more valuable than they are. 

The principle behind the IKEA Effect is simple: people value things that they build themselves more than things that are built for them. There is a certain satisfaction that comes from spending an hour building your own sofa that simply can’t be had if you buy one pre-assembled. Doing the work yourself gives you a better appreciation of the value, and since people tend to think quite highly of their own craftsmanship, they will tend to view the furniture as well-made. 

This helps IKEA with a cost leadership sleight of hand: by asking customers to assemble their own furniture, they can keep their own costs low, while simultaneously making their customers view their products as higher-quality and more valuable.

A variety of strong and consistent production relationships

While many low-price retailers attempt to keep production costs low by pitting suppliers against each other and selecting the most competitive price offerings, IKEA takes the opposite approach. Instead of fostering competition among the suppliers it works with, it opts for collaboration. 

IKEA keeps production costs low by signing long-term contracts with its suppliers. The result is that IKEA is able to keep its costs low consistently, instead of constantly scrambling to find the lowest cost supplier. 

The strategy appears to work. IKEA has more than 1,800 suppliers in 50 countries , and it consistently has more than 95% of its inventory in stock. 

Additionally, IKEA does its best to source its wood close to its suppliers in order to keep transportation costs down. For example, in 2018, IKEA bought 25,000 acres of timberland in the US to provide raw materials to its suppliers. This also helps with the company’s sustainability initiatives. 

A unique and cost-saving experience

Although IKEA originally started as a primarily mail-order retailer, the showroom experience has become an integral part of the company’s branding and operations. It’s a devilishly clever strategy because, like the IKEA effect, it keeps business-side costs low while simultaneously providing a high-quality shopping experience to customers. 

If you’ve ever been to an IKEA, you’ll recognize one thing immediately: these stores are big. They are essentially repackaged warehouses. Within the store, customers are presented with realistic representations of how each furniture item might be used in a contemporary living situation. The displays are not sterile lineups — they feel alive, livable, and customers can easily see the functionality of each item.

To make the shopping experience even more pleasant, IKEA provides play areas for children and eating areas for hungry shoppers. The end result is a store that feels homey and comfortable despite the industrial scale. 

Although this may all seem entirely in service of the customer, it also confers several cost-saving benefits to IKEA. 

For one, IKEA specifically places its stores in more domestic areas, where real estate prices are lower and the stores can be more expensive. This saves the company from having to spend top dollar for competitive retail space in a large city. 

Secondly, by making stores so large, they can effectively function as both a warehouse and a showroom. As a result, IKEA can combine warehouse and showroom expenses into one, keeping total costs low. Of course, the fact that IKEA products are flat-packed also means that more products can be stored per warehouse, further reducing storage expenses.

Thirdly, the huge amount of space allows IKEA to present many different design possibilities to customers without the need for large numbers of staff to constantly rearrange furniture for shoppers.  

Overall, the end result is that the unique IKEA showrooms provide customers with an enjoyable shopping experience, all while allowing the company to save on real estate, warehousing, and staffing expenses. 

Key takeaway #3: valuable doesn't mean expensive 

When we think of something valuable, we tend to think of something expensive: gold watches, luxury cars, rare jewelry. But not all value can be measured in dollar bills: to a parent, their child’s drawing could be more valuable than the Mona Lisa. 

IKEA was able to leverage this phenomenon by offering what is essentially “low-cost value” — the type of value that money can’t buy. Thanks to the IKEA effect, customers often find IKEA products to be more valuable to them than other, higher-priced products. Add on a unique experience, filled with memories of eating Swedish meatballs with your family, and you have a value that money can’t touch. 

After all, it’s a part of their vision “To create a better everyday life for the many people.”

Business leaders should follow in IKEA’s footsteps and look for new ways to increase their products’ or services’ worth without raising costs. Sometimes, small changes can lead to big results. 

Understanding IKEA's positioning 

From its humble beginnings in small-town Sweden to its current seat as a major player in the global retail market, IKEA has been nothing short of a Cinderella story. But no business can rest on its laurels — the market is constantly changing, and a single bad move could throw away 80 years of success in a flash. 

That said, the future does look bright for IKEA — even during the pandemic, the company was able to generate almost the same amount of revenue as the previous year ( €39.6 billion in FY2020 and €41.3 billion in FY2019). But a few figures don’t tell the full story. To get a better view, let’s dive into a SWOT analysis. 

Market understanding

If there is one thing that IKEA does well, it’s understanding its market and leveraging that understanding to better position itself. From the start, IKEA has had the goal of becoming a company that sold low-priced products that would appeal to mass-market consumers. Today, IKEA has become practically the world leader in budget furniture — it is the first place that the average Joe will go when searching for new furnishings. It is particularly popular amongst young people furnishing their first apartments and houses. 

Throughout its development, IKEA had ample opportunity to stray from this initial vision, but it never has. As a result, it’s carved out an important part of the market that it can expect to hold onto for years to come. 

Affordability 

IKEA doesn’t merely understand what its target market is, it’s able to corner that market. Through the various cost leadership strategies we discussed in Chapter #3, IKEA is able to consistently price its products cheaper than its competitors. In turn, this has made IKEA the go-to brand for budget-friendly furniture. 

Quality and value

Although IKEA surely isn’t top-of-the-line, its products retain a respectable level of quality despite being priced so low. This is largely thanks to IKEA’s strong relationships with its suppliers and the culture of collaboration it fosters with them. 

Any quality deficits that IKEA products may have been made up for by the IKEA Effect, which causes self-assembled products to take on a higher apparent value in the eyes of the builder. 

Unique brand experience

From the unique furniture designs to the use of Swedish names to the beloved in-store restaurants and beyond, IKEA has crafted a brand experience that is unlike any other. In fact, what IKEA has created is so special that in some countries, it’s known as a fun place to go and get a bite to eat than as a place to buy furniture. When you’re able to turn a boring old furniture store into a cool place to hang out with your friends, you know you’ve done something right. 

Brand recognition

Across the world, people instantly recognize the IKEA name and its bold yellow-and-blue logo. Without a doubt, IKEA is a household name, and that level of recognition is rare. To put things into more quantifiable terms, in 2020, the IKEA brand was worth almost $18 billion . This level of brand recognition means that IKEA is ingrained in the global culture as the first stop for affordable furniture. 

Optimized and efficient supply chain 

Unlike many companies vying for cost leadership, IKEA refuses to force its suppliers to compete with each other. Instead, it opts for a more collaborative approach, which leads to strong relationships and consistently low pricing in the long term. Additionally, having control of some of the raw material supply chain helps keep IKEA in a strong position.

Weaknesses 

Lower quality than competitors .

IKEA’s products could accurately be described as “good but not great.” Although the company makes products that are at an acceptable and functional standard, they can’t compete with high-end furniture manufacturers and dealers.

However, this weakness is mitigated by the fact that IKEA isn’t trying to compete with luxury furniture providers. Instead, they have focused on cornering the budget market. 

Reliance on third-party manufacturers

Although IKEA has developed strong relationships with its suppliers, the fact that more than 50% of its products are manufactured by third-parties leaves IKEA in a position of serious reliance on other companies. Its long-term and collaborative arrangements help reduce this risk, but it is still a less favorable position to be in than producing everything in house. 

Bad press and dangerous products

Since 2011, five children have been killed by an IKEA product, the Malm dresser, toppling over onto them. The company has agreed to pay settlements of around $50 million to several families of the victims.  

Unsurprisingly, this has led to a public relations nightmare, which could seriously damage IKEA’s reputation. The company has also received bad press for treating its workers poorly .

Few assembled furniture offerings

IKEA is a company that focuses on providing its customer base with cheap, unassembled furniture. While this works well to corner its core market, it does leave other potential markets, like budget pre-assembled furniture, almost completely untapped. 

Managing timberland could distract from the core mission

By leasing its own forest land, IKEA is able to further ensconce itself in its supply chain, which leads to more control, lower prices, and better sustainability initiatives. However, managing and operating timberland is a costly and time-consuming effort, which could ultimately leave IKEA scattered and less focused on its core purpose. 

Opportunities

Gain a greater hold over the developing market.

Currently, IKEA is overwhelmingly focused on the developed world. In fact, 90% of its sales are from OECD countries , and 70% are in Europe alone. This leaves large swaths of the developing world practically untouched and represents a sizeable growth opportunity. 

IKEA is cognizant of this and has made moves into the Indian and Chinese markets. If the company continues to direct energy and resources in this direction, it could see a strong ROI.

Make use of e-commerce

Historically, IKEA’s strategy has focused on the in-store experience, which has been a key component of its success. However, as e-commerce becomes a greater part of everyday life, IKEA will need to find a way to effectively digitize and create a similarly enticing brand experience in the digital world. 

IKEA has begun making changes to better position itself in the developing e-commerce landscape. For example, many of its stores now double as fulfillment centers, and the company has made many behind-the-scenes changes to ensure online orders are fulfilled faster. 

Increase particleboard usage

Particleboard is a material that is made by gluing together wood particles. Essentially, particleboard is made from wood, but it is not wood. 

Surprisingly, a single log of wood yields more particleboard than wood, and it’s also lighter. Combined, this means that particleboard makes more efficient use of raw materials and transportation, given that its lower weight allows more particleboard items to be shipped per load. Overall, particleboard is 20% cheaper than wood. 

Currently, IKEA produces 45% of its products with particleboard and 55% with wood. If it raised the percentage of particleboard products, it could save significantly.

Earlier, we mentioned that IKEA has been at the butt of several lawsuits relating to the death of children that its products purportedly caused. Although the settlement amounts are drops in a bucket for a company of IKEA’s size, they do represent a threat if they increase in number or if the bad PR severely damages the company’s reputation. 

Possible recessions

Analysts have been predicting a recession in the American and European markets for years now. Unfortunately, this is also where the bulk of IKEA’s sales and customers come from. Although IKEA is diversifying into other markets, a severe recession in its core markets could theoretically represent an existential threat to the company. 

Following standards in developing markets

IKEA has made it clear that it places an emphasis on sustainability and market expansion. However, in some developing nations, local laws are antithetical to the standards IKEA holds for itself. This leaves the company in a dilemma: it must either adapt to the lower sustainability standards of these countries or delay its market expansion. Slowing down on either one of these could threaten IKEA’s current branding and positioning. 

Key takeaway #4: Ecommerce and the developing world present the largest opportunities 

It should come as no surprise that two areas that are growing rapidly, the developing world and e-commerce, represent some of the biggest growth opportunities for IKEA. Indeed, despite IKEA’s position as a global leader in the furniture space, failure to invest in these areas could spell trouble for the brand. 

Steps towards sustainability

As we stand face to face with an unprecedented climate crisis, businesses are seeking new avenues for sustainable growth. IKEA has fully embraced this new business paradigm and is making great strides in its effort to reduce its carbon footprint and become an all-around eco-friendly company. 

However, IKEA thinks that being sustainable means more than caring for the environment. It’s for this reason that it refers to its sustainability strategy as “People and Planet Positive.” In this strategy, IKEA notes three broad areas that it wants to improve on: 

Healthy and sustainable living

• Circular and climate positive
• Fair & equal

Let’s take a look at some of the changes IKEA is implementing to meet this goal. 

The first prong of IKEA’s sustainability plan is quite simple: to inspire others to live more happy and fulfilling lives. Overall, this is the vaguest part of its plan, and IKEA itself doesn’t seem to be entirely clear about what its own goals are. For example, IKEA states that  “We will, together with others, define what sustainable consumption means for IKEA.”

On a more concrete note, IKEA has been a leader in removing toxic materials from its supply chain. It has been ahead of the curve, removing problematic substances from its products even before they were officially banned.

Circular and climate positive 

IKEA is hoping to go one step beyond becoming a carbon-negative business and actually become a climate-positive business — that means that it’s attempting to not only stop hurting the environment but to benefit it as well. 

To this end, IKEA has made a shift towards more sustainable sources of its raw materials. For example, all its cotton, fish, and seafood currently come from sustainable sources. The company is also trying to source 100% of its wood from sustainable sources. Additionally, it will also promote the reuse of its products to extend their lifetime. 

By 2030, IKEA aims to be a completely circular business. 

Fair and equal

IKEA has received bad press over the years for the way that it treats its workers. Although it is vague about how it hopes to improve, IKEA notes several areas that it is attempting to make changes to. Some of these include gender equality, children’s rights, diversity encouragement, and providing stable and secure employment. 

Key takeaway #5: make the world better

IKEA, like all businesses, is up against an unprecedented climate crisis. Beyond that, there are serious social issues that IKEA can sometimes indirectly contribute to. As the world changes, it’s important to remember to change with it — don’t stubbornly take new paradigms as a chance to prove your original view was correct but as an opportunity to find new solutions that ultimately make the world a better place. 

IKEA in the Digital Age

From the start, IKEA has placed a significant focus on showrooms and the in-person experience — in some places, IKEA has become more known for its food than its furniture. But as more and more people move away from brick-and-mortar stores in favor of the e-commerce giants like Amazon, IKEA is put in a tough position. 

Its solution? Find ways to move into the modern age without sacrificing the original IKEA vision. Here are a few ways that the company is doing that. 

Stores double as fulfillment centers

Earlier, we discussed how IKEA is able to maintain cost leadership thanks to its dual-purpose showroom warehouses. Now, these facilities are taking on a third purpose as a fulfillment center. 

Although IKEA has had some degree of e-commerce for quite some time now, the increased popularity of e-commerce along with COVID, which forced IKEA to temporarily close 75% of its stores, has made the company fast track its online experience. These new moonlighting fulfillment centers have played a crucial role in handling the onslaught of online orders.

Teaching an old dog new tricks: integration

IKEA has been making an effort to not only improve its e-commerce presence but to better integrate technology into the shopping experience as a whole. One of the latest additions is “Shop & Go,” a feature in the IKEA mobile app. This lets you scan and pay for items while you shop so that you don’t have to wait in line for checkout.

Ethical data sourcing

Like all modern companies, IKEA’s digital strategy will rely in part on customer data. However, after gaining the market’s trust over approximately 80 years, it doesn’t want to throw that away. For this reason, it introduced the “Customer Data Promise,” which says that people need to come first in all data analytics and data-driven processes.

Although IKEA hasn’t gone too far down the rabbit hole, the company has started implementing XR to help customers visualize objects in their own homes.

Placing furniture in your home with the help of XR!

Key takeaway #6: keep up with the times

IKEA is a company steeped in tradition — 80 years worth. Perhaps more importantly, during that time, the business has focused almost exclusively on brick-and-mortar selling. Unfortunately, relying entirely on the old way of doing things simply isn’t tenable in this market. Business leaders need to learn to pivot as new technology emerges and integrate it into their strategy.

Finding the right employees and customers

Whether it’s employees or customers, all companies are run by and revolve around people. Finding the right people, however, is what makes or breaks a company. 

Between hiring strong candidates and reaching its target buyer persona, IKEA has succeeded in getting its products in front of the right people. 

IKEA's target buyer personas

Part of IKEA’s success lies in its ability to understand its target market. By getting fully acquainted with its ideal buyer persona, it can make better strategic decisions on all levels. 

So, who is IKEA’s core target market? Well, there are a few. 

To start, IKEA tries to corner young urbanites between the ages of 25 and 35, primarily those that have graduated high school, and are either single and living with a significant other or are married. 

There’s a good reason for this too: nearly 60% of American city dwellers plan to move in the next year. And that means they’ll likely need to buy furniture. 

Additionally, IKEA tends to target renters, not homeowners, as this demographic is more likely trying their best to budget and save up for their future goals, like buying a house, getting married, etc. 

Beyond that, IKEA also tries to get the attention of married couples with children, which is evidenced by the fact that they include playpens for children in the stores. Plus, situating the stores outside cities can make them more appealing to suburbanites. 

IKEA's hiring process

Worldwide, IKEA has over 220,000 employees . To get to that level, IKEA has developed a unique hiring process.

Primarily, IKEA seeks to hire people who are interested in home furnishings, are friendly, and care about providing good customer experiences. It hires primarily during the months between April and August and provides relocation assistance for successful applicants. 

Most of its candidates come from online sources, such as Indeed. However, IKEA has also branched out and partnered with some social media sites and universities to find new candidates. Plus, it has a strong internal referral program. 

In interviews, IKEA hopes to find candidates with some connection to the store, such as having visited one of their outlets or their website. 

IKEA has a strong internship program in logistics, marketing, communications, and interior design. Interns are not only paid but receive college credit as well. 

However, unlike many employers, IKEA doesn’t require that employees hold a formal degree except for specialist positions. That said, experience is still largely required — IKEA does expect some of its employees, such as interior design managers, to be well-versed in home design and retail trends. For other positions, just an interest is enough. 

Key takeaway #7: surround yourself with the right company 

Wise people have said that you’re only as good as the people you surround yourself with. IKEA has taken that to heart. 

For any business to succeed, it’s important to have a robust hiring process that attracts the right candidates and places them in suitable positions. On the consumer side, businesses need to be clear on what type of customers they hope to attract so that they can target their marketing efforts towards them. 

Final thoughts and key takeaways

Over the past 80 years, IKEA has grown from a small mail-order catalog in rural Sweden into one of the world’s largest furniture retailers. In the process, it has become nothing short of a global staple and a cultural icon. 

Recap: growth by the numbers

The ultimate list of strategic takeaways

Strategy must be built on market insights.

While Kamprad did have a strong vision of where the company is heading, his strategic steps were based on market evaluation and identified market needs. 

He built the product strategy around the wishes and behaviors of IKEA customers. For example, disassembled furniture was created from observing customers how they struggled with getting furniture into their cars. 

Place customer experience at the heart of your strategy

Unique, home-like layout, delicious meatballs, and play area are only the start of the IKEA experience. 

Customers continue to value IKEA products due to building them at home, associating higher value to them. With this approach, IKEA continues its cost-leadership strategy while ensuring loyalty and high quality of its products. 

Innovation as a part of the strategy

IKEA’s been around for more than 80 years. Sticking to the traditional business model would only take them so far and it’s safe to say that they’d definitely not emerge as market leaders without any innovation and adaptation. 

With their vision in mind, they’ve managed to transform from brick and mortar stores to e-commerce and pick-up points. To support the transformation, they leaned into the latest technology and managed to strategically expand into the digital world.

Sustainable practices for a better world

With great power comes great responsibility… And big brands like IKEA understand the environmental and societal power they have. They have already banned toxic materials from their production, they are striving to become a climate-positive business and to positively impact the whole value chain.  

In the end, it seems that IKEA’s success largely comes from its ability to balance maintaining its core vision with changing to adjust to new market landscapes. At the start, Kamprad envisioned a store that sold products at budget prices for the masses to enjoy. Now, Kamprad has achieved that, but it took several changes along the way, such as pivoting from small goods to furniture, from fully-assembled furniture to flat-pack furniture, and more recently, from brick-and-mortar to e-commerce. 

Following in IKEA’s footsteps, business leaders should fully understand the need to keep your vision intact while still staying flexible enough that you can adjust your strategy to the changing waters of the market.

More From Forbes

Unlocking skills and growth: how ikea is empowering its workers.

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Ulrika Biesèrt, the chief human resources officer and global people and culture manager at Ingka ... [+] Group, the parent to Swedish furniture company IKEA

Employee engagement in the United States is dropping. A recent survey by McKinsey & Company reveals that worker engagement fell to 32% , down 3% from the prior year. While these individuals fulfill the basic job requirements, they do just the bare minimum. Factors that lead to disengagement include feeling undervalued, poor work-life balance and a toxic workplace culture.

In a conversation with Ulrika Biesèrt, the chief human resources officer and global people and culture manager at Ingka Group, the largest IKEA retailer, the executive shared how she looks after her 170,000 workers in more than 31 countries.

Biesèrt is committed to strengthening workers’ employability at Ingka through lifelong learning, development and reskilling. The CHRO emphasizes employee values, kindness, collaboration and prioritizing mental health and emotional wellbeing.

Values Are As Important As Performance

Employees, specifically in the tech sector, dread being subjected to a performance improvement plan, fearing they’ll be pushed out the door. In stark contrast, at IKEA, performance evaluation is equally weighted, with a 50% focus on the business KPIs, deliverables and performance goals and 50% on values and leadership.

Leadership expectations at the company cover the following topics:

• “I communicate with impact.”
• “I communicate in an inclusive and straightforward way.”
• “I act with honesty and transparency and show my vulnerability in dialogue with others.”
• “I lead by example.”
• “I live our IKEA values while performing in our business as what we do and how we do it is equally important.”

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“We ground our work in our vision and values, striving to take responsibility and take care of people,” Biesèrt said.

IKEA has several initiatives to support its workers' mental health and emotional wellbeing. The international retailer offers flexible wellness days to its employees and has a “co-worker experience manager” tasked with fostering a great workplace for employees to facilitate a great customer experience. This entails focusing on areas such as health and wellbeing, employment practices and reward structures.

Looking After Workers

The company champions the concept that everyone is a learner, has talent and can lead, referring to this movement as “leadership by all,” in which the organization empowers individuals to help lead the business together.

Employees are encouraged to share their career goals and take ownership of their development. For example, an IKEA employee can meet with their manager and openly state, “I want to become a team leader. What do I need to do to achieve that?” Nearly 90% of the company’s managers were hired from within , according to Alejandra Piñol, who is responsible for talent at Ingka Group.

Piñol said about the company’s inclusive leadership initiatives, “We want to encourage each of us to lead, to feel trusted and take decisions, so that, in turn, we better serve our customers.” She added, “Giving everyone the opportunity to lead allows for real entrepreneurship, which is in the DNA of IKEA.”

The company has a program in which staff at all levels try new assignments to gain new skills and a sense of appreciation for the jobs being carried out by colleagues. If you pop into an IKEA store one day, you may see Biesèrt or Piñol onsite doing manual tasks.

Deploying AI to Help Managers And Increase Retention

In an evolving business landscape, the company must contend with trends like digitization, automation, e-commerce, diversifying workforce models and changes in traditional retailing.

“These changes mean that life-long learning and innovation are prerequisites, and our future needs are about unlocking skills and driving growth,” said Biesèrt. To meet the demands of the future, IKEA is leveraging artificial intelligence to improve its operations and enhance the customer experience.

Biesèrt is focused on upskilling and reskilling workers for resilience in the age of AI. For instance, the company uses AI to transform call center employees into interior design advisors.

Other Use Cases For AI

• Support managers with automated retention analysis customized for their team
• Help pinpoint the employees in most need of attention and suggest topics to address
• Keep track of agreed actions
• Enables follow-up that managers take their responsibility to act on employee turnover

The deployment of AI to help increase retention has been rolled out to 122 stores in six countries, with more coming. The results from the first three countries showed an improvement of voluntary turnover by 2.7%.

Managers will conduct a probability analysis using data, such as time in their position, salary, schedules and more, to determine who is at high risk for voluntary turnover. Armed with this valuable insight, supervisors can initiate a dialogue with the employees regarding their work life.

For example, if the data shows that hours worked is the most significant contributing factor to an employee potentially voluntarily separating from the company, the manager can touch base with the employee and inquire if everything is okay and whether they feel they are working too much and any adjustments are needed. This practice also holds managers accountable for making the necessary improvements to ensure employee retention, engagement and happiness.

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Select Clients

Defining and executing the vision for the next-generation customer experience

What we did

• Vision for transformation
• First e-commerce app
• Global site redesign
• Redefined in-store digital
• Built a design system

Growth in e-commerce in 3 years

Increase in online sales in 2020

Star rating, up from 2.5

IKEA’s footprint is vast—over two billion people shop a range of 12,000 products in 500+ sales locations in 59 countries and online. But as digital becomes increasingly important—especially in the age of Covid—the retail behemoth needed to modernize and transform their business.

As their digital agency of record, Work & Co defined the vision of a future where technology holistically enhances the customer experience at every interaction. Of course, we didn’t stop there. We also helped bring it to life.

Our first challenge—creating IKEA’s first e-commerce-enabled mobile app—took just 6 months from concept to MVP. From there, we took on the entire multi-channel ecosystem of digital touchpoints, including the website, internal tools, and the stores.

The new experience led to greater efficiency, richer engagements, and incremental revenue.

Recognition & Awards

“It is a completely new experience. The app is combined with the store." Read more

"A bona-fide, full-featured shopping app." Read more

"The approach is sound and offers much to learn from." Read more

Shortlist, Design Week Awards, Best App Design. Read more

Winner, 6X Lovie Awards. Read more

Winner, 3X Platinum Awards. Read more

Finalist, FastCo Innovation by Design Awards, Data Design. Read more

4 Big Takeaways

Defining a vision for product and partnership, overhauling web and mobile commerce, a unifying design system, redefining in-store touch points, bringing ikea into the “now”.

Already a worldwide leader in brick-and-mortar retail, IKEA’s leadership partnered with Work & Co to accelerate their digital transformation. Our team’s first task was to develop a cohesive and tech-savvy vision and strategy around which the global organization could align. We began a months-long process of research and brainstorming and problem solving.

From idea to execution

Once we’d identified effective solutions to the challenges, we drafted a new vision for the customer journey intricately detailed in animations and prototypes, which helped ensure all parties were aligned on the plan: aspirational and sophisticated, but also attainable. Together with IKEA, we established a strategy to work as partners with internal teams, sharing design and development labor, openly exchanging ideas and feedback, and even providing guidance on IKEA’s hiring strategies.

Personalized inspiration

To bring IKEA’s famed catalog to life for the digitally native, the app leads with inspiration. Customers browse the app the same way they would IKEA’s showroom—imagining how products complement their home or aesthetic—but with technology enhancing the journey.

A new AI-powered API suggests images based on a customer’s interests and evolving taste. Our cross-platform CMS allows editors to create content once, then deploy them across both the app and IKEA.com. And to bring over 760 collections to life, our team of writers built new engaging copy that scales no matter the country.

Category-specific experiences

From mattresses to lightbulbs to kitchens and beyond, the variety of products IKEA offers are presented and sold in a myriad of ways. The flexible digital designs enable a shopping experience optimized by category and use. Inspiration galleries, planners, guides, and other content can easily be added to help shoppers find their perfect option, plus accessories and add-ons to complete the look. With around 250,000 SKUs per market, this aspect of our work was essential.

Ethical data usage

Industry-leading contextual digital tools raise the bar on data transparency and give customers control over how data is collected, stored, and used. Customers can choose if and how the company uses information—such as their IKEA browsing history, previous purchases, and product preferences—to inform product recommendations in its app, and eventually on its website. To aid explanation of these abstract concepts to users, we explored evolving the iconic IKEA assembly character as an approachable guide.

Consistency at scale

To address the challenge of keeping consistent design across all of the different touchpoints, we worked with IKEA to build a new design system. Skapa is a single source of truth for global button styles, iconography, interaction patterns, and motion libraries brought to life in one React Storybook component library. Components are strategically added and removed over time, meaning the design system is treated as a product that will never stop evolving, while simultaneously keeping the brand universally aligned.

Branding and tone of voice

From a custom icon set to branded price presentation and rigorous color guidelines, each component infuses the IKEA branding into our digital platforms. To complete our design system, we also established a new, digital-first tone of voice with dynamic writing guidelines. Now, writers, designers, motion designers, and developers have everything they need to produce new work across the digital ecosystem.

Integrated accessibility

By including best practices for accessibility into design components, we ensure our digital products are natively inclusive. Solutions are defined once, and repeated throughout development.

Global adoption

A design system is only successful if it’s used globally by an organization. That’s why we helped IKEA establish strategies for training tailored to user types and knowledge levels, advocating for adoption, maintenance and upkeep of components and documentation, and hiring a team dedicated to its management. These critical pieces helped to ensure long term success.

New ways to shop

Part of IKEA’s transformation includes the introduction of new store formats—spaces dedicated to browsing, planning, and ordering—in addition to the traditional locations. The new ecosystem Work & Co delivered integrates digital and physical across all stores in new ways, enhancing the experience for both shoppers and co-workers. New digital tools and features provide more relevant product browsing and interactions, personalized recommendations and shopping lists, and seamless checkout processes—all tailored to the shoppers’ preferences and needs.

Digital touchpoints are integrated to bridge the omni-channel experience. In-store features give users the ability to scan products, explore options and accessories, then skip the checkout line while in the physical store, reducing customer stress and simplifying the path to purchase.

We helped create Upptäcka, a replacement for the aging digital in-store installations. These new kiosks integrate with each other and the overall IKEA digital ecosystem, reducing one-off solutions. Upptäcka adapts to each store and location, making it the most contextually relevant digital touchpoint at IKEA.

Employee tools

Fixa is a task management app designed to digitize time-consuming paper-based processes, making co-workers more efficient and effective, freeing up time to focus on customers. Co-workers have called it “the best product IKEA has ever given them.”

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Ikea Case Study

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

Introduction

This is a case study on IKEA. The case study will introduce IKEA, analyze its history, state its mission, and explain what it does and its profitability. It will additionally discuss IKEA operations design, location and layout of stores, delivery and manufacturing process of its products.

The case study will also introduce John Lewis, compare and contrast it with IKEA. It will state the problems facing IKEA and conclusively highlight its operations and sales functions.

IKEA is a private owned company that sells furniture and household items; it draws its market from all over the world. IKEA was started by a 17-year old Swedish named Ingvar Kamprad in 1943. Ingvar Kamprad was born in 1926 in South Sweden.

IKEA History

The history of IKEA is tied to the founder Ingvar Kamprad. Ingvar Kamprad is from Smaland in Sweden. It is said that Smaland does not offer much opportunities but its people are very sharp and skilled.

IKEA is an acronym developed from the initials of the founder’s name, Ingvar Kamprad (I.K), “the first letter of the farm he grew in, Elmtaryd (E) and his village, Agunnaryd (A)” (IKEA, 2009, p. 1). IKEA locations are now owned by INGKA foundation.

Initially, IKEA dealt with products like pens, ladies’ stockings, watches, picture frames and small furniture items. It distributed its wares through the county’s milk van. However, in 1951 IKEA decided to zero in on furniture products only and additionally produced its first catalogue.

IKEA opened its first store in Almhult, Sweden in 1953 and outside Sweden in 1963 (Norway) and Denmark in 1969. IKEA expanded rapidly opening many stores outside Sweden; in 1987 it won the Excellent Swedish Design prize. As time went by the company incorporated children items (IKEA, 2009, p.1).

IKEA Mission and Profitability

IKEA has a big mission, “to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices affordable to the majority” (IKEA, 1994, p.1). The INGKA foundation which owns IKEA is a Dutch charitable organization controlled by Kamprad family and thus IKEA profit is non-taxable. IKEA annual revenues total to US$28.8 billion, making it the world’s largest furniture manufacturer.

IKEA Delivery and Manufacturing Process

IKEA has a labor force of highly qualified staff of 130,000 people around the world. IKEA products are manufactured in a responsible way and follow the normal supply chain. The designing is undertaken in Sweden but the manufacturing process is carried elsewhere where expenses are minimal.

The IKEA furniture is assembled by the buyers saving on expenses. IKEA products include furniture and accessories for kitchens, living rooms, bedrooms, bathrooms, and children rooms. Annually, the company enjoys a demand of 410 million shoppers.

IKEA Operations Design

The naming of IKEA store-brand products is a complex system that can amaze anybody. They are named by a single word which in most cases originates from Sweden. Many IKEA products are divided into special categories and named accordingly.

This is referred to as the Nordic naming which was developed by IKEA in conjunction with Colin Edwards a renowned international naming expert, “For example, all carpets are named after Danish locations, while chairs and desks are given men’s names” (Ellis, 2011, p. 1).

However, the Nordic naming has in many instances lead to some interesting and conflicting marketing issues in countries where words may have different meanings from what they were intended. In such a case, renaming has always been the only option.

The IKEA vision is to make people comfortable: “IKEA actualizes this by offering a wide range of well-designed, functional home furnishing products at prices comfortable to a common man” (Ellis, 2011, p. 1).

However, in offering low prices, IKEA does not compromise its principle of sustaining its business and hence sells at breakeven price. The supply technique of IKEA is amazing in that it is beneficial to the customers and the environment: the reduction of trucks in the supply chain has lowered carbon dioxide emissions.

IKEA restaurants offer only reusable plates, spoons, knives e.t.c; Customers all over the world have responded positively to IKEA’s strategy as justified by IKEA’s continued rising turnover (IKEA, 2009, p.1).

Layout of IKEA Stores

The general layout of an IKEA store includes one or more showroom floors for large pieces of furniture and various room sets. IKEA stores in most cases are housed in a building with dominantly a blue color. Many IKEA stores are situated outside the city centers to enhance their accessibility and reduce the cost of establishment. However, the format of the stores conveniently changes with government conditions.

The IKEA showrooms are located upstairs. They also have minor departments, such as lighting and textiles, which are well distributed throughout the major departments. The layout of the shop is made in such a way that all that customers have a view the products on sale before proceeding to the payment section (Chopra, 2009, p.1).

Most IKEA stores are open full time and replenish their products at night. Majority of IKEA stores offer a counter where all damaged, returned and formerly showcased goods are displayed before being sold.

IKEA restaurants also have unique features in that instead of providing chain restaurant outlets, the IKEA markets its own food in counter-service eating areas. This food is usually extremely affordable in line with its vision. IKEA restaurants open earlier than the stores. Many stores also have a Swedish- made food, Swedish-style groceries and Scandinavian cookies.

IKEA had more than 300 stores in 35 countries by 2008: Some of the stores in Europe are located in Belgium (1984), Czech Republic, Germany (1974), Denmark (1969), Spain (1981), Greece, France (1981), Iceland, Ireland, Italy (1989), Cyprus, Hungary, Netherlands, Norway (1963), Austria, Russia, Poland, Portugal, Romania, Switzerland (1973), Slovakia, Finland, Sweden (1953), Turkey, United Kingdom (1987).

Some of the stores in North America and Caribbean are located in Canada (1976), United States (1987), and Dominican Republic. Stores in Middle East are located in Kuwait, Israel, Saudi Arabia, and United Arab Emirates. Stores in Asia/Pacific are located in Australia, China, Hong Kong (1975), Japan (1974), Malaysia, Taiwan, and Singapore (1978).

IKEA has opened more stores in the 21 st century and has planned to open its first shopping centre in Croatia in 2012 and the Winnipeg store by 2013 in Canada (Staff Writer, 2008, p.1). Notable is the fact that Germany has the most locations, with 43 stores throughout the country, while the United States comes close behind with 34 locations. IKEA is headquartered in Delft, Netherlands (Finchy, 2010, p.1).

IKEA dominance in the market has conspicuously been catalyzed by a variety of reasons, which include: price, style, products range, high class customer service, 24 hour service and money for value aspects which have boosted its market share.

Due to the affordability of IKEA products to poor college students, the company has become a popular culture reference in America. Several books have been written and songs composed in praise and reference to the company. The Company has however not registered much success in developing countries.

John Lewis is an internationally recognized chain of departmental stores operating in Great Britain. The earliest John Lewis store was launched in 1864. This store is situated along Oxford Street, London. It is owned by the John Lewis Partnership and deals with a wide range of furniture, office equipment, furnishing textiles, linens, china wares, cleaning materials, electrical gadgets, and party stationery.

John Lewis collection, John Lewis men, and John Lewis women have also been introduced. John Lewis restaurants have also been in operation. Lewis Partnership which owns John Lewis stores was founded by John Lewis son, John Spedan Lewis in 1920 (John Lewis Partnership, 2011, p.1).

The partnership is governed by its constitution and company principles. From a humble beginning as a drapery store the store has expanded immensely. John Lewis stores continued to expand with acquisition of more stores like Jessop’s in Nottingham in 1933, Selfridge Provincial stores in 1944 and Herbert Parkinson in 1953.

All acquired stores were rebranded to John Lewis though Oxford Street shop remains as the main branch in the Partnership.

To date, John Lewis Partnership has 76,500 permanent staff /partners and own 35 John Lewis shops in United Kingdom, a production unit, 267 Waltrose supermarkets, an online and catalogue business, and a farm. John Lewis Partnership is a successful and visionary mode of business whose first priority is guarding partner’s interests.

The partnership has a gross turnover of over 8.2 billion pounds where the benefits and profits are shared by the partners. John Lewis operations are multi channeled, it has a ‘home’ format initiative and its Waitrose supermarkets are very convenient.

John Lewis Partnership success was rewarded in 2011 when they won the, “Retailer of the Year award” at the Oracle Retail week Awards (People and Partners, 2011, p. 1). More than 40 million customers shop at John Lewis annually.

Comparing IKEA and John Lewis

Both IKEA and John Lewis are internationally recognized stores that transact their businesses in various countries all over the world. This is evident from the many stores they have which are located in different parts of the world. Both IKEA and John Lewis are non-governmental hence privately owned: IKEA owned by INGKA foundation while John Lewis is owned by John Lewis Partnership.

Additionally, both companies deal with furniture products, furnishings and catalogue business. Of concern is that both companies have grown tremendously over the years enjoying high demands for their products, recording massive sales turnovers and getting international recognition: IKEA won the Excellent Swedish Design prize in 1987, while John Lewis won the Retailer of the Year award in 2011.

Both companies are more dominant in the countries where they were found; IKEA is dominant in Sweden while John Lewis is dominant in UK. Both companies have also started engaging in restaurants in the recent years.

Differences between IKEA and John Lewis Companies

IKEA is solely owned by INGKA foundation while John Lewis is owned by a group of people called the John Lewis partnership. This leads to differences in management. IKEA has its background in Sweden while John Lewis has its background in the UK. IKEA annual profit is non-taxable while that of JOHN LEWIS is taxable.

This is because IKEA is owned by a charitable organization, INGKA which enjoys a tax exemption while John Lewis is owned by John Lewis Partnership which does not enjoy tax exemption.

While IKEA designs and manufactures its furniture products, John Lewis does not manufacture but only sells the ready made furniture. IKEA has a policy of building its own stores in matters of expanding its business while John Lewis acquires already built stores for expanding its business.

IKEA workers are just employees while all John Lewis workers are partners of the company and as such the workers of IKEA and those of John Lewis have different working terms. While IKEA was named among the 100 Best Companies for working women, John Lewis had harsh working conditions for the women in earlier times (Memory Store, 2011, p.1).

While IKEA mostly extends its profits to charity, profits and benefits of John Lewis are shared among the partners. IKEA has developed an environment friendly policy while John Lewis has not.

IKEA uses the Nordic naming method to name its furniture products but John Lewis uses the general method of naming since they do not manufacture products. Acquired stores by John Lewis preserved their names until recently while stores owned by IKEA bore its name from the start.

IKEA Problems

Despite its resounding success and dominance in the world of furniture, IKEA has faced a lot of challenges and problems in its operations and existence. IKEA founder Ingvar Kamprad was involved in the pro-Nazi New Swedish Movement a situation which created a lot of tension when IKEA was opening stores in Israel.

He later regretted his involvement terming it as the greatest mistake in his life. IKEA received a lot of criticism when Canadians realized that IKEA charged twice the price in goods in Canadian stores compared to those in American stores. IKEA was also accused of imperialism in regard to the naming of its products. IKEA engaged in worker mistreatment at one time.

Operations and Sales Function

Operations are all the activities involved in running an enterprise with an aim of producing value to customers. IKEA has a workforce of 130,000 people around the world serving its growing number of esteemed shoppers. The customers have in a long time appreciated this service. John Lewis has a workforce of 76,500 permanent staff that similarly serves the company customers.

The main function of sales is to feel the needs and satisfy the wants of customers. A sales department will strive to attract and retain customers: “IKEA products are based on a functional approach to design and they are also attractive, practical and easy to use” (IKEA, 2009, p.1). The products are simple and offer full customer satisfaction. John Lewis products are pretty and make household chores easier and quicker to do.

The appliances are modern hence convenient to use. The washing machines make cleaning easy and improve the sanitation conditions. Hence, from their sales turnover IKEA and John Lewis products attract and retain customers. This is due to the satisfaction that they derive from their products.

It is evident from statistics derived from the case study that IKEA and John Lewis companies have made great impact in the business world. They have brought furniture and other products close to the consumers through their well distributed stores located all over the world.

They have given consumers a variety and timely satisfaction from their wide-range of products that are easily accessible. The existence of the two companies dealing with almost the same products, and subsequent dominance in different countries demonstrates fair market competition.

Chopra, R 2009, IKEA case study, Slide Share.Web.

Ellis, J 2011, What is IKEA ? Conjecture Corporation , Wise Geek. Web.

Finchy, A 2010, IKEA introduction . Finchy Summer Blog. Web.

IKEA 2009, IKEA introduction, Education Highway. Web.

John Lewis Partnership 2011, John Lewis Partnership, John Lewis Partnership. Web.

Memory Store 2011, Working lives, John Lewis Partnership. Web.

People and Partners 2011, People and Partners, John Lewis Partnership. Web.

Staff Writer 2008, What is IKEA anyway?, Manitoba press council. Web.

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Bibliography

IvyPanda . "Ikea." May 14, 2019. https://ivypanda.com/essays/ikea-case-study/.