IKEA brief

(Ingvar Kamprad- Founder)

(LOGO)


Impressed with the first book on GOOGLE , I decided to carry on the series of book on great brands. Next I picked was IKEA! , though I only heard of it in INDIA but never visited as it does not have any stores.
BOOK NAME: GREAT IKEA! A Brand For All People
Author: ELEN LEWIS
PUBLISHER: CYAN BOOKS, UK

IKEA is the 43rd top global brand in the world .The blue and yellow stores and uniform reflects the Swedish flag.The name IKEA is formed from the initials of its founder Ingvar Kamprad and his native place called Elmtaryd farm in Agunnaryd village in Sweden.

It is a shopping journey that hopes to lull you into the IKEA belief that an inner self of well being can be achieved through a combination of low prices and design.At IKEA the belief is that only while sleeping one makes no mistakes. The fear of making mistakes is the root to bureaucracy and the enemy of development. IKEA was formed in 1943, by its founder Ingvar Kamprad at the age of 17.

Historically life has been a struggle in Scandinavia, with a limited range of raw materials. This led to a culture of minimizing waste wherever possible.

There are 20000 products in the IKEA catalog. It has a unique way of naming its products. A community of bloggers is involved in cracking the code of naming the products by IKEA. As per British newspaper Guardian Bathrooms named after Norwegian lakes, Kitchens named after boys, Bedrooms named after girls, Beds after Swedish cities. Often IKEA designers think about the material of the product before they consider a design. Annually 2000 new products are added to the range.

The biggest discovery for IKEA was the flat pack furniture invented by designer called Gillis Lundgren ( IKEA’s 4th employee). He could not get the table in the back of his car and hence cut the legs of the table. This led to the concept of flat pack. It allowed huge economies of scale at the buying end and the user end .It impacted design stage, manufacturing stage and the distribution stage. Now air sending along with the product was reduced, transportation and storage costs were reduced. It cut labor costs as some workmanship came from consumer while assembling.

Economies of scale example
1990 IKEA produced 242000 Lacks, a small coffee table , price € 25.70
2004 IKEA produced 2 milllion Lacks, price € 9.90

IKEA differs from most` retailers because it passes its savings onto the consumers.
Its profit on individual items is huge. Between 17-18% of price is pure profit, while competitors operate at single digit margins. IKEAs scale a blessing for some manufacturers is a double edged. As they become dependable on IKEA as it takes large volumes. Hence any change in prices suggested has to be accepted by manufacturers.

Key to success of IKEA is its logistics. It is the first company to have warehouse run by robots. It has its own rail company, launched in 2002 in china to help IKEA physically build rail tracks and trains in china to shuttle its goods across vast country. IKEA has an authority of range.

Whenever IKEA launches into a new market it can choose 3 strategies
i) Accept that they do things differently overseas and write off certain countries as unsuitable for expansion.
ii) It could compromise on what it believes in to make its offering more acceptable to foreigners
iii) It could stick to its guns and challenge local beliefs and tastes.

IKEA always opts for the third option. It positions itself as a challenger brand, an outsider that has parachuted into shake up the status quo, sometimes leaning on Swedishness, but sometimes not.As a challenger brand it can take more risks in its advertising than other brands might.

IKEAs most powerful weapon is its catalog. In 2004 it distributed 145 million copies, in 48 editions and 25 languages. Catalogs were read by 200 million people in 31 countries. Entire catalog is shot at the IKEA studio in Almhult, the largest photographic studio in Europe. It takes 35 part time photographers over 4 months to shoot the 6800 new photos for the catalog.

The thinking behind the marketing strategy at IKEA is :
First year you give people catalog and they wont even open it.
Second year they might flick through, shrug shoulders and not consider it again
Third year they might venture to a store and have a look around but not buy anything
Fourth year they might visit the store and buy an eggcup.
Its only 5-6th encounter with IKEA that they will buy something significant.
Ingvar Kamprad is a very patient businessman.

At IKEA employees are called as co-workers. This majorly comes form the Scandinavian culture.
In Scandinavian culture---- no one should be seen to be better than anyone else.— IKEAn quality
Odumjukhet----- implies humility, modesty and respect for fellow humans—IKEAn quality
If someone moves from head office to a store, at IKEA this is regarded as a step up. The ultimate experience for co-workers is getting a chance to work with logistics or in a store.

The biggest competition to IKEA in the near future is from WALMART which is increasingly getting interested in furniture business. IKEA has seriously underexploited the internet as a sales channel.

What IKEA can teach others:
1.It recruits on potential rather than experience. It instinctively knows whether an individual will fit into its way of working. Once inside there is space for people to grow and to make mistakes.
2.It is driven by long term thinking rather than short term sales pressure. Russia and China markets where it expects to lose money initially but in the long run they will pay off.
3.It understands the importance of being honest and transparent. When it makes mistakes, it admits to them, apologizes and tries to make things right.
4.It rarely asks its customers what they want, but uses good design, low prices, and challenging advertising to persuade them.
5.It turns problems and difficulties into opportunities.

Some other facts which I came across while reading this book:
1. Norwegians and Swedes have traditionally caused more injuires per liter of alcohol drunk than other Europeans., pattern is shifting now.
2. Some other global Swedish companies Volvo, Ericsson, Tetra Pak, H&M, Saab, Absolute Vodka, Gant, and Electrolux.
3. Sweden population only 8.9 million.
4. RED BULL is an Austrian brand
5. One of the products was named Gutvik which means in German a good f***. It was removed from market as soon as mistake was realized. It could have led to wrong conclusions by customers apart from image distortion of the brand. :-))
6. Swedish words:
Vackrare verdagsvara---- more beautiful everyday objects
Folkhemmet---- peoples home
Ett Hem ----- the home
7. Swatch founder---Nicholas Hyatt
8. Zara- Spanish fashion retailer
9. Ombudsman—someone who mediates fair settlements.
10. Kamprad was involved in a Nazi youth organization when he was young. He confessed to all employees of the company when this came to light and apologized for his mistake.

....... the story will continue as I have another book LEADING BY DESIGN on IKEA , probably will finish it by next weekend.