business plan for ikea

• Innovative Prompts
• Strategies Packs
• Skills Packs
• SOPs Toolkits
• Business Ideas
• Super Guides
• Innovation Report
• Canvas Examples
• Presentations
• Spreadsheets
• Discounted Bundles
• Search for:

No products in the cart.

Return to shop

Ikea Business Model

IKEA is a furniture design company that specializes in the sale of flat-packed furniture, kitchen appliances, and other home accessories. The IKEA business model provides the framework for how the company runs profitably. 

IKEA operates as a franchise and earns the majority of its profit from annual franchise fees. Aside from that, they accrue income through the wholesale of products and retail catalogs to franchisees.

Additionally, the company’s sale of ready-to-assemble furniture as well as the unique structure of its physical stores and customer-friendly online stores serve as a secondary means of income.

Using these systems, IKEA succeeded in becoming the world’s largest furniture retailer.

A brief history of IKEA

IKEA was founded in 1943 by Ingvar Kamprad as a mail-order sales company and only introduced furniture to their sales five years later, in 1948. Möbel-IKÉA, their first store, opened in 1953 in Lmhult, a town in Smland, southern Sweden.

In 1963, the first IKEA store outside Sweden opened in Norway, and it was closely followed by its Denmark store in 1969. IKEA quickly spread to other parts of Europe throughout the following decade, with showrooms opening in Switzerland (1973) and West Germany (1974). 

By the end of the decade, IKEA had already established itself as a top player in the furniture industry, opening stores and showrooms in different parts of the world. In 1973, the company operated in Japan through a joint retailer under the name “IKEA Corner”. Unfortunately, due to corporation problems, the Japanese business was shut down in 1983, only to return twenty years later in 2003. In 1975, IKEA opened stores in Australia, Canada, and Hong Kong. And, in 1978, Singapore and the Netherlands got their slice of the IKEA pie.

The 1980s brought with it further expansion for the company following the opening of stores in France, Spain, Belgium, the United States, the United Kingdom, and Italy.

IKEA made its first appearance in Latin America in February 2010, opening its first branch in the Dominican Republic. Its first store in India was opened in August 2018 in Hyderabad, the capital of southern India’s Telangana state. 

IKEA’s largest store, measuring 65,000 square meters, is located in the Philippines and was opened in November 2021.

2019 marked the launch of the company’s mobile app, IKEA Place. Making use of augmented reality technology, the application allows users to see how products would look in their own homes. This, combined with other features, has made the app extremely popular among consumers, leading to the over 31.3 million downloads and 4.6-star average rating that it boasts. 

Due to the COVID-19 pandemic, IKEA has had to cease publication of their popular annual catalog after seventy years in print. The company has also been forced to shut down one of its stores in Guiyang and is undergoing stock shortages and shipping problems. The prices of their products have also increased. 

In March 2022, IKEA paused all retail operations in its 17 Russian stores and its stores in Belarus as a result of the Russian invasion of Ukraine. The company announced in June 2022 that it would sell all four of its factories in Russia, close its offices, and reduce its workforce. 

Who Owns IKEA

IKEA is owned by Inter IKEA Holding B.V ., a holding company under the private foundation Interogo Foundation. Interogo Foundation is a self-owned entity, and there is no individual beneficiary. 

Inter IKEA Holding used to be under the ownership of IKEA’s founder, Ingvar Kamprad, but is now run by the company’s CEO, Jon Abrahamsson Ring.

IKEA’s Mission Statement

“To offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”  

How IKEA makes money

All IKEA stores (except one) operate under franchise agreements, and the company makes the majority of its money from annual franchise fees and the wholesale of products to franchisees.

IKEA combines this franchise system with a direct producer-to-consumer system to generate income. 

Franchise fees

 In exchange for access to the IKEA trademarks, authorization to market and sell the IKEA product range as well as managing IKEA stores and sales channels, IKEA franchisees pay Inter IKEA Group an annual fee of 3% of their net sales.

Sale of goods

IKEA franchisees must purchase their store’s inventory from the company’s product supplier. The wholesale of IKEA products to franchisees generated $25.46 billion in revenue in 2021.

Sale of catalogs and other materials 

The sale of the IKEA catalog and other materials created for IKEA franchisees is marked under what the company refers to as “other income”. This makes up the least percentage of the company’s income.

IKEA’s Business Model Canvas

Download FREE!

To download Ikea Business Model Canvas today just enter your email address!

The IKEA Business Model can be explained in the following business model canvas :

IKEA’s Customer Segments

IKEA’s customer segment is single customer-oriented.

IKEA targets young middle-class individuals who are cost-conscious and in need of stylish, quality furniture. The company provides for them by offering such products at a lower price than competitors. 

IKEA’s Value Proposition

IKEA’s value proposition consists of:             

• Ready-to-assemble furniture system: IKEA offers this DIY style of furniture to customers, which not only attracts them to its easy nature of transportation and assembly, but also to the satisfaction gained from building something from the ground up;

Use of renewable sources: The use of renewable resources attracts customers to the eco-friendly side of the company, as well as creates a healthy balance between business and the environment.

IKEA’s Channels

IKEA’s channels consist of:

• Physical stores
• Website & Mobile app

IKEA’s Customer Relationships

IKEA’s customer relationships consist of:

• Customer support
• Social media

IKEA’s Revenue Streams

IKEA’s revenue streams consist of:

• Franchise fee
• Wholesale of goods
• Sale of catalogs and materials

IKEA’s Key Resources

IKEA’s key resource involves around 1,400 suppliers from over 60 countries. These suppliers provide IKEA with furniture designs, wood, distribution facilities, and other necessities the company requires to function. 

• Suppliers Network

IKEA’s Key Activities

IKEA’s key activities consist of:

• Designing of furniture 
• Manufacturing of furniture 
• Sale of furniture 

IKEA’s Key Partners

IKEA’s key partners consist of:

• Manufacturers
• Transporters
• Delivery companies

IKEA’s Cost Structure                            

IKEA’s cost structure consists of:

• Manufacturing of designs
• Manufacturing of products
• Distribution

IKEA’s Competitors

• Walmart: Walmart is famous for providing a wide range of quality products. One such product is home furnishings. As a popular retail brand, their furniture is not only of good quality, but also easily available and affordable;
• Amazon: Amazon provides its services online and offers a wide range of furniture under the name “Amazon Home”. Their provision of easy installation and free scheduled delivery services makes them a top IKEA competitor;
• Wayfair: Wayfair is an American e-commerce company that specializes in the sale of furniture and home accessories online. Their unique user interface as well as their provision of free shipping encourage customers to choose their products over IKEA’s;
• Tesco: A United Kingdom-based company, Tesco Home and Furniture, offers attractive discounts and services to customers;
• Pepperfry: Pepperfry is an online furniture shop in India that provides home decor, furniture, and other homeware at affordable prices. Their products, prices, and the wide-reach the company has in their home country make them one of IKEA’s competitors;
• American Woodmark: American Woodmark is a kitchen and bath cabinet manufacturer based in Virginia. The company offers unique designs of cabinets and is very popular amongst American homebuilders.

You can take a look at our Top 10 IKEA Competitors article to find the top IKEA competitors and alternatives.

IKEA’s SWOT Analysis

Here’s a breakdown of IKEA’s SWOT analysis :

IKEA’s Strengths

• Customer knowledge: IKEA understands its target market and creates products that suit customers. All products are designed in a way that makes them easy to transport and assemble and offers a positive shopping experience for customers;
• Use of innovations to drive down costs: IKEA boasts of its low prices, and the company is constantly finding new ways to reduce the cost of products while simultaneously keeping them at high quality;
• Supply chain integration: IKEA’s supply chain is structured in such a way that costs are reduced during supply;
• Brand reputation and market presence: IKEA has succeeded in establishing itself as a furniture retailer giant, and the company’s worldwide presence and reputation draw customers to it;
• Diversified product portfolio: Aside from providing furniture, IKEA also runs restaurants, houses, and apartments. The company’s diversified portfolio saves it from the changing furniture market forces that affect competitors.

IKEA’s Weaknesses

• Negative publicity: The company has been widely criticized for a slew of reasons, ranging from price discrimination to illegal wood sourcing practices;
• Decreasing quality: Unable to find a way to maintain quality with the increasing price of materials, IKEA has taken to using cheaper alternatives of less quality, which leaves customers dissatisfied;
• Standard products: IKEA deals with standard products, so customers in need of customized goods have no place shopping with the company, leaving competitors to satisfy that need for potential customers.

IKEA’s Opportunities

• New markets in developing economies: Retail markets have the potential for growth and expansion in developing economies that have so far gone without such businesses. IKEA will benefit from spreading its reach to developing economies;
• Expansion into the growing grocery market: IKEA has already taken the initiative of adding restaurants to its stores, and the company could profit greatly from going into the grocery business.

IKEA’s Threats

• Intensifying competition: IKEA’s competitors are quickly catching up with the company as they offer virtually the same products at the same or even cheaper rates;
• Growth of consumer income: IKEA is all about offering low-quality products, which are only attractive to people trying to cut costs. The growing average income of consumers means they will go for more expensive, luxurious products, thereby leaving the company behind.

-> Read More About IKEA’s SWOT Analysis .

IKEA is the world’s largest furniture company, and it is known for its high-quality, low-cost DIY furniture, kitchenware, and home accessories.

The company aims to create a better everyday life for many people and has since succeeded in doing so.

Daniel Pereira

Receive our updates.

Username or email address  *

Password  *

Remember me Log in

Lost your password?

Creating Value: IKEA’s Innovative Business Strategy

In the ever-evolving world of business, staying ahead of the curve is crucial. That’s why companies like IKEA have embraced the art of creating value through their innovative business strategy.

From its humble beginnings as a small mail-order furniture operation, IKEA has transformed into the global leader in home furnishings.

By redefining the traditional customer-supplier relationship, IKEA has made it easier for customers to take on tasks typically done by manufacturers and retailers.

This approach not only benefits the customers but also enables suppliers to access global markets and enhance their competitiveness.

Innovation at its finest.

Table of Contents

Key Takeaways

• Strategy is about reinventing value and the value-creating system in a fast-changing competitive environment.
• IKEA’s business innovation includes offering simple, high-quality Scandinavian design, knock-down furniture kits, and amenities in their stores.
• IKEA mobilizes customers to take on tasks traditionally done by manufacturers and retailers and has a network of suppliers in over 50 countries.
• IKEA plays a major role in improving the business infrastructure and manufacturing standards of its partners and provides access to global markets for long-term suppliers.

The Art of Creating Value

IKEA’s innovative business strategy focuses on the art of creating value by offering customers a new division of labor and mobilizing them to take on tasks traditionally done by manufacturers and retailers. This approach allows IKEA to create value through innovation and leverage the impact of customer involvement on value creation.

By involving customers in the value creation process, IKEA not only empowers them but also taps into their creativity and knowledge. This customer involvement leads to the co-production of improvements in family living, as customers are mobilized to take on tasks they haven’t done before.

Through its network of suppliers in more than 50 countries, IKEA carefully selects and evaluates partners to maintain low costs and good quality. This global supplier network enhances value creation by ensuring efficient coordination and access to global markets, ultimately contributing to IKEA’s success in creating value for its customers.

Evolution of Strategy in a Changing Environment

As the competitive environment continues to change rapidly, companies are reevaluating their strategies to adapt to global competition, changing markets, and new technologies.

In this changing landscape of value creation, companies like IKEA have implemented innovative business strategies to stay ahead. They have shifted from traditional thinking about value and focused on reinventing value and the value-creating system.

By reconfiguring roles and relationships, successful companies create an ever-improving fit between their competencies and customers. IKEA, for example, has transformed into the world’s largest retailer of home furnishings by offering simple, high-quality Scandinavian design and engaging customers in the value creation process.

They have mobilized customers to take on tasks traditionally done by manufacturers and retailers, and have built a global supplier network to enhance their business infrastructure and manufacturing standards.

Adapting to new competitive environments is crucial for companies to thrive in today’s dynamic marketplace and continue to create value.

Reinventing Value and the Value-Creating System

Successful companies in today’s dynamic marketplace are constantly reevaluating their strategies and reinventing their approach to creating and delivering value to customers. Rethinking value creation and transforming value chains have become crucial for staying competitive.

Companies like IKEA have embraced this mindset and have successfully reinvented their value-creating systems. By mobilizing customers and suppliers, IKEA has revolutionized the division of labor and enabled customers to take on tasks traditionally done by manufacturers and retailers. This innovative approach not only empowers customers but also enhances their overall experience.

Through a global supplier network, IKEA carefully selects and evaluates suppliers from different countries, providing them with technical assistance, leased equipment, and access to global markets. This collaborative approach has not only improved the business infrastructure and manufacturing standards of partners but also strengthened IKEA’s brand presence worldwide.

The Business Formula That Transformed IKEA

By revolutionizing the division of labor and empowering customers to take on tasks traditionally done by others in the industry, IKEA transformed its business formula and became the world’s largest retailer of home furnishings. This innovative approach had a significant impact on the retail industry, setting a new standard for customer-centered strategies.

IKEA’s business formula allowed customers to actively participate in the furniture assembly process and take on roles traditionally reserved for manufacturers and retailers. This not only reduced costs for IKEA, but also increased customer satisfaction and loyalty. By providing clear instructions and organizing their stores in a way that facilitated customer choices, IKEA made it easy for customers to engage in these tasks.

This customer-centered approach not only streamlined operations for IKEA, but also provided a unique and personalized experience for customers. Overall, IKEA’s business formula revolutionized the retail industry by empowering customers and redefining the relationship between manufacturers, retailers, and consumers.

IKEA’s Unique Approach to Customer Relationships

Customers play an active role in IKEA’s unique approach to building relationships by taking on tasks traditionally done by manufacturers and retailers. This customer participation is a key aspect of IKEA’s co-creation process, which involves collaborating with customers to create value.

IKEA makes it easy for customers to take on these tasks by providing clear instructions and resources, such as printed catalogues that explain the roles in its business system. Additionally, IKEA’s stores offer amenities and organized product displays to facilitate customer choices.

By mobilizing customers and suppliers, IKEA is able to tap into a global network of partners in more than 50 countries. This network allows for the careful selection and evaluation of suppliers, ensuring low costs and good quality.

Overall, IKEA’s unique approach to customer relationships and co-creation process enables the company to continuously innovate and provide innovative solutions to its customers.

Mobilizing Customers and Suppliers for Value Creation

Mobilizing customers and suppliers is a key aspect of IKEA’s approach to co-creation. This enables the company to tap into a global network of partners. Collaborative innovation and customer engagement are at the heart of this strategy. IKEA wants customers to understand their role in creating value and offers co-produced improvements in family living.

Customers are mobilized to take on tasks they haven’t done before, shifting the traditional division of labor. The company also has a network of suppliers in over 50 countries. These suppliers are carefully selected and evaluated to maintain low costs and good quality.

IKEA’s global supplier network allows long-term suppliers to gain access to global markets. They provide these suppliers with technical assistance, leased equipment, and assistance in improving their business infrastructure and manufacturing standards.

This collaborative approach to value creation fosters innovation and engagement both within and outside the company.

Building a Global Supplier Network

Building a global supplier network is a strategic initiative undertaken by IKEA. This allows IKEA to expand its reach and ensure access to a diverse range of suppliers from over 50 countries. By tapping into a global pool of talent and resources, IKEA enhances its ability to innovate and meet the evolving demands of its customers.

The process of supplier selection is a crucial aspect of this strategy. IKEA carefully evaluates potential suppliers based on their ability to deliver low-cost, high-quality products. By working with a network of suppliers, IKEA is able to leverage their expertise and capabilities. This also provides suppliers with access to global markets, benefiting both parties.

This symbiotic relationship benefits suppliers by giving them increased business opportunities and market exposure. At the same time, IKEA maintains a reliable and efficient supply chain. Through its global supplier network, IKEA is able to enhance its competitiveness and drive innovation in the global market.

The Role of Designers in Supplier Selection

Designers play a crucial role in the supplier selection process at IKEA. They ensure efficient coordination between designers and suppliers for a seamless integration of design and production. With a focus on innovation, IKEA understands the importance of selecting the right suppliers to meet their quality and cost requirements.

The designers at IKEA’s centralized design office in Sweden are responsible for evaluating and deciding on suppliers. They work closely with the suppliers to ensure that the design specifications are met and that the products are produced to the highest standards. By selecting suppliers that align with IKEA’s values and objectives, designers contribute to the overall success of the company.

This collaborative approach ensures that IKEA’s products not only meet the expectations of their customers but also maintain the brand’s reputation for quality and innovation.

Improving Business Infrastructure and Manufacturing Standards

Suppliers in IKEA’s global network benefit from the company’s efforts to enhance business infrastructure and improve manufacturing standards.

Streamlined Business Processes: IKEA’s focus on improving business infrastructure allows suppliers to optimize their operations and reduce inefficiencies. By implementing efficient processes, suppliers can enhance their productivity and deliver products in a timely manner.

Enhanced Manufacturing Efficiency: Through its commitment to improving manufacturing standards, IKEA assists suppliers in adopting innovative techniques and technologies. This leads to increased efficiency in production processes, reducing costs and improving quality. Suppliers can benefit from the expertise and guidance provided by IKEA to enhance their manufacturing capabilities.

Competitive Advantage: By collaborating with IKEA, suppliers gain access to a global market and the opportunity to expand their customer base. This not only increases their business opportunities but also enhances their competitiveness in the industry. The improved business infrastructure and manufacturing standards provided by IKEA enable suppliers to meet international quality standards, further strengthening their position in the market.

IKEA’s Advice on Bringing Production to World Quality Standards

With IKEA’s guidance, suppliers receive valuable advice on elevating their production to meet world quality standards. IKEA plays a major role in improving the manufacturing standards of its partners, ensuring that they are able to compete in the global market.

By providing technical assistance, leased equipment, and advice on bringing production up to world quality standards, IKEA helps its suppliers enhance their production efficiency. This not only benefits the suppliers by improving their operations, but also allows them to expand their customer base through access to global markets.

With IKEA’s strong brand presence worldwide, suppliers can capitalize on the opportunities that come with global market expansion. By leveraging IKEA’s expertise and resources, suppliers are able to elevate their production to meet the demands of the global market and achieve greater competitiveness.

The Crucial Role of the Centralized Design Office

The centralized design office at IKEA’s operational headquarters in Sweden plays a crucial role in coordinating and ensuring efficient collaboration between the designers and suppliers. This office serves as the hub of communication, allowing designers to work closely with suppliers to bring innovative products to market.

The role of designers in this process is to conceptualize and design products that align with IKEA’s vision and brand. They work closely with the centralized design office to select suppliers who can meet the company’s quality and cost requirements.

Supplier selection is a meticulous process that involves evaluating potential partners based on their capabilities, capacity, and track record. The centralized design office ensures that the selected suppliers have the necessary expertise and resources to deliver on IKEA’s design specifications.

Once suppliers are selected, the centralized design office facilitates coordination between designers and suppliers throughout the production process. This ensures that the designs are translated accurately into the final products, and any issues or changes are addressed promptly.

Overall, the centralized design office plays a vital role in maintaining the high standards of design and quality that IKEA is known for, while also fostering effective collaboration between designers and suppliers.

Long-Term Suppliers and Access to Global Markets

Long-term collaboration with IKEA provides suppliers with opportunities to expand their customer base and access global markets. Through their global supplier network, IKEA seeks out candidates from different countries and carefully selects and evaluates suppliers to maintain low costs and good quality.

Long-term suppliers gain access to global markets, as IKEA plays a major role in improving their business infrastructure and manufacturing standards. With access to global markets, suppliers can expand their customer base and benefit from IKEA’s strong brand presence worldwide. This not only increases their business opportunities but also enhances their competitiveness.

Enhancing Competitiveness Through Global Market Access

Suppliers gain a competitive edge by accessing global markets through their partnership with IKEA. This collaboration allows suppliers to expand their market reach and enhance their international competitiveness. Here are three key ways in which suppliers benefit from this global market access:

Increased customer base: By partnering with IKEA, suppliers gain access to a global network of customers. This expanded customer base provides suppliers with greater opportunities to showcase their products and increase their sales.

Strong brand presence: IKEA’s strong brand presence worldwide helps suppliers enhance their own brand recognition. Being associated with a well-known and trusted brand like IKEA can significantly boost a supplier’s reputation and attract new customers.

Business opportunities: Access to global markets opens up a plethora of business opportunities for suppliers. They can explore new markets, forge new partnerships, and tap into different customer segments, thereby diversifying their revenue streams and driving growth.

Through its global reach and strategic partnerships, IKEA empowers its suppliers to thrive in an increasingly competitive international marketplace, expanding their market reach and bolstering their international competitiveness.

Frequently Asked Questions

How has ikea’s business formula transformed the company from a small mail-order furniture operation to the world’s largest retailer of home furnishings.

IKEA’s business formula, with its focus on simple, high-quality design and customer involvement in assembling furniture, has propelled the company from a small mail-order operation to the world’s largest retailer of home furnishings.

What Unique Approach Does IKEA Take in Its Customer Relationships?

IKEA takes a unique approach in its customer relationships by offering personalized experiences and building long-term partnerships. By involving customers in the value creation process, IKEA creates a strong connection and fosters loyalty.

How Does IKEA Mobilize Customers and Suppliers to Create Value?

By mobilizing collaboration and engaging suppliers, IKEA creates value. Customers are empowered to take on tasks traditionally done by manufacturers and retailers. IKEA’s global supplier network ensures low costs and good quality.

How Does IKEA Build and Maintain a Global Supplier Network?

IKEA builds and maintains a global supplier network through supply chain optimization and supplier relationship management. By carefully selecting and evaluating suppliers, providing technical assistance and leased equipment, and improving partners’ manufacturing standards, IKEA ensures efficient coordination and access to global markets.

How Does IKEA Enhance Competitiveness Through Global Market Access?

IKEA enhances competitiveness through global market access by expanding globally and facing increased market competition. This allows the company to reach new customers, expand its customer base, and leverage its strong brand presence worldwide.

IKEA Business Strategy and Competitive Advantage: Capitalising on IKEA Concept

IKEA business strategy is built upon the IKEA concept. The IKEA Concept starts with the idea of providing a range of home furnishing products that are affordable to the many people, not just the few. It is achieved by combining function, quality, design and value – always with sustainability in mind. The IKEA Concept exists in every part of the company, from design, sourcing, packing and distributing through to business model. [1]

The following points constitute integral elements of IKEA business strategy.

1. Offering the lowest prices . Cost effectiveness is one of the solid bases of IKEA competitive advantage. The global furniture retailer is able to offer low prices thanks to a combination of economies of scale and technological integration into various business processes.

2. Increasing variety of products . Great range of products also belongs to the list of IKEA competitive advantages. There are 12000 products across in IKEA portfolio and the company renews its product range launching approximately 2000 new products every year. [2] The company is also increasing its presence in food and catering industries.

3. International market expansion strategy . The home improvement and furnishing chain has traditionally engaged in new market development in an aggressive manner. IKEA has11 franchisees operating in more than 500 locations in 63 countries. [3] Furthermore, The Swedish furniture chain has long-term plans to establish its firm presence in many developing countries.

4. Benefiting from strategic alliances . The global furniture retailer benefits from strategic alliances to a maximum extent. The formation of strategic alliances is placed at the core of IKEA business strategy. The list of the most successful collaborations include partnership with Apple to explore the possibilities of  Augmented Reality as a tool for home-furnishing, partnership with LEGO for new product development and partnership with Adidas in knowledge sharing about customer behaviour. Experience and competency in the formation of strategic alliances can be specified as one of the most important IKEA competitive advantages.

Currently, IKEA is in the middle of transformation of its business model that made it successful in the global scale. Specifically, for many decades IKEA business strategy was largely 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-centre stores, online shopping, home delivery and assembly, and more radical ideas such as leasing furniture and selling on websites such as Alibaba. [4]

 IKEA Group Report contains the above analysis of IKEA business strategy. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on IKEA . Moreover, the report contains analyses of IKEA leadership, organizational structure and organizational culture. The report also comprises discussions of IKEA marketing strategy, ecosystem and addresses issues of corporate social responsibility.

[1] The IKEA Concept (2019) IKEA, Available at: http://www.ikea.com/ms/en_US/this-is-ikea/the-ikea-concept/

[2] Sustainability Report FY 2021,IKEA

[3] Inter IKEA Holding B.V. Annual report FY21

[4] 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

The Leading Source of Insights On Business Model Strategy & Tech Business Models

IKEA Business Model

IKEA’s business model centers around offering affordable and functional furniture to a wide range of customers. With a comprehensive product range, DIY assembly, and efficient operational processes, IKEA provides value to homeowners, renters, students, and professionals. Value-based pricing generates revenue from product sales, restaurant sales, and e-commerce. Key activities include design , supply chain management , and marketing . IKEA’s key resources include a global store network , supply chain infrastructure, and design centers. Strategic partnerships and cost-efficient operations contribute to IKEA’s success.

Table of Contents

Value Proposition:

• Affordable and Functional Furniture: Providing affordable and functional furniture solutions for customers.
• Wide Product Range: Offering a wide range of furniture products to cater to different customer needs .
• Do-It-Yourself (DIY) Assembly: Enabling customers to assemble their furniture, reducing costs and providing a sense of accomplishment.

Operational Model:

• Flat-Pack Furniture: Designing furniture that can be efficiently packaged in flat packs, reducing transportation costs.
• Self-Service Shopping: Encouraging customers to navigate and collect products themselves, reducing labor costs.
• Large Warehouses: Operating large warehouses to store and distribute furniture products.

Pricing Model:

• Value-Based Pricing: Setting prices based on the value perceived by customers, considering factors such as design , quality, and functionality.

Revenue Model:

• Product Sales: Generating revenue through sales of furniture and home furnishing products.
• Restaurant Sales: Generating revenue through sales of food and beverages in IKEA’s restaurants.
• E-commerce Sales: Generating revenue through online sales via IKEA’s e-commerce platform.

Customer Segments:

• Homeowners and Renters: Targeting individuals who own or rent homes and require furniture and home furnishing solutions.
• Students and Young Professionals: Catering to the needs of students and young professionals who seek affordable and functional furniture.
• Interior Designers and Decorators: Targeting professionals involved in interior design and decoration projects.

Key Activities:

• Product Design and Development: Designing and developing furniture products with a focus on affordability, functionality, and aesthetics.
• Supply Chain Management: Managing the supply chain to ensure efficient sourcing, production, and distribution of furniture products.
• Marketing and Advertising: Promoting IKEA’s brand and products through marketing and advertising campaigns.

Key Resources:

• Global Store Network: Physical store locations worldwide to showcase and sell IKEA’s furniture products.
• Supply Chain Infrastructure: Efficient supply chain infrastructure to ensure timely sourcing and distribution of furniture products.
• Design and Innovation Centers: Centers dedicated to product design , development, and innovation .

Key Partnerships:

• Supplier Partnerships: Collaborating with suppliers to ensure a reliable and cost-effective supply of materials and components for furniture production.
• Design Partnerships: Partnering with designers and design firms to create innovative and appealing furniture products.
• Delivery and Logistics Partnerships: Partnering with delivery and logistics companies to streamline product distribution and improve customer experience.

Cost Structure:

• Production and Manufacturing Costs: Costs associated with furniture production, including materials, labor, and manufacturing processes.
• Store Operations Costs: Expenses related to operating physical stores, including rent, utilities, and staff salaries.
• Marketing and Advertising Costs: Costs associated with marketing campaigns, advertising, and brand promotion.

Key Highlights

• Affordable and functional furniture for diverse customers.
• Comprehensive range, DIY assembly, efficient operations.
• Revenue from sales, restaurants, and e-commerce.
• Design, supply chain, and marketing activities.
• Reliance on partnerships and cost-efficiency.
• Affordable, functional furniture solutions.
• Wide range catering to various needs .
• DIY assembly reduces costs, provides satisfaction.
• Flat-pack design for cost-effective transportation.
• Self-service shopping, lower labor costs.
• Large warehouses for efficient distribution .
• Value-based pricing reflecting perceived value .
• Product sales, restaurant sales, e-commerce.
• Homeowners, renters seeking solutions.
• Affordable, functional furniture for students, professionals.
• Furniture catering to interior designers, decorators.
• Product design focusing on affordability, functionality, aesthetics.
• Efficient supply chain management .
• Brand promotion through marketing and advertising.
• Global store network showcasing products.
• Efficient supply chain infrastructure.
• Design and innovation centers.
• Reliable, cost-effective material supply.
• Design collaborations for innovation .
• Delivery and logistics for improved experience.
• Production costs for materials, labor.
• Store operations including rent, utilities, staff.
• Marketing expenses for campaigns, promotion.

Business Model Recap

Related Visual Stories

Who Owns IKEA

IKEA Revenue

IKEA Revenue By Channel

IKEA Profits

More Resources

About The Author

Gennaro Cuofano

Discover more from fourweekmba.

Subscribe now to keep reading and get access to the full archive.

Type your email…

Continue reading

Business Plan Template for IKEA

• Great for beginners
• Ready-to-use, fully customizable Subcategory
• Get started in seconds

Starting an IKEA-style furniture store is an exciting venture, but it requires careful planning and preparation to ensure success. That's where ClickUp's Business Plan Template for IKEA comes in handy!

This comprehensive template is specifically designed to help entrepreneurs and business owners outline their vision, conduct market analysis, develop operational strategies, create financial projections, and set clear goals. With this template, you'll have everything you need to secure funding and effectively communicate your business plan to potential investors or lenders.

Don't let the thought of creating a business plan overwhelm you. ClickUp's Business Plan Template for IKEA will guide you every step of the way, empowering you to turn your dream into a thriving reality. Start planning your IKEA-inspired furniture store now!

Business Plan Template for IKEA Benefits

A business plan template for an IKEA-style furniture store offers several benefits for entrepreneurs and business owners:

• Streamline the planning process by providing a structured framework to organize your ideas and strategies
• Ensure a comprehensive and professional business plan that covers all essential elements for success
• Save time and effort by leveraging a pre-designed template tailored specifically for an IKEA-style furniture store
• Increase your chances of securing funding or investment by presenting a well-thought-out business plan to potential investors or lenders
• Effectively communicate your vision, market analysis, operational strategies, financial projections, and goals to stakeholders to gain their support and confidence in your business venture.

Main Elements of IKEA Business Plan Template

ClickUp's Business Plan Template for IKEA provides entrepreneurs and business owners with a comprehensive tool to outline their vision and secure funding. Here are the main elements of this List template:

• Custom Statuses: Track progress with statuses like Complete, In Progress, Needs Revision, and To Do, ensuring that each section of your business plan is accounted for and easily manageable.
• Custom Fields: Utilize custom fields such as Reference, Approved, and Section to add specific details and organize your business plan effectively.
• Custom Views: Access different views like Topics, Status, Timeline, Business Plan, and Getting Started Guide to visualize your business plan from various angles, ensuring a clear understanding of each aspect and helping you stay on track.

With ClickUp's Business Plan Template for IKEA, you can confidently present your business plan and take the next step towards launching your IKEA-style furniture store.

How To Use Business Plan Template for IKEA

Creating a business plan for IKEA can be a complex task, but with the help of the Business Plan Template in ClickUp, you can easily outline your strategy and set yourself up for success. Follow these six steps to effectively use the Business Plan Template for IKEA:

1. Executive Summary

Start by writing a concise and compelling executive summary that highlights the key elements of your business plan. This section should provide a clear overview of IKEA's mission, vision, and goals, as well as a summary of your target market and competitive advantage.

Use the Docs feature in ClickUp to draft and collaborate on your executive summary.

2. Market Analysis

Conduct a thorough market analysis to understand the current trends, customer needs, and competition in the home furnishing industry. Identify your target market segments, their preferences, and their purchasing behaviors. Analyze the strengths, weaknesses, opportunities, and threats (SWOT analysis) of the market to inform your business strategy.

Utilize the Table view in ClickUp to organize and analyze market research data.

3. Product and Service Offering

Describe IKEA's product and service offerings in detail. Highlight the unique features and benefits of IKEA's furniture, home accessories, and design services. Explain how these offerings meet the needs and preferences of your target market.

Use the Board view in ClickUp to visually map out your product and service offerings.

4. Marketing and Sales Strategy

Develop a comprehensive marketing and sales strategy for IKEA. Identify the channels and tactics you will use to reach your target market, such as digital advertising, social media, and partnerships. Outline your pricing strategy, promotional activities, and sales projections.

Track your marketing and sales activities using Automations in ClickUp to ensure efficient execution.

5. Operational Plan

Outline the operational aspects of running IKEA, including the organizational structure, staffing requirements, and supply chain management. Define the roles and responsibilities of key team members and establish processes for inventory management, logistics, and customer service.

Visualize your operational plan using Gantt charts in ClickUp to track timelines and dependencies.

6. Financial Projections

Create detailed financial projections for IKEA, including sales forecasts, expenses, profit margins, and cash flow analysis. Calculate key financial ratios and indicators to assess the financial health and viability of your business.

Utilize the Goals feature in ClickUp to set financial targets and track progress against them.

By following these six steps and leveraging the Business Plan Template in ClickUp, you can confidently develop a comprehensive and strategic business plan for IKEA.

Get Started with ClickUp’s Business Plan Template for IKEA

Entrepreneurs or business owners looking to start an IKEA-style furniture store can use the Business Plan Template for IKEA in ClickUp to effectively communicate their vision, market analysis, operational strategies, financial projections, and goals to potential investors or lenders.

First, hit “Add Template” to sign up for ClickUp and add the template to your Workspace. Make sure you designate which Space or location in your Workspace you’d like this template applied.

Next, invite relevant members or guests to your Workspace to start collaborating.

Now you can take advantage of the full potential of this template to create a comprehensive business plan:

• Use the Topics View to outline different sections of your business plan, such as Executive Summary, Market Analysis, Operations, Marketing Strategy, Financial Projections, and Goals.
• The Status View will help you track the progress of each section, with statuses like Complete, In Progress, Needs Revision, and To Do.
• Utilize the Timeline View to set deadlines and milestones for completing each section of your business plan.
• The Business Plan View provides a holistic overview of your entire business plan, allowing you to see how all the sections fit together.
• Create a Getting Started Guide View to provide step-by-step instructions for filling out each section of the business plan.
• Use custom fields like Reference, Approved, and Section to add additional information and categorize different parts of your business plan.
• Collaborate with team members to gather input, refine your ideas, and ensure your business plan is comprehensive and compelling.
• Business Plan Template for Investment Bankers
• Business Plan Template for Professors
• Business Plan Template for Kelloggs
• Business Plan Template for Website
• Business Plan Template for Venture Capitalists

Template details

Free forever with 100mb storage.

Free training & 24-hours support

Serious about security & privacy

Highest levels of uptime the last 12 months

• Product Roadmap
• Affiliate & Referrals
• On-Demand Demo
• Integrations
• Consultants
• Gantt Chart
• Native Time Tracking
• Automations
• Kanban Board
• vs Airtable
• vs Basecamp
• vs MS Project
• vs Smartsheet
• Software Team Hub
• PM Software Guide

Technology and Operations Management

Mba student perspectives.

• Assignments
• Assignment: The TOM Challenge: TOM…

IKEA’s business and operating models: a match made in heaven

“For us, good design is the right combination of form, function, quality, sustainability and a low price. We call it ‘democratic design’, because we believe good home furnishing is for everyone. It’s why we’re constantly exploring smarter, thriftier ways to do things.” – IKEA Website

With revenue of over 29 billion euros in 2014, 315 stores in 27 countries, 9,500 product types, and 147,000 employees, IKEA Group is one of Sweden’s best-known companies. IKEA designs, manufactures, and supplies quality furniture at low prices to make it accessible to the majority of people. IKEA’s furniture products are designed to be sleek and minimalist, and manufactured to be easy to assemble and maintain.

IKEA is a great example of a company that effectively aligns it business model and operating model. In order to deliver on its customer promise of providing quality furniture at affordable prices, IKEA relies on its value chain to optimize its production and overhead costs, as exemplified below:

Product design process: In order to reach the shop floor, a product must meet four criteria: affordability, sustainability, good design, and functionality. Interestingly, the design-planning of any product starts by first setting a price at which a product will be sold. As part of that, designers have to select which design elements, raw materials, and production techniques to use in order to reduce production costs. Furthermore, the designers often work on the factory floor, directly interacting with the manufacturing team in order to understand the capabilities and constraints of the manufacturing department, thereby streamlining the design process and minimizing the cost of the prototyping phase.

In addition to that, IKEA standardizes the production processes by using a limited selection of raw materials across the product ranges and it uses the same base design for different products (example: the chairs from the PELLO series have the same base design as chairs from the POÄNG chairs). This level of standardization results in lower rates of defect and scrap, therefore less waste and cost.

Pathways to Just Digital Future

Production & Distribution: IKEA has over 50,000 SKUs; in order to relieve the challenge of product variability, IKEA relies on extensive forecasting, and usually planning production five years in advance. Similar to Toyota’s Heijunka practice, IKEA relies on long-term planning to evenly balance production volumes across its network of more than 1,000 third-party manufacturers. As we learned in the TOM course, spreading out production demand allows for suppliers to have a uniform cycle time which ultimately leads to lower production costs per unit. Furthermore, with the help of an Advanced Planning and Scheduling software, IKEA allocates production to suppliers based on each supplier’s production capacity and raw material availabilities.

After productions, the products are transported to a network of 47 IKEA-owned, highly-automated distribution centers located in 17 countries. In order to optimize on warehousing and transportation requirements, the finished products are tightly packed into flat packages. This type of packages makes the finished goods easy to transport (leading to decreased transportation costs) and easy to store (leading to decreased warehousing costs).

Retail: After customers browse the shop floor and select the items to purchase, they head to the store’s warehouse to retrieve the packages themselves. Because the customers are responsible for picking up their packages, IKEA does not have to hire labor that would otherwise assume such a responsibility. This helps drive down IKEA’s labor cost.

Consumers play another role in IKEA’s low-cost strategy. Because the customers are responsible for transporting the furniture out of the store and assembling it, IKEA further saves on labor, shipping and overhead costs associated with furniture assembly and delivery.

Overall, I think IKEA effectively manages several key elements of its value chain from design-process to its retail stores, and it has access to customer’s demand patterns. With this information flow and control from one end of the supply to the other, IKEA is able to smoothen the bullwhip effect that other firms typically experience. This in turn helps IKEA drive operational efficiencies throughout the supply chain, resulting in reduced costs and lead times. Given IKEA’s strong financial performance with profit margins of over 11%, I believe that that IKEA’s business and operating models are strongly aligned with one another.

• IKEA Group Website ( ikea.com )
• IKEA Group FY2014 Yearly Summary ( http://www.ikea.com/ms/en_US/pdf/yearly_summary/ikea-group-yearly-summary-fy14.pdf )
• “Anatomy of an IKEA product” ( http://www.cnet.com/news/anatomy-of-an-ikea-product/ )
• “IKEA’s Inventory Management Strategy: Why It Works” ( http://www.supplytimes.com/inventory-management/ikeas-inventory-management-strategy-why-it-works )
• “How is IKEA so inexpensive?” ( https://www.quora.com/How-is-IKEA-so-inexpensive )
• “IKEA as an Innovator: The Right Combination of Execution and Ecosystem Innovation” ( http://faculty.tuck.dartmouth.edu/images/uploads/faculty/ron-adner/17EIS_Main_Project_-_IKEA_-_Final.pdf )
• Lean Management of Global Supply Chain (Japanese Management and International Studies), a book by Yasuhiro Monden and Yoshiteru Minagawa, which can be find through Google Scholar ( https://books-google-com.ezp-prod1.hul.harvard.edu/books?hl=en&lr=&id=qtqiCgAAQBAJ&oi=fnd&pg=PA65&dq=ikea+fabless&ots=YKAwVPF5JG&sig=flyn7qcY9IYSid6gzEi6S_ZnoJs#v=onepage&q=ikea%20fabless&f=false )

Student comments on IKEA’s business and operating models: a match made in heaven

IKEA has a unique value proposition that it delivers to its customers and it seems it has been able to be successful because of the distinct brand image it has developed together with reduced costs to effective supply chain management and scalability.

I found it extremely interesting it the way IKEA develops products. It seems intuitive that the designers work together with the production team on the factory shop floor to develop products that are functional, aesthetic and yet provide good value for money. In most companies the design and production team are separate even though there are obvious synergies between the two.

What I also found interesting is that, IKEA plans its production 5 years in advance. While this helps to smooth out demand forecasts, I was wondering what this would mean for changing trends in design? It seems that design trends change season to season, so how is IKEA able to keep up with design trends, if they plan 5 years in advance?

This is a great post Amine! I think IKEA is a great example of a company creatively disrupting what used to be a standard – and clunky, and expensive – event in a person’s life. IKEA set out to democratize design. Their mission is to “create a better everyday life for the many people” and so much of that comes back to the elements you discussed ( http://www.ikea.com/ms/en_SG/about_ikea/our_business_idea/index.html ). I would like to add a couple of notes expanding on your product design process idea.

First, IKEA does its research. When IKEA first came to the US, it dropped off truckloads of products all measured in centimeters and Americans rejected them. IKEA has learned, and now sends anthropologists into countries to learn how people interact with their homes and what their lives are like. They publish a quarterly “Life at Home” report with qualitative and data-intensive quantitative findings. For example, here is a sample showing differences in peoples’ habits in the kitchen around the world: http://lifeathome.ikea.com/food/en/ . Based on this research, IKEA might develop products, but more often they learn how their existing products can fit into the lifestyles of people around the world. IKEA stores’ showrooms and catalogs tell people how to integrate products into their lives, and with this anthropological understanding, IKEA can adapt its products to fit the world and increase volumes, creating further economies of scale ( http://fortune.com/ikea-world-domination/ ).

Second, IKEA is conscious that when you supply the world with tables and chairs, you are also taking a lot from the world. IKEA uses an incredible 1% of the world’s wood supply, which is roughly 17.8 million yards of wood ( http://gizmodo.com/heres-why-ikea-is-discontinuing-everyones-favorite-sh-1527126312 ). In 2012 IKEA published an intensive report detailing their sustainability strategy in which they begin by stating they would “economise with resources” ( http://www.ikea.com/ms/en_US/pdf/reports-downloads/sustainability-strategy-people-and-planet-positive.pdf ). Holding true to that mission, a little over a year later they replaced the beloved EXPEDIT bookcase (a bestseller), with the KALLAX; the only difference between the two was shaving down the width of the outside wooden pieces. It is a small change, but at the volumes this bookcase is sold it has a meaningful impact on IKEAs raw material usage. This demonstrates IKEAs iterative product development expertise, helps them lower costs, and more importantly supports their philosophy of creating a better life for many people – if they can reduce their wood usage, they can bring their product to more people without further environmental impact. Bring on the Poang.

Dear Amine,

Great note and highlight on Ikea’s operating & business models! That is very telling. My question was about subproduction. It seems IKEA outsources part of its manufacturing to Chinese and Indian manufacturers for cost logics. How do you think Ikea can keep an edge, as it is being copied by some of its Chinese sub contractors?

Another question I have is about IKEA’s terrible customer service. Do you think that a wrong customer service may hamper Ikea’s s sales on the long run? Isn’t it part of the business model?

Thanks again for you note, really interesting!

Great post Amine. I really liked the way how you brought to life the operating model of IKEA – an innovative industry leader. IKEA is certainly a good example of a company which has effectively employed lean supply chain management practices. I had a few questions regarding this strategy. 1. Can you elaborate on IKEA’s third party manufacturer suppliers? Are they based in Sweden or in low cost locations in developing countries? I am assuming that at this price point, they will need to be sourcing cheap. 2. Since the design and production functions have to work together to ensure standardization, how is this managed with manufacturing being outsourced? Does IKEA have its design teams working with the third party manufacturers? 3. What is IKEA’s raw material procurement strategy? 4. I find it quite incredible that IKEA has a 5 year demand forecast. Given that it has 50,000 SKUs, does IKEA only forecast demand for the base models or for all 50,000 SKUs?

Leave a comment Cancel reply

You must be logged in to post a comment.

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

By Aditya Shastri

Ikea is an international company that sells ready-to-assemble housewares, furniture, and kitchen sets. Solid online growth in 2020, IKEA Canada announces consistent revenues of $2,32B. IKEA is known all over the world for its retailing of Home Furnishing Products. Ikea retails for consumer e-mail, mobilizers, retail, shopping, and smart homes as well.

In this blog, we will uncover the key features of the business model of Ikea and learn how it manages all its activities and earns revenue. See also our other blog that outlines Ikea’s marketing strategy .

Therefore, let us instantly learn more about the organization .

In 1943, IKEA started with Ingvar Kamprad, a 17-year-old lad. Born in southern Sweden in Smaland. He was working as a carpenter when he started IKEA. The company sold just joys, plums, and wallets in the initial years. The main motto of IKEA was to serve customers and products at an economical price. In 1948, IKEA also started retailing furniture. It has been its main business since then. The firm is renowned for its modernist design for many sorts of equipment and furnishings and often combines its interior design work with ecological simplicity. Further, the corporation is known for its focus on cost management, operational detailed information, and ongoing product development, such that IKEA has averaged between two and three per cent cheaper pricing. It is the largest furniture in the World but didn’t enter India until 2013, even though it has been sourcing from India since the 1980s. Now, IKEA is a multinational brand. IKEA’s headquarters is in the European Union(EU). IKEA saw rapid growth when it landed in other developed countries like the US, Italy.

What’s new with IKEA?

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.

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

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  iis motivated by affordable home furnishings, DIY creativity, sustainability, and functional design, with interests in interior design, gardening, reading, and cooking.

Want to know about the current challenges of IKEA? Read a detailed SWOT Analysis of the brand before moving on with marketing strategies.

Business Model of IKEA

The business model of a company is a core strategy it implies to gain commercial and economic value. It involves all those components that are required to make a business successful. IKEA’s motto of promoting a “better life for everyone” focuses highly on making it good quality as well as affordable, making it a point that every customer can benefit from it. IKEA’s demand is not only for the two benefits mentioned but also for its exclusive design that reflects modernism as well as being friendly at such a low cost. IKEA is a non-profit organization whose goal is to make every day a better person. IKEA’s business approach is noted for its innovative designs for various types of appliances and mobilization. IKEA’s interior design service values a lot because of its eco-friendly simplicity. IKEA’s business model success is based upon its attention to cost control, regular product development, and operational details that empower the business model to lower its product prices by 2% to 3%.

1. Business Model of IKEA – Customer Segments

Clients must capture the mass market and ship the products to customers which are sensitive to costs.

2. Business Model of IKEA – Customer Relationship

IKEA offers a family card to the customers through which they can avail good Discounts. It also maintains good relationships with customers by providing them with assembly and delivery services.

3. Business Model of IKEA – Cost Structure

IKEA’s cost goes into the manufacturing of designs and marketing of products. It also spends on distribution.

4. Business Model of IKEA – Channels

It sells its products through its websites. To enhance its market presence it also gives advertisements in a catalogue. Also adding to the company’s revenue is the subscription model of IKEA.

5. Business Model of IKEA – Key Resources

IKEA uses the service of around 1400 suppliers from over 60 countries. These suppliers form a big chain and also help IKEA in venturing into the fresh market. IKEA uses skilled and semi-skilled labour that become an integral component in its supply system.

6. Business Model of IKEA – Key Activities

Its activities include designing and manufacturing furniture. Besides that, it also invests in sales and marketing.

7. Business Model of IKEA – Key Partners

IKEA is at the service of distributors and manufacturers for-profit. IKEA has a collaboration with WWF, UNICEF, UNDP with non-profit organizations. The main key partners of IKEA are as follows:

• Wood makers 
• Transporting Firms
• Trucking Firms 
• Delivery companies 
• Manufacturing firms
• Outfitting firms

8. Business Model of IKEA – Key Components

IKEA offers raw materials, product development, product design, manufacturing and processing, sales flows, and customer services. Every three years, IKEA performs an extensive market survey on product input from the customer. They are aiming at reducing costs by employing environmentally friendly products such as reusing wood raw materials rather than forest reduction. With the development of new technologies, a way for gas injection of composite polymers has been successfully identified.

9. Business Model of IKEA – Revenue Model

In Ikea’s case, its franchisees pay the firm a 3 per cent annual royalty on their net sales. Ikea makes money through the sale of goods & other revenue in addition to the franchise fees. Goods sold by IKEA franchises are related to the wholesale sale of IKEA products. Other revenue consists mostly of money from the IKEA catalog and other IKEA marketing materials. IKEA made revenues of franchise charges, merchandise sales, and other revenues of EUR 23.7 billion in FY 20. Here’s a sector-specific revenue breakdown. However, if the Ikea online division’s revenue, few Ikea self-operated shops, and restaurant sales should be included, FY20 sales total EUR 39.6 billion.

10. Business Model of IKEA – Value Proposition

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.

11. Business Model of IKEA – Global Presence

The commercial sales of IKEA for 2018 amounted to EUR 38.8 billion. In its capacity, IKEA has launched 12,000 goods which provide clients a range of choices without missing any chance. The large chains conduct their business successfully with great efficiency about 1350 suppliers from 50 countries across the world. IKEA performs a market study every 3 years to find out about the product’s comments. after all.

12. Business Model of IKEA – Target Market

In accordance with its demographic segmentation, IKEA segments its target market. People in various demographic sectors would have distinct preferences, desires, and requirements. IKEA’s effective segmentation meets its specific requirements on the market. IKEA employs target market age, employment, income level, and lifestyle to segment its market segment. IKEA targets young and cost-conscious clients, generally students or young professional adults. Their salaries range from $15 000 to $50,000, most likely budgetary households that make them furniture shopping for the first time in their lifestyle.

Top Competitors of IKEA 

Here’s the list of top competitors of IKEA:

• Ashley Furniture
• Crate & Barrel
• Rooms To Go

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” catalog:  In 2012, IKEA released a catalog 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 apologize and withdraw the catalog.
• 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.

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

Whether you’re a marketing professional or just starting out, be sure to check out our free digital marketing masterclass to gain a solid foundation in the essentials of digital marketing.

Who knows, you might just develop the next big marketing strategy like IKEA’s! Don’t forget to share your thoughts and comments on IKEA’s strategy in the comments 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]

Submit a Comment Cancel reply

Your email address will not be published. Required fields are marked *

Submit Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed .

Related Posts

Marketing Mix Of Uniqlo with Updated Company Overview and Explanations

by Aditya Shastri | May 15, 2024

Uniqlo is a Japanese clothing brand known for its high-quality essential pieces formed from the...

In-depth Marketing Strategy of Bata India – India’s Largest Footwear Company

In this article, we will learn about the marketing strategy of Bata India, the largest footwear...

Airtel: Case Study on its Business Model and Marketing Strategy

Bharti Airtel is one of the three telecom giants of India, known for its distinct and engaging...

" * " indicates required fields

I’m Interested in This Masterclass

By providing your contact details, you agree to our Terms of Use & Privacy Policy

The Business Strategy of IKEA: A Discussion

Key elements in the business strategy of ikea, the marketing strategy of ikea, product strategy: capitalizing on affordability and mass consumer culture, pricing strategy: mass appeal through affordable pricing considerations, placement strategy: maintaining global distribution through retail operations.

IKEA implements a variety of store designs and considerations depending on the geography of a particular location. For example, in some countries with limited land area and planning restrictions, retail stores serve as display galleries and provide pick-up services in which customers would have to make in-store or online reservations.

Promotion Strategy: Traditional and Contemporary Marketing and Sales Promotion

The manufacturing strategy of ikea, insourcing and outsourcing: achieving economies of scale and reducing production cost.

Insourcing provides several advantages. The first is that it allows the company to have a complete control over the production process while having a separate organizational structure to focus on specific business activities. Furthermore, the manufacturing facilities have been strategically located in areas and countries to lower costs associated with production and distribution.

An insourcing-outsourcing manufacturing consideration has also enabled the company to achieve economies of scale that has continuously allowed it to produce in high volumes, lower the production cost, and lower the end-user price points of its productions.

Supply, Logistics, and Inventory Management: Promoting Operational Sustainability

Raw materials are critical to its production. The company has an established relationship with suppliers made possible through a dedicated team of officers stations in 42 trading offices around the world while maintaining guidelines to align these suppliers with its promise of providing high-quality products without compromising the environment.

The company has also utilized proprietary information systems such as an inventory tracking system and order quantitate management to keep track of its inventory and align it with retail demand and production capacity. The warehouses are also divided into two portions: automated facilities for fast-selling items and manual facilities for slow-selling items.

In a Nutshell: Understanding the Business Strategy of IKEA

Marketing and manufacturing represent the two major elements of the business strategy of the company. The overarching goals and objectives of its specific marketing and manufacturing strategies and tactics collectively represent the realization of the IKEA concept.

• Skip to primary navigation
• Skip to content

• Try Tactyqal

Ikea’s Success Story: 12 Business Strategy Lessons to Learn

Ikea is a household name. The Swedish furniture giant has stores in over 50 countries. It employs close to 200,000 people worldwide. With EUR 47.6 billion in revenues in 2023, Ikea is one of the largest retailers on the planet.

But Ikea’s success story is far from ordinary. It defied conventional wisdom and charted its own path. Ikea tackled challenges head-on with out-of-the-box solutions. Over seven decades, it perfected a unique business model.

As an entrepreneur and angel investor, I’ve studied Ikea closely. I’m in awe of its founder Ingvar Kamprad’s genius. Ikea’s rise is a masterclass in smart business strategies.

1. Solve a Real Customer Pain Point

In 1943, when Ingvar Kamprad started Ikea in Sweden, furniture was bulky and expensive. It was hard for people to afford and transport home.

Young Ingvar recognized this massive customer pain point. He decided to solve it by designing affordable, flat-pack furniture. This simple yet brilliant idea was the foundation of Ikea’s future success.

Lesson: Deeply understand your target customer’s problems. Then develop solutions that truly address their pain points. Don’t sell products. Sell solutions.

2. Disrupt With a Unique Business Model

Ikea completely reinvented furniture retail with its unique business model:

a) Flat-pack, self-assembly furniture

b) In-house design and manufacturing

c) Gigantic warehouse-style stores

d) Fixed prices with no negotiation

e) Customer self-service and checkout

This disruptive model enabled lower costs. It offered affordable prices and a better customer experience. It disrupted incumbents through innovation.

Lesson: Constantly evaluate industry practices. Look for inefficiencies you can remove. Be bold in disrupting the status quo through new business models.

3. Be Frugal, Stay Lean

Ikea was relentlessly frugal in its early days. They cut costs at every step. This enabled it to offer rock-bottom prices and grow aggressively.

For example, it asked customers to assemble furniture themselves. Its in-store restaurants serve cheap food like hotdogs. Its massive blue boxes minimized shipping costs.

Even today, Ikea strives to stay lean. Its quirky ‘un-luxurious’ headquarters embraces frugality as a core value.

Lesson: Don’t fall for the startup luxury trap. Bootstrap as long as you can. Stay lean and capital-efficient. Invest in areas that matter most for growth.

4. Embrace Simplicity

Have you noticed? Ikea’s furniture designs are stunningly simple. They go for minimalist, no-frills aesthetics without compromising quality.

This simplicity philosophy extends beyond products:

• Store interiors are straightforward, not lavish
• Product instructions use little text and more diagrams
• The website and app are clean and easy to navigate

By embracing simplicity, Ikea enhances the user experience. It caters better to diverse customers worldwide.

Lesson: Don’t over-complicate things. Keep business processes simple and intuitive. Focus on core value drivers. Avoid unnecessary bells and whistles.

5. Build Iconic Products

Ikea has created many iconic products from the Billy bookcase to Klippan sofa and Lack tables. Millions swear by their practicality and aesthetic appeal.

Ikea nails the right balance between affordability and quality. Its products solve real problems efficiently. Plus they boast a signature Scandinavian style.

This potent mix of function, form, and branding aids product cult status. It drives customer loyalty and repeat purchases for Ikea.

Lesson: Aim to create products that become cultural icons. Focus on functionality and design thinking. Cultivate brand identity and fan following.

6. Empower the Team

Ask any former Ikea employee – it empowered them immensely. The flat organizational structure minimized bureaucracy.

Product designers had the autonomy to innovate without excess oversight. Store staff acted like business owners running their own outlets.

Ikea fostered an ownership mentality in its team. It motivated and unleashed their true potential to excel.

Lesson: Trust your team implicitly. Push decision-making down to the ground level. Create an environment for people to take charge and be their best.

7. Promote a Strong Culture

Ikea heavily emphasized building a strong, cohesive culture. It went beyond usual corporate values to a distinct “Ikea Way.”

This culture prioritized:

• Cost-consciousness in decision making
• Involving customers as “co-workers”
• Environmental sustainability at all levels
• Teamwork and mutual respect among coworkers

Ikea zealously safeguarded this culture. It became the company’s anchoring philosophy for lasting success.

Lesson: Your culture defines who you are as an organization. Proactively build a culture aligned with your vision and mission. Uphold it fiercely.

8. Master Supply Chain Efficiency

Ikea mastered supply chain management. It kept costs razor-thin by efficient global sourcing.

Ikea has 1,600+ suppliers across 50+ countries. It owns factories to control input costs. It deploys sophisticated logistics to move goods worldwide.

Ikea’s inventory management is tight too. Its “big bath” approach replenishes stocks in bulk from regional distribution hubs. This model boosts in-store productivity.

Lesson: Develop world-class supply chain capabilities. Streamline sourcing, manufacturing, and distribution flows. Build agile supplier networks. Deploy tech for inventory optimization.

9. Go Global Strategically

Ikea executed a carefully planned, strategic global expansion over decades. It studied new markets thoroughly before entering.

In new countries, it tweaked products, prices, and branding for cultural fit. It empowered local staff for effective localization. This glocal approach helped grow Ikea into a multi-billion dollar global brand. It fostered brand love across diverse populations worldwide.

Lesson: Plan internationalization with proper market research and localization strategies. Adopt a glocal model with both global and local elements.

10. Experiment Continuously

Ikea is surprisingly innovative for a large mature enterprise. It constantly experiments to improve operations, products, and customer experience.

The Ikea website and mobile apps are AI-powered. Augmented reality helps buyers visualize furniture. Automated warehouses boost productivity.

Ikea also iterates with new formats like city center stores or pickup points. It aims to stay contemporary and relevant.

Lesson: Established businesses must continuously reinvent themselves. Embrace rapid prototyping and experimentation. Stay agile and adaptive to changing customer needs.

11. Pursue an Integrated Strategy

Ikea didn’t implement disconnected tactics in silos. Its strategies are cohesively integrated into one unified, synergistic business model.

For example:

• Flat-pack furniture enabled customer self-service and massive store formats
• In-house manufacturing coordinated with global sourcing for cost efficiency
• Self-assembly and fixed pricing aligned with involving customers as “co-workers”

Ikea’s strategies complemented and reinforced each other systematically. This integration created a multiplicative impact far greater than piecemeal efforts.

Lesson: Don’t pursue strategies in isolation. Develop an integrated, synergistic game plan where different components amplify each other. Alignment is key.

12. Leverage the First-Mover Advantage

Ikea was the true pioneer of flat-pack, ready-to-assemble furniture. It seized the massive first-mover opportunity in a nascent market.

As the frontrunner, Ikea could shape consumer perception from the start. Early branding cemented its identity as “The Flat-Pack Furniture Experts.”

Ikea’s first-mover status created prohibitively high entry barriers for latecomers. Imitating Ikea’s model became extremely costly and risky for competitors.

Lesson: In new/re-invented markets, being the first mover is invaluable. It allows you to influence customer mindsets and lock in major competitive advantages early on.

Q: What differentiated Ikea’s products from competitors initially?

A: Ikea pioneered flat-pack, self-assembly furniture. This made its products more affordable and portable for customers.

Q: How did Ikea achieve supply chain efficiency at scale?

A: Ikea mastered efficient global sourcing from over 1,600 suppliers in 50+ countries. It owns some factories to control input costs. It leverages sophisticated logistics and inventory management systems enabled by technology.

Q: What is the “Ikea Way” culture all about?

A: The “Ikea Way” culture emphasizes cost-consciousness, involving customers as “co-workers”, environmental sustainability, and promoting teamwork and mutual respect among employees. This strong unifying culture is core to Ikea’s success.

Q: How did Ikea localize its offerings for different global markets?

A: Ikea conducted thorough market research before entering new countries. It tweaked products, pricing, branding and empowered local staff to adapt the business model for maximum cultural relevance using a “glocal” approach.

Q: What kind of innovations is Ikea adopting currently?

A: Ikea experiments with technologies like AI, AR/VR, and warehouse automation to improve operations. It iterates with new formats like city center stores and pickup points. The goal is to enhance customer experience continually.

Q: How did Ikea empower its employees and teams?

A: Ikea had a flat organizational structure minimizing bureaucracy. Product designers had the autonomy to innovate freely. Store staff operated like business owners running their own outlets. This fostered an ownership mentality.

Ikea Business Strategy Quiz

1. Which of these is NOT one of Ikea’s disruptive business model elements? a) Flat-pack, self-assembly furniture b) Gigantic warehouse-style stores c) Luxury showroom experience d) Customer self-service and checkout

Answer: c) Luxury showroom experience

2. True or False? Ikea designed iconic products solely focused on functionality, ignoring aesthetics.

Answer: False. Ikea’s iconic products carefully blended functionality with Scandinavian minimalist design aesthetics.

3. Which aspect did NOT contribute to Ikea’s supply chain efficiency? a) Owning some manufacturing facilities b) Using AI for inventory optimization c) Negotiating separate deals with each supplier d) Operating regional distribution hubs

Answer: c) Negotiating separate deals with each supplier

4. As part of its glocal strategy, what did Ikea NOT do while entering new countries? a) Adapt product designs for local tastes b) Modify pricing as per market dynamics c) Rebrand the company with a new local name d) Empower local teams for effective localization

Answer: c) Rebrand the company with a new local name

5. Ikea’s strong culture emphasizes all of these EXCEPT: a) Sustainability and environmental friendliness b) Customer involvement as “co-workers” c) Hierarchical decision-making processes d) Mutual respect and teamwork among employees

Answer: c) Hierarchical decision-making processes

Scoring Interpretation:

5 correct: Excellent understanding of Ikea’s business strategies!

3-4 correct: Good grasp, but there’s room for improvement.

0-2 correct: You may want to revisit the key lessons covered.

Partha Chakraborty

Partha Chakraborty is a venture capitalist turned entrepreneur with 17 years of experience. He has worked across India, China & Singapore. He is the founder of Tactyqal.com, a startup that guides other startup founders to find success. He loves to brainstorm new business ideas, and talk about growth hacking, and venture capital. In his spare time, he mentors young entrepreneurs to build successful startups.

You may also like

Ryan Petersen & Flexport Success Story

• Business success stories

25 Startup Success Stories From All Over The World

Leave a comment cancel reply.

Save my name, email, and website in this browser for the next time I comment.

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

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.

Partner Center

Marketing91

Business Model Of Ikea and its Key Components

June 9, 2023 | By Hitesh Bhasin | Filed Under: Business

The business model of IKEA revolves around the manufacturing and selling of Ready-to-assemble furniture, home-ware, and food products. IKEA is a Dutch-based Swedish company established in 1943 as large and renowned furniture retail globally recognized and was set up by Ingvar Kamprad in Sweden.

It is known for its services of designing and selling ready-to-assemble furniture and home accessories. It boosted ever since 2008 as the world’s largest furniture retailer. At the moment, they have 433 large-scale outlets established in 52 countries and regions around the globe.

Their motto of promoting a ‘better life for everyone’ focuses highly on making it affordable as well as good quality, making it a point that every customer gets benefits as well as themselves. IKEA has always been in demand for not only the two points mentioned but also for its exclusive designs reflecting modernism as well as eco-friendly at such low costs.

It must come as a shock when heard that IKEA is a non-profit organization with the vision to create a better every day for every single individual.

Let us begin with a glimpse of IKEA’s journey.

Table of Contents

Introduction

The world’s largest furniture retailer being IKEA, has got its initials from the creator’s name Ingvar Kamprad Elmtaryd (his family farm) Agunnaryd (his hometown) in 1943.

It had initially started with selling wallets, pens, jewelry as well as had the primary motive of meeting the demands of a customer at affordable prices.

After five years of running the business, they came up with the idea of selling furniture. IKEA, since then, became synonymous with household accessories and furniture.

The unconventional start gave it a push as the primary motive kept being held through the actions and cost of the products that are very affordable yet modern for its capacity to let the common people assemble their furniture.

The business model of IKEA is known for its modernist designs for different types of appliances and furniture. The interior design service of IKEA is value a lot because of its eco-friendly simplicity.

The success of the business model of IKEA is based upon its attention upon the cost control, regular product development, and operational details that empower the IKEA business model to lower its product prices by 2 to 3%.

As per a 2019 study, 433 IKEA stores are functioning in 52 countries. In the fiscal year 2018, IKEA goods of total €38.8 billion (US$44.6 billion) worth were sold. At the IKEA website, you can find around 12,000 products, plus there were 2.1+ billion visitors to the websites of IKEA in the year from September 2015 to August 2016.

Key Partners in Business Model of IKEA

Their main key partners are as follows-

• Manufacturing firms
• Transport and trucking firms
• Delivery companies
• Outfitting firms

Global Presence of IKEA Business Model

IKEA has a global revenue amounting to 38.8 billion Euros in 2018.

They have launched over 12000 products in their capacity, which has provided the customers with an array of options to choose from without any possibility of not being missed.

With around 1350 suppliers from 50 countries around the world, the massive chain successfully runs its business with an ample amount of efficacy. IKEA is yet to explore several different avenues for more markets.

Key Components

IKEA has a supply of raw material, product development , product design , production, and processing manufacturing, sales flow, and customer services .

IKEA has a comprehensive market survey every three years about the customer’s feedback on the product. They try to reduce costs by using eco-friend materials like recycling raw materials of wood instead of cutting down forests. With the development of new technology, it has successfully found a way to gas injection composite plastics.

This has two motives attached- one, to use a lesser amount of material, and two, to reduce the weight of products leading to a faster production of products. They first focused on making custom-built properties align with developing new retail stores .

1. The Volume of Sales

IKEA firmly believes in the following words- the higher the volume of business, the more the profit, and the lesser the cost.

IKEA reaps the benefits of its cyclic process with its low-cost furniture, placing itself in the market to over a population of 500000 in several cities. The device they play with is the economics of scale. This enables IKEA to produce cheaper furniture compared to other standard furniture manufacturers.

2. Shipping Cost Eliminated

IKEA saves non-essential costs using strategies that are genius in nature. They use a system of flat pack that the world works to their advantage. The box package looks identical to a flat-screen TV that enables IKEA to ship more furniture within a single shipment cost.

The compact and space-saving packaging arrangement makes it easier to fit in more furniture at a lesser cost. This is because consumers do the assembling at home.

3. Hybrid Material

IKEA uses hybrid material like laminates and medium density fiberboards enabling the furniture to have a strong structure at a low cost. The products also weigh less than wood, allowing the products to have a reduced price, with the results being impressive.

The furniture of IKEA is manufactured using Computer Numerically Controlled machines or CNC machines that cut out shapes from 4′ by 8′ sheet material. Hardly any staff is required to assemble the furniture as that part is vested upon the consumers.

4. Lesser Skilled Carpenters

IKEA has a strong R&D team that effectively cuts expenses and finalizes the design according to the requirements. They continuously remain involved in setting up and creating cheap and easy to set up the furniture.

The design is the essential aspect that IKEA focuses on to avoid any errors with the help of the CNC machines instead of custom carpenters. This contributes to the fact that the final product costs less.

5. Private Franchising

IKEA has an annual fee of 3% of all sales for franchise made from the stores that franchise IKEA. This leads to generating high revenue for IKEA.

6. Specific Market Research

IKEA had come up with a huge line of products in the foreign market only to realize that their sales wouldn’t meet their expectation. This initiated a new thought to crop up; that is, IKEA was selling cheap products but did not fit the consumer ’s needs.

At this juncture, IKEA decided to shift its focus from low cost and stressed upon fulfilling the needs of its consumers with the three-year feedback loop to analyze who their market was made for and what they wanted and accordingly started making furniture that suited the needs.

7. Distribution Channel

IKEA has over 1400 suppliers in 52 countries and more than 40 distribution centers in 16 countries. With the strong footings, IKEA’s supply chain management appears to manage to supply products to any country.

60% of IKEA’s suppliers are mainly from Europe and the rest from China as well as local markets. The suppliers and distributors stay connected to get a ready stock available at all IKEA stores.

Wrapping thoughts!

With the massive number of network suppliers dealing with IKEA, the business model creates whatever products their customers desire to own at an exceptionally affordable cost.

The profit is primarily from the production costs as well as the packaging that allows IKEA to minimize expenses. From making furniture to home-ware to smart-home business to flat-pack houses and apartments, the business model of IKEA is for sure unique and best-suited to contemporary market trends.

What, according to you, are the most exciting aspects of the business model of IKEA? Update us with your viewpoints in the comment section.

Liked this post? Check out the complete series on Business Models

Related posts:

• Business Model of Infosys and its Revenue Model
• Revenue Model and Business Model of IndiaMART Explained
• Business Model of Amway – How Amway Business makes money?
• Import and Export: Meaning & Key Difference Between Import and Export
• Key Differences between Import vs Export
• Social Audit: Definition, Example, Importance, Objectives & Components
• Demand Management – Importance, Components and Benefits
• Cost Management: Important Components, Techniques, and the Steps
• Cost Efficiency – Meaning, Components, Analysis and Steps
• Business Model of Samsung – How does Samsung make money?

About Hitesh Bhasin

Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.

All Knowledge Banks (Hub Pages)

• Marketing Hub
• Management Hub
• Marketing Strategy
• Advertising Hub
• Branding Hub
• Market Research
• Small Business Marketing
• Sales and Selling
• Marketing Careers
• Internet Marketing
• Business Model of Brands
• Marketing Mix of Brands
• Brand Competitors
• Strategy of Brands
• SWOT of Brands
• Customer Management
• Top 10 Lists

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

• About Marketing91
• Marketing91 Team
• Privacy Policy
• Cookie Policy
• Terms of Use
• Editorial Policy

WE WRITE ON

• Digital Marketing
• Human Resources
• Operations Management
• Marketing News
• Marketing mix's
• Competitors

• Newsletters
• Best Industries
• Business Plans
• Home-Based Business
• The UPS Store
• Customer Service
• Black in Business
• Your Next Move
• Female Founders
• Best Workplaces
• Company Culture
• Public Speaking
• HR/Benefits
• Productivity
• All the Hats
• Digital Transformation
• Artificial Intelligence
• Bringing Innovation to Market
• Cloud Computing
• Social Media
• Data Detectives
• Exit Interview
• Bootstrapping
• Crowdfunding
• Venture Capital
• Business Models
• Personal Finance
• Founder-Friendly Investors
• Upcoming Events
• Inc. 5000 Vision Conference
• Become a Sponsor
• Cox Business
• Verizon Business
• Branded Content
• Apply Inc. 5000 US

Inc. Premium

IKEA Is Testing a $44 Billion Pivot to Its Business Model. Here's Why It's a Brilliant Strategy

To avoid creative destruction, ikea is testing rentals..

It's the biggest piece of news from last month that caught my eye: Furniture giant Ikea is expanding tests for customers to rent furniture . In doing so, Ikea is beginning to shift its  business model  to  subscription-based leasing options.

The idea is to encourage product reuse--as much as possible before being recycled. Ikea aims to test the rental model in 30 markets next year, after making  39 billion euros ( $44 billion) last year from its classic build-it-yourself model.

Ikea is clearly seeking to leverage global economic shifts in consumer behavior--specifically, that younger buyers rent assets more than buying them. It risks causing a wave of creative destruction to the company's preexisting revenue streams.

It's a bold move. The current model supports more than 208,000 employees. Why is one of the world's most recognized brands thinking about risking it all?

In short: The same reason any company decides to pivot.

Why Ikea Is Testing This Huge Strategy Shift

I define a pivot as a strategic mindful shift in one of the nine parts of a business model: customer segment, problem, solution, unique value proposition, competitive advantage, channels, key metrics, costs, and revenues.

Netflix pivoted from facilitating DVD rentals by mail to online streaming. Wikipedia pivoted when it shifted content creation and curation from internal paid employees to community volunteers.

The issue isn't knowing how to pivot, or even what business model element to pivot, the issue is knowing when.

Ikea's business model is flourishing with billion-dollar revenues. A rental model could cannibalize preexisting sales, as some customers opt out of buying. That's what caused Blockbuster to disappear--it feared that offering streaming would kill off its rental store business, and refused to adapt.

That's probably what Ikea is testing: the impact of the new model on existing revenue. It's a dominant market leader, so why now? Look no further than Blockbuster for the answer.

Five Questions to Ask Before Executing a Pivot

As an entrepreneur, you're often faced with a choice: pivot, carry on, or cut your losses. In the early days of a new venture, when the search for product market fit drives you to test and iterate on all parts of pre-existing business models, pivots happen regularly.

When you're running those business model tests, I recommend using a 40 percent benchmark. If 40 percent or more of your early adopters like the idea, you can deem the pivot a success.

If less than 10 percent say the pivot isn't valuable, you should consider that experiment a failure. Anything between 10 and 40 percent simply isn't enough evidence to decide either way. In such cases, you should keep iterating with your early adopters until you find a version they like. 

Once you're past your startup's early days, the "When?" question can become much harder to answer. Here are five questions I ask founders in my investment portfolio before formally committing to a pivot:

• Why are you pivoting? Micah Rosenbloom, a venture partner at Founder Collective, put this nicely in a TechCrunch article : "Do you feel like you have a viable product, but you misjudged the go-to-market plan? Did you underestimate the complexity of the product you seek to build? These may be perfectly good reasons to pivot."
• How do you know that your current offering isn't working?  What assumption didn't turn out to be true?
• What are you customers saying? Your customers are the real bosses. Before throwing anything out, make sure to fully understand what they're telling you. 
• What can you pivot toward? Some innovations may not be feasible for your business. Get those off the table right away.
• What's the plan?  What steps need to be taken to test the pivot? What resources need to be shifted? What costs would change? What people will be needed? If you're going to risk it all, make sure you have a calculated, well thought-out, and well-resourced plan.  

Ikea's latest move illustrates the need for continuous reinvention and innovation--from the smallest startups to the biggest firms. Only the most agile survive economic evolution.

To stay ahead of the game, you must regularly revisit your business model to see if there's a business model innovation worth testing. Every venture should undergo changes as it grows and (hopefully) becomes successful. These questions will help.

A refreshed look at leadership from the desk of CEO and chief content officer Stephanie Mehta

Privacy Policy

More From Forbes

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

• Share to Facebook
• Share to Twitter
• Share to Linkedin

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.”

Best High-Yield Savings Accounts Of September 2023

Best 5% interest savings accounts of september 2023.

“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.

• Editorial Standards
• Reprints & Permissions

Join The Conversation

One Community. Many Voices. Create a free account to share your thoughts. 

Forbes Community Guidelines

Our community is about connecting people through open and thoughtful conversations. We want our readers to share their views and exchange ideas and facts in a safe space.

In order to do so, please follow the posting rules in our site's  Terms of Service.   We've summarized some of those key rules below. Simply put, keep it civil.

Your post will be rejected if we notice that it seems to contain:

• False or intentionally out-of-context or misleading information
• Insults, profanity, incoherent, obscene or inflammatory language or threats of any kind
• Attacks on the identity of other commenters or the article's author
• Content that otherwise violates our site's  terms.

User accounts will be blocked if we notice or believe that users are engaged in:

• Continuous attempts to re-post comments that have been previously moderated/rejected
• Racist, sexist, homophobic or other discriminatory comments
• Attempts or tactics that put the site security at risk
• Actions that otherwise violate our site's  terms.

So, how can you be a power user?

• Stay on topic and share your insights
• Feel free to be clear and thoughtful to get your point across
• ‘Like’ or ‘Dislike’ to show your point of view.
• Protect your community.
• Use the report tool to alert us when someone breaks the rules.

Thanks for reading our community guidelines. Please read the full list of posting rules found in our site's  Terms of Service.

• The Inventory

Support Quartz

Fund next-gen business journalism with $10 a month

Free Newsletters

IKEA is paying employees more to stop them from quitting

The swedish furniture maker is also boosting benefits and work flexibility to improve retention.

IKEA is going to great lengths to keep its employees from quitting.

According to a Bloomberg report, the Swedish furniture maker recently experienced a rash of employee departures, with the company losing over 62,000 employees around the world in 2022, a time during which the company was flooded with news of disgruntled employees. Each time an employee left, it cost IKEA roughly $5,000 to replace them .

Suggested Reading

Related content.

Since then, the company has made a number of adjustments, including hiking wages, improving parental leave benefits, and even leaning on AI to gauge whether employees will quit. And now, nearly two years later, more workers are sticking around. According to Ingka Group, IKEA’s largest franchisee, which operates hundreds of IKEA locations, the quit rate has declined from 22.4% in August of 2022, to just 17.5% in April of this year.

Bloomberg reports that IKEA has made it a point to adjust its approach by region. In the U.K. and Ireland, IKEA’s part-time workers, which make-up two-thirds of its labor force and generally answer calls from customers, can work more hours remotely. In India, parents are being given subsidized daycare, weeks of parental leave, and a five-day workweek. Before the changes, employees with children were quitting because of limited childcare related benefits.

Meanwhile, in the U.S., IKEA is working with the Shift Project to pilot test an online tool that lets employees change and set their availability. The company is also using “Stay,” an AI powered tool that looks at data from previous employees and current ones. The tool is intended to flag to IKEA managers if an employee changes their hours repeatedly, and whether that signals they they are likely to quit.

Separately, IKEA said last week that it was looking to hire 10 people to work in its virtual store on the gaming platform Roblox. Those remote employees will be tasked with serving meatballs and helping shoppers inside the game.

📬 Sign up for the Daily Brief

Our free, fast, and fun briefing on the global economy, delivered every weekday morning.

We've detected unusual activity from your computer network

To continue, please click the box below to let us know you're not a robot.

Why did this happen?

Please make sure your browser supports JavaScript and cookies and that you are not blocking them from loading. For more information you can review our Terms of Service and Cookie Policy .

For inquiries related to this message please contact our support team and provide the reference ID below.