IKEA

Running head: THE IKEA CONCEPT

Marketing and Management 520 Christine Doxey Davenport University

Dr. Angie Sokal October 5, 2012

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Executive Summary IKEAs success in the business world can be attributed to its commitment to creating and distributing affordable household goods to the middle class. In addition to providing affordable options to the consumer, IKEA has immerged as a leader in Corporate Social Responsibility (CSR). First introduced in the companys Sustainability Report in 2010, Sustainability Product Score Card and The Never Ending List outlines IKEAs commitment to reducing carbon imprint and To create a better everyday life

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IKEA Inc. IKEA is known as the world's largest designer and retailer of affordable and modern home products (Owens). It built its image and corporate culture based on Swedish roots (Edvardsson, 2009). Its Scandinavian style products have a reputation of being produced with integrity, timeenduring craftsmanship and from quality low-cost materials. These values are central to the Swedish culture and were adopted by IKEAs Swedish founder, Chairman, and still dominant presence, Ingvar Kamprad when he started the company in 1943 (Nattrass & Altomare, 1999). He later became one of the richest people in the world, ranking 11th in 2010 before assigning most of his wealth to foundations. His net-worth, as of March, 2012, is estimated to be around $3 Billion (Ingvar Kamprad & family, 2012). The acronym IKEA, was developed from: I (Ingvar) - Founders first name K (Kamprad) - Founders last name E (Elmtaryd) Farm where he grew up A (Agunnaryd) Home village He starting selling matches as a child and reinvested his profits in seeds, Christmas decorations, and pens and pencils (Allen, 2012). At age 17, he took all his savings and started IKEA, a mailorder catalog that offered a variety of small goods. Four years later, Kamprad introduced furniture into the IKEA product line. It was such a hit that he discontinued all the other products, focused on the furniture line, and opened the first showroom in 1953. Kamprad contracted a number of furniture factories in Poland and helped re-invent these Polish factories by bringing in their processes and machinery. Poland soon became IKEAs largest source with mass production that still kept the prices low. Currently, IKEA has expanded to over 37 countries and 301 stores.

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The IKEA Group itself owns over 280 stores in 26 countries; the other 34 stores are owned and run by franchisees outside the IKEA Group in 16 countries (IKEA, 2012). Attention to detail and simplicity are emphasized at IKEA. Kamprad first detailed the IKEA concept of frugality and enthusiasm in a manifesto entitled A Testament of a Furniture Dealer. Written in 1976, it has since been considered the fundamental ideology of the IKEA furniture retail concept. Cost consciousness was also another emphasis at IKEA and wastage of resources was considered unacceptable and was greatly discouraged. By making all their furniture flat packed and assembled by the customer, they can cut down on transportation and assembly costs. IKEA wants to take a leading role towards a low carbon society The Companys long-term direction states that all IKEA buildings shall be supplied with 100% renewable energy (Tay, 2011). Currently IKEA owns 52 wind turbines which generate roughly 10% of the electricity consumed by the IKEA Groups operations. It is further equipping 150 stores and distribution centers with solar panels. All new IKEA buildings are energy-efficient and many are designed to use bio-fuels, geothermal energy or solar or wind power. The IKEA vision is; To create a better everyday life for the many people. We believe that home is the most important place in the world. We offer affordable home furnishing products and solutions, while also taking responsibility for people and the environment. We want our customers to be able to freely choose from our range, knowing that they do not have to choose between sustainability, style, function, or price (IKEA Sustainability Report , 2010). During FY10 IKEA introduced the IKEA Sustainability Product Score Card. The score card is a new internal tool introduced to help IKEA classify and offer more sustainable products. The Score Card includes 11 criteria that have an impact on a products sustainability throughout its life cycle, including:

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More from less (using less material in the product) Renewable material Recycled material Environmentally better material Separable and recyclable material Product quality Transport efficiency (number of products per container) Energy efficient production Renewable energy in production Raw material utilization at suppliers Product use (less use of energy and water, and less waste in customers homes)

In addition to the score card, the company announced its Sustainability Direction which outlines IKEAs priorities and goals for 2015: 1) Offering a range of products that are more sustainable, 2) Taking a leading role towards a low carbon society, 3) Turning waste into resources, 4) Reducing our water footprint, and 5) Taking social responsibility. To help consumers follow and monitor programs, the company put together The Never Ending List (available on the company web site) which outlines current commitments and achievements. Continuing to act as an environmental leader, IKEA recently announced, It will only sell LED lamps and bulbs in its stores by 2016 in an effort to help customers save energy, reduce electricity bills and cut carbon emissions (Morales, 2012), becoming the first US home furnishing retailer to sell only LED bulbs and lamps. LED lighting consumes 85% less energy than incandescent bulbs and can last up to 20 times longer. With household electricity bills

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continuing to rise rapidly and global energy consumption increasing, a small LED bulb can have a very big impact (IKEA to Sell Only LED Lighting by 2016, 2012). IKEAs vision is to continue working with global projects to combat climate change, create a more sustainable and efficient household, and support social responsibility in education and health issues. The company is working hard to implement rules to ensure better social and environmental practices, both within the company and with business partners." (IKEA's Social and Environmental Responsibility Initiatives, 2006) At IKEA, we're moving toward a way of thinking based on the philosophy that everything we take should be used, reused and recycled, either by ourselves or nature, in such a way that causes the least possible harm to the environment."

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References Allen, S. (2012). Ingvar Kamprad - IKEA Founder and One of the World's Richest Men. Retrieved October 2012, from About.com Entrepreneurs: http://entrepreneurs.about.com/cs/famousentrepreneur/p/ingvarkamprad.htm Edvardsson, B. (2009). Values-Based Service for Sustainable Business. Karlstad University, CTF-Service Research Center, Karlstad, Sweden. Retrieved October 2012, from http://www.ep.liu.se/ecp/033/018/ecp0803318.pdf IKEA. (2012). Retrieved October 2012, from Brandirectory-The Definitive Online Encyclopedia of Brands: http://brandirectory.com/profile/IKEA IKEA Sustainability Report . (2010). Retrieved October 2012, from IKEA: http://www.ikea.com/ms/en_US/about_ikea/pdf/ikea_ser_2010.pdf IKEA to Sell Only LED Lighting by 2016. (2012, October). Retrieved October 2012, from Business Wire: http://www.businesswire.com/news/home/20121001006043/en/IKEASell-LED-Lighting-2016 IKEA's Social and Environmental Responsibility Initiatives. (2006). Retrieved October 2012, from ICMR-IBS Center for Management Research: "At IKEA, we're moving toward a way of thinking based on the philosophy that everything we take should be used, reused and recycled, either by ourselves or nature, in such a way that causes the least possible harm to the environment." Ingvar Kamprad & family. (2012). Retrieved October 2012, from Forbes: http://www.forbes.com/profile/ingvar-kamprad/ Ingvar Kamprad. (2012). Retrieved October 2012, from Wikipedia: http://en.wikipedia.org/wiki/Ingvar_Kamprad

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Morales, A. (2012, October). Ikea Plans to Sell Only LED Lights Worldwide to Cut Emissions. Retrieved October 2012, from Bloomburg.com: http://www.bloomberg.com/news/201210-01/ikea-plans-to-sell-only-led-lights-worldwide-to-cut-emissions.html Nattrass, B., & Altomare, M. (1999, January). IKEA, Nothing is Impossible. Retrieved October 2012, from High Beam Research: http://www.highbeam.com/doc/1G1-80128073.html Owens, H. (n.d.). IKEA. Retrieved October 2012, from Natural Step Organization: http://www.naturalstep.org/en/usa/ikea Tay, E. (2011, May). How IKEA Embraces Sustainability Globally and in Singapore. Retrieved October 2012, from Green Business Times.com: http://www.greenbusinesstimes.com/2011/05/24/how-ikea-embraces-sustainabilityglobally-and-in-singapore/