Ingvar Kamprad and IKEA
What are the sources of Kike’s successful entry In the furniture retailing business In Sweden? The first and most Important aspect Is the market. As mentioned in the article, during the post-war economic boom, there was a trend in Sweden that young householders tended to buy new, yet inexpensive furniture. However, the inter-association supply contracts and agreements between Swedish manufacturers and retailers kept prices high while foreclosing entry.
Such phenomenon is not only a social problem but also a business opportunity. Thus, KEA focused on young customers. Such huge demand should be the key factor of Kike’s success. Secondly, Kike’s products have some unique features which helped them outstays from traditional furniture and win customers. Compared with traditional manufacturers who mostly focused on elegancy and refinement, KEA paid more attention to Its furniture simplicity, function, wide range, low price as well as good design. Besides, KEA spent special effort In reducing the cost.
Although the author doesn’t tell us how KEA achieved that in the startup phase, we have reasons to speculate that they might choose cheaper material, match their products to abilities and build up long-term relationships with suppliers. Such strategies were also used in the internationalization process. Angina Samara’s own personality and the culture of KEA built up by him also play a crucial role in its success. Innovation, enthusiasm, humbleness and simplicity are encouraged while bureaucracy is definitely rejected. Such environment can directly or indirectly Improve employee’s productivity, making them feel freer.
Furthermore, such split also Influenced Kike’s management style. For example, the company always operated Informally and focused on details and cost, which conforms to Its main strategy. Last but not least, KEA also implemented different retail operations. For example, considering the impact of automobile on shopping habits, KEA chose to create ample parking space rather than focus on downtown location. Besides, Kampala also developed Kike’s basic practice in the startup phase. Concepts, such as self-service, explanatory tickets, knock-down kits and cash-and-carry, were built up.
Such strategies helped in transforming customer’s shopping habits and finally attracted them from traditional manufacturers. 2. How Important was Internationalization to KEA? What challenges did they face ND how did they overcome them? Analyze it from two aspects, the market aspect and the human aspect. Market Aspect To begin with, the most direct reason of its internationalization is the stagnating growth of Swedish furniture market in early sass. In addition, according to the passage, furniture retailing was still a fragmented national industry in 1989.
Small manufacturers and distributors catered to the demands of local markets, for customer preference varied by region. However, KEA broke the constraint that furniture retailing was a strictly local business, and established its retailing stores all ever the world. KEA made its product new, yet inexpensive, and offered a wide range of home furnishing items of good design and function that majority of people can afford to buy them. In this way, the internationalization strategy gave it more space and potential to grow and it was a wise idea to make more profits as well.
Human aspect Just like the success of Swatch, KEA spread a great emotion and influenced people all around world. The founder, Angina Kampala, focus on a human aspect and aimed to create a better everyday life for the majority of people. What motivates him is not refit along but improving the quality of the life of the people. So, he said that “It is our duty to expand. ” When it comes to the challenges they faced, the best description is that KEA consistently turned problems into opportunities and showed that it is not dangerous to be different.
The first time is in 1951, when KEA Just launched its business. The company was explicitly forbidden from selling directly to customers at fairs, it responded by only taking order. After such order taking was banned, it noted the names of potential customers and contacted them after fairs. Then, under the pressure added by retail rater members, manufacturers cartel didn’t sell to ‘KEA. This time, KEA started buying from a few independent Swedish furniture makers by establishing new sources in Poland. Surprisingly, the approach made the costs fall.
People were kidding like that, “KEA resembles the monster, if we cut one of its heads, it soon grows another. ” After it expanded into Germany, German retailers responded vigorously to resist its popularity. The German court support the German retailers and put constraints on how KEA could use the seals following legal proceedings as well as curtailed Kike’s advertising activities. Nonetheless, Kike’s business unexpectedly boomed. As KEA accelerated its pace of expanding, how to maintain its low price was of increasing significance.
To achieve the production flexibility and responsiveness, the company did following activities: 1) Finding low-price material. 2) Matching products to capabilities. As the company approached sass, its managers faced a number of major challenges: Changes in demographics cause problem to its historical product line policy. Over the nest a few years, the median age and income level in most developed countries was expected to rise. As a consequence, it has to expand into other segments and its advertising is supposed to stress its superior quality image.
People wondered if the company had not bitten off too much by attempting major new market entries simultaneously in I-J, Italy, US and several Eastern Bloc countries. In spite of limited ability to transfer hard currency, KEA extended countertenor deals to go international with the persistence of Angina Kampala. So some people thought that it is overextending. But if it slowed down its speed, the imitators would come up quickly. To preserve its image and to preempt imitators, high-paced expand was accessory.
The future of the company without its founder, strategic architect, and cultural guru, Angina Kampala was of widespread concern. The change of leadership and management style was likely to give rise to some unstable conditions, and some argued that such similarity of senior executives’ background was no longer the best interest. Others may be skeptical on how to retain the cultural value. Yet, the initial founder explained that the KEA ideology is not the work of one man but the sum of many impulses from all KEA leadership. Its supporting framework is massive.