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Management Giants

Ingvar Kamprad

Peddled matches, fish, pens, Christmas cards and other items by bicycle as a teenager. Started selling furniture in 1947. Opened first Ikea store 50 years ago; stores’s name is a combination of initials of his first and last name, his family farm and the nearest village. Retired in 1986; company’s “senior adviser” still reportedly works tirelessly on his brand. Discount retailer now sells 9,500 items in 36 countries; prints catalog in 27 languages. Revenues up 7% to $27.4 billion in fiscal year 2008. Opened tenth store in China this February; planning to open first in Dominican Republic later this year. Three sons all work at the company. Thrifty entrepreneur flies economy class, frequents cheap restaurants and furnishes his home mostly with Ikea products.

Ingvar Kamprad

Ingvar Kamprad was born in the south of Sweden in 1926 and raised on a farm called Elmtaryd, near the small village of Agunnaryd. At an early age, he learned that he could buy matches in bulk from Stockholm and sell them at a fair price, but a good profit. He reinvested his profits and expanded to fish, seeds, Christmas tree decorations, and pens and pencils. At age 17, Kamprad’s father gave him a nice reward for doing well in school. What did he spend it on? He founded IKEA!

The Birth of IKEA

The name IKEA was formed from Kamprad’s initials (I.K.) plus the first letters of Elmtaryd and Agunnaryd, the farm and village where he grew up. He continued to expand his business to a variety of goods, including wallets, watches, jewelery and stockings. When he outgrew his ability to call on his customers individually, he converted to a sort of makeshift mail order operation, hiring the local milk van to make his deliveries.
Focus on Furniture

In 1947, Kamprad introduced furniture into the IKEA product line. The use of local manufacturers allowed him to keep his costs down. The furniture was a hit, and in 1951, Kamprad decided to discontinue all other product lines and focus on furniture. In 1953, the first IKEA showroom opened.

It came about because of competitive pressures. IKEA was in a price war with its main competitor. The showroom allowed people to see it, touch it, feel it, and be sure of the quality before buying.

Competition Leads to Innovation

IKEA has now become known worldwide for its innovative and stylish designs. Almost all IKEA products are designed to for flat packaging, which reduces shipping costs, minimizes transport damage, increases store inventory capacity, and makes it easier for customers to take the furniture home themselves, rather than needing delivery. But the original reason for it was competitive pressure from IKEA’s competitors to their suppliers, who actually boycotted IKEA, forcing IKEA to do it themselves.

Good Design, Good Function and Good Quality, with Low Prices

Kamprad’s vision has been the driving force behind IKEA’s succcess. IKEA hires its own designers, who have received numerous awards over the years. Kamprad believes that the company exists not just to improve people’s lives, but to improve the people themselves.

The self-service store design and ease of assembly of their furniture are not merely cost controls, but an opportunity for self-sufficiency.

This vision is reinforced in their advertising and catalog, as well.

All In the Family

Kamprad has been extremely shrewd in creating IKEA’s organizational structure. It is owned ultimately by a Dutch trust controlled by the Kamprad family, with various holding companies handling different aspects of IKEA’s operations, such as franchising, manufacturing, and distribution.

IKEA even has an investment banking arm.

Kamprad has repeatedly resisted pressure to take the company public, feeling that it would slow their decision-making processes that have allowed their phenomenal growth.

Frugality and Charity

On the one hand, Kamprad has a reputation for being, well, “cheap”.

He takes the subway to work, and when he drives, it’s an old Volvo.

Rumor is that when he stays in a hotel, if he feels the urge to drink one of those expensive sodas from the wetbar, he replaces it later with one picked up from a nearby convenience store.

Yet IKEA has a long tradition of community outreach and philanthropy, with each store encouraged to support local causes, plus international sponsorship of UNICEF and others.

The company is now run jointly by Mr Kamprad’s three sons Peter, 44, Jonas, 41, and Matthias, 39, because their father does not want any one person to have total control.