HARVARD BUSINESS SCHOOL

9-504-094

REV: SEPTEMBER 14, 2004

YOUNGME MOON

Ikea Invades America

In 2002, the IKEA Group was the world's top furniture retailer. With sales approaching $12 billion, IKEA operated 154 stores in 22 countries and serviced 286 million customers a year. (See Exhibits 1 through 4.) In the United States, IKEA had 14 stores, with plans to open as many as nine more in 2003. There were a number of factors that distinguished IKEA from other furniture retailers—its stores were strictly self-service and featured such amenities as playrooms for children and Swedish cafes, and all of its furniture came unassembled (customers were expected to put together the furniture on their own)—yet there was no question about the company's success; when a new store opened, it was not unusual for thousands of shoppers to line up on the first day.

Company Background

IKEA was founded in 1943 when 17-year-old Ingvar Kamprad decided to start a local catalog company using some money his father had given him.¹ Initially, the company sold basic household goods at discount prices; in 1947, however, Kamprad began selling home furnishings. Six years later, Kamprad opened his first furniture showroom, and two years after that, IKEA began designing its own low-priced furniture. In 1958, IKEA opened its inaugural store, in Almhult, Sweden; at 6,700 square meters, it was the largest furniture display in Scandinavia at the time.

By the time IKEA opened its flagship store in Stockholm in 1965, IKEA had become the favored furniture-shopping destination for price-conscious Swedes. The 45,800-square-meter flagship— which ultimately became the prototype for all of IKEA's retail outlets—was inspired by New York's Guggenheim Museum and featured a childcare center, a restaurant, a bank, and enough parking for 1,000 cars. The store's magnetic appeal was apparent from the start; literally thousands of Swedes showed up on the first day. Before long, IKEA was opening similar low-priced furniture stores in countries beyond Scandinavia, first in Europe, and then in both Asia and North America. (For a more detailed history, see Figure A below.)

¹ The name IKEA came from Kamprad's initials combined with the first letters of the names of the family farm (Elmtaryd) and village (Agunnaryd) where Kamprad was raised.

Figure A Significant Events in IKEA's Early History (excerpted from the IKEA Web site)

Date Event

1926 The founder of ikea, Ingvar Kamprad, is born. He was raised on a farm called

Elmtaryd, near the small village of Agunnaryd. Even as a young boy, Ingvar knew that he wanted to develop a business. He started by selling matches to neighbors from his bicycle. He found that he could buy matches in bulk very cheaply from Stockholm and sell them individually at a very low price but still make a good profit.

1943 IKEA is founded by Kamprad. In 1943, when Ingvar was 17, his father gave him a gift

for succeeding in his studies. The gift was used to establish his own business.