Today the company operates 315 stores in 27 countries, and logs over 700 million annual store visits[1]<\/a>. \u00a0Its geographic footprint includes the U.S., Italy, France, the U.K., Russia and Japan. \u00a0Sales totaled \u20ac28.7 billion in FY14, increasing 3.0% from the prior year; store visits increased ~5%[1]<\/a>.\u00a0 Today, the company has over 147,000 employees and relationships with over 1,000 suppliers.<\/p>\n Business Model<\/u><\/p>\n IKEA\u2019s business model is to sell modular design furniture for low-end prices. \u00a0IKEA targets the younger demographic for whom a furniture purchase is yet not a 20-year commitment. \u00a0Instead, IKEA met the specific needs of this demographic, who care primarily about low pricing, product functionality over durability, and a clean design aesthetic. To this end, IKEA offers a diversity of products \u2013 in 2014, IKEA offered 9,500 products, and launches about 2,000 a year with a team of 15 in-house designers and 75 externally-contracted designers[1]<\/a>. \u00a0Its products also reflect simple, modular design.\u00a0 Most importantly, its products compete against higher-end stores like \u201cDesign Within Reach\u201d or \u201cWest Elm\u201d with similar design aesthetics, but price points 5-10x higher.<\/p>\n Operating Model<\/u><\/p>\n Modularizing the steps of furniture purchase, transport and assembly is key to IKEA\u2019s operating model, and allows IKEA to offer this low-price\/high-quality value proposition to consumers. \u00a0By separating the assembly and delivery from the furniture item, IKEA allows customers to buy the bare-bones of what they need, with a choice to opt in to the more service-oriented value propositions. \u00a0In other words, customers are able to pay for exactly what they want, and not what they don\u2019t.<\/p>\n Self-service is a defining part of the IKEA customer experience.\u00a0 Customers record their favorite items on a card catalogue, and then retrieve their own furniture from the stocked warehouse.\u00a0 By limiting customer service and allowing customers to serve themselves from the basic warehouse, IKEA reduces the need for extra sales staff or warehouse labor.\u00a0 IKEA is able therefore to charge customers only for the furniture item \u2013 and lower its own costs, passing these on to consumers through low prices and employees through living wages[4]<\/a>.<\/p>\n Customers are also able to transport items (the majority of which are flat-packaged through IKEA\u2019s famous modular design Competitive Advantage<\/u><\/p>\n IKEA\u2019s showrooms are a key component to the success of its operating model.\u00a0 Store locations are also \u201cdestinations\u201d, located outside of city centers. \u00a0Stores are designed to keep shoppers in-store longer, with a cafeteria (serving the famous IKEA Swedish meatballs) so shoppers don\u2019t leave when they get hungry, and colorful play areas for children, so families can spend longer at the store. Lastly, IKEA focuses on social responsibility as part of its brand \u2013 a competitive advantage for consumers at a time when more millennials see the primary purpose of business as \u201cimproving society\u201d (36%) than \u201ccreating wealth\u201d (15%) [3]<\/a>.\u00a0 IKEA pays workers a living wage[4]<\/a>, has donated \u20ac104 million from the IKEA Foundation[1]<\/a>, and most recently has teamed up with the UN refugee agency UNHCR to develop temporary refugee housing for Syrian refugees[5]<\/a>. \u00a0Moreover, IKEA has folded sustainability into its basic operating ethos, setting ambitious water, energy, waste, and raw material sustainability goals for its business to hit by 2020. \u00a0It owns and operates 224 wind turbines around the world, sells mostly LED\/LED-compatible lighting products, and in 2014, sourced 76% of its cotton and 41% of wood from \u201csustainable\u201d production facilities that used less water, chemical fertilizers, and pesticides[1]<\/a>.\u00a0 In its focus on building a vision for the world, IKEA builds brand ambassadorship among its most loyal consumers.<\/p>\n <\/p>\n [1] IKEA Yearly Summary 2014: http:\/\/www.ikea.com\/ms\/en_US\/pdf\/yearly_summary\/ikea-group-yearly-summary-fy14.pdf<\/p>\n [2] http:\/\/www.economist.com\/node\/18229400<\/p>\n [3] World Economic Forum Impact Investing Report: http:\/\/www3.weforum.org\/docs\/WEF_II_FromMarginsMainstream_Report_2013.pdf<\/p>\n [4] http:\/\/fortune.com\/2015\/06\/24\/ikea-hikes-minimum-wage\/<\/p>\n [5] http:\/\/world.time.com\/2013\/12\/16\/lebanon-says-no-to-ikea-housing-for-syrian-refugees-because-its-too-nice\/<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" IKEA\u2019s vision is to \u201ccreate a better every day life for the many people\u201d[1], aiming to bring good design to as many people as possible. As CEO Mikael Ohlsson once said, IKEA\u2019s goal is to offer \u201cpeople with limited means the ability to furnish their houses like rich people\u201d[2]. By catering to this target demographic with low prices, modular design aesthetics, and a focus on immediate functionality over durability \u2013 combined with its personable brand and strong sustainability focus \u2013 IKEA has become one of the leading retailers in the furniture industry. <\/p>\n","protected":false},"author":1082,"featured_media":3605,"comment_status":"open","ping_status":"closed","template":"","categories":[61,233],"class_list":["post-3604","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-effectiveness","category-ikea"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\n![\"0185790_PE325480_S5\"](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/0185790_PE325480_S5-300x300.jpg\")
<\/a><\/p>\n![\"Ikea-Brooklyn-Warehouse-Aisles\"](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Ikea-Brooklyn-Warehouse-Aisles-300x199.jpg\")
<\/a><\/p>\n![\"flatpack\"](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/flatpack-275x300.jpg\")
) easily in their own vehicles.\u00a0 IKEA products are famously designed for self-assembly as well, removing another cost that the consumer might have to bear with a traditional furniture retailer. \u00a0\u00a0Furthermore, by designing its own furniture, IKEA is able to vertically integrate.\u00a0 IKEA also collaborates closely with suppliers who can help influence the design and quality of its product offerings.
\n <\/p>\n![\"A](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/1-ikea-culture-blv-01-300x210.jpg\")
With such a diversity of products, customers might be overwhelmed \u2013 but by arranging items in an innovative showroom design, IKEA solves the pain-point of consumers wondering, \u201cwhen might I ever use that?\u201d\u00a0 Rather, consumers are asking, \u201cHow can I use this in my own home?\u201d\u00a0 Showrooms also gave customers the ability to vet quality firsthand, and was key to engendering trust in low-priced furniture purchases. \u00a0IKEA opened its first furniture showroom in 1953, actually in response to a competitor during a price war.<\/p>\n![\"P1120634\"](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/P1120634-300x169.jpg\")
<\/a><\/p>\n