IKEA is a privately-held, international home products retailer that sells flat pack furniture, accessories, bathrooms and kitchens at retail stores around the world. The company, which pioneered flat-pack design furniture at affordable prices, is now the world's largest furniture manufacturer.
IKEA was founded in 1943 by Ingvar Kamprad in Sweden and it is owned by a Dutch-registered foundation controlled by the Kamprad family. IKEA is an acronym comprising the initials of the founder's name (Ingvar Kamprad), the farm where he grew up (Elmtaryd), and his home county (Agunnaryd, in Småland, South Sweden).
INGKA Holding B.V. is the parent company for all IKEA Group companies, including the industrial group Swedwood, which manufactures IKEA furniture, the sales companies that run IKEA stores, as well as purchasing and supply functions, and IKEA of Sweden, which is responsible for the design and development of products in the IKEA range. INGKA Holding BV is wholly owned by Stichting INGKA Foundation, which is a non-profit foundation registered in Leiden in the Netherlands.
Inter IKEA Systems B.V. in Delft, also in the Netherlands, owns the IKEA concept and trademark, and there is a franchising agreement with every IKEA store in the world. The IKEA Group is the biggest franchisee of Inter IKEA Systems B.V. Inter IKEA Systems B.V. is not owned by INGKA Holding B.V., but by Inter IKEA Holding S.A. registered in Luxemburg, which in turn is part of Inter IKEA Holding registered in the Netherlands Antilles. The ownership of the holding companies has not been disclosed.
The company distributes its products through its retail outlets. The chain has 278 stores in 36 countries, most of them in Europe, the United States, Canada, Asia and Australia. 2006 saw the opening of 16 new stores. A total of at least 30 openings or relocations are planned for 2008. IKEA is one of the few store chains to have locations both in Israel and in other Middle Eastern nations.
IKEA is generally but in many English-speaking regions, it is , rhyming with the word "idea". As such, IKEA brought action in the Supreme Court of British Columbia successfully preventing a competitor in Victoria from using the name "Idea". It is generally in China, Singapore and Taiwan. Its Chinese name is "yíjiā" (宜家), which literally means "fit for home" in written Chinese and sounds like the phrase "right now" in Cantonese pronunciation.
The IKEA Website contains about 12,000 products and is the closest representation of the entire IKEA range. In 2005 IKEA reported over 275 million visitors to their websites.
IKEA has shown leadership in adopting more environmentally friendly measures in its manufacturing processes. In 1990, IKEA adopted The Natural Step framework a the basis for its environmental plan (see "Environmental performance," below).
IKEA was founded in Älmhult, Sweden, in 1943 by Ingvar Kamprad, when he was 17. The acronym IKEA is incidentally similar to the Greek word οικία [oikia] (home) and to the Finnish word oikea (true, correct, right), but was originally an abbreviation for "Ingvar Kamprad Elmtaryd Agunnaryd" which is the initial letters of his first and last name, the farm where he grew up and the town he lived in.
Originally, IKEA sold pens, wallets, picture frames, table runners, watches, jewelry and nylon stockings or practically anything Kamprad found a need for that he could fill with a product at a reduced price. Furniture was first added to the IKEA product range in 1948 and, in 1955, IKEA began to design its own furniture. The company motto is: "To create a better everyday life for the many people."
At first, Kamprad sold his goods out of his home and by mail order, but eventually a store was opened in the nearby town of Älmhult. It was also the location for the first IKEA "warehouse" store which came to serve as a model for IKEA establishments elsewhere. On March 23, 1963, the first store outside Sweden was opened in Asker, a Norwegian municipality outside Oslo.
Newer IKEA stores, like the one in Koblenz, Germany, make more use of glass, both for aesthetic and functional reasons. Skylights are also now common in the Self-serve warehouses. More natural light reduces energy costs, improves worker morale and gives a better impression of the product.
Whilst the original design involved the warehouse on the lower level and the showroom and marketplace on the upper, today most stores globally have the Showroom upstairs with the marketplace and warehouse downstairs. Additionally, some stores are single level. Some stores maintain separate warehouses to allow more stock to be kept on-site at any given time, although this occasionally results in challenges in finding the items, as well as a perception of having to queue in line twice. Single-level stores are found predominantly in areas where the cost of land would be less than the cost of building a 2-level store -- examples include the store in Saarlouis, Germany and Haparanda, Sweden.
Most IKEA stores offer an "as-is" area at the end of the warehouse just prior to the cashiers. Returned, damaged and formerly showcased products which are not in new condition or taken out of the IKEA product range are displayed here, and sold with a significant discount, but also with a "no-returns" policy. Most IKEA stores communicate the IKEA policy on environmental issues in the "as-is". In the United Kingdom, Canada and Australia, this is referred to as "Bargain Corner".
In Hong Kong, where shop space is limited and costly, IKEA has opened three outlets across the city, which are actually part of shopping malls. They are relatively tiny compared to common "large blue box" store design, but are huge by Hong Kong standard. Most of the outlets still have a "one-way" layout. An exception is the newest outlet in Telford Plaza, where the three independent floors can be accessed freely from each. Following IKEA tradition, though, the only cashier is located on the lowest floor.
The vast majority of IKEA stores are located outside of city centres, primarily because of land cost and traffic access. Several smaller store formats have been unsuccessfully tested in the past (the "midi" concept in the early 90s, which was tested in Ottawa and Heerlen with 9,300 m2, or a "boutique" shop in Manhattan). A new format for a full-size, city centre store was introduced with the opening of the Coventry (UK) store in December 2007. This is in response to UK government restrictions blocking retail establishment outside city centres, and the format is expected to be used for future IKEA stores in the UK. The Coventry store has 7 levels and therefore has a flow different from other IKEA stores.
Many stores include restaurants serving typical Swedish food such as potatoes with Swedish meatballs, cream sauce and lingonberry jam, hot dogs and drinks for around 5 kr ($2.50 US), a few varieties of the local cuisine, and beverages such as lingonberry juice. The restaurant area is usually the one place in the store where there are large windows.
In many locations the IKEA restaurants open daily before the rest of the store and serve a cheap breakfast. In Canada, this breakfast costs $1 and has eggs, sausage, fried potatoes and a croissant. In the Netherlands it costs €1 and consists of a croissant, a small bread roll, butter or margarine, jam, a slice of cheese, a boiled egg, and coffee or tea.
Refills of coffee, tea, and softdrinks are free of charge, even in countries where this is uncommon in other restaurants.
Many stores also have a mini-shop selling Swedish-made, Swedish-style groceries, such as Swedish meatballs, packages of gravy, and various Scandinavian cookies and crackers, as well as salmon and salmon roe. IKEA also sells lingonberry jam in a wide array of sizes, including buckets.
Many stores have a play area for children aged 3 to 10 years old named Småland. The service is offered completely free of charge. The area mostly features things such as slides, seesaws, cartoons, a ball pit, etc. Småland is also the province in Sweden where Ingvar Kamprad was born (translated from swedish to english: Små = little (plural) and land = land, "littleland").
IKEA contends that it has been a pioneering force in sustainable approaches to mass consumer culture. Kamprad refers to the concept as "democratic design," meaning that the company applies an integrated approach to manufacturing and design (see also environmental design). In response to the explosion of human population and material expectations in the 20th and 21st century, the company implements economies of scale, capturing material streams and creating manufacturing processes that hold costs and resource use down, such as the extensive use of particle board. The intended result is flexible, adaptable home furnishings, scalable both to smaller homes and dwellings as well as large houses.
Family Mobile is available to all UK IKEA Family members and offers UK calls for 9p per min and UK text messages for 6p each, with a minimum initial top up of £10. According to IKEA this made the network the cheapest pay as you go operator in the UK at time of launch – "at least 25 per cent cheaper than any other comparable prepay offer". The service targets families and allows customers a number of SIM cards per account, so credit is shared among the different lines. Customers can order a free SIM at the Family Mobile website familymobile.co.uk
As part of the launch for the service all 9500 UK employees were given a free mobile phone along with a free Family Mobile SIM card with £5 credit pre-loaded on August 5.
For example, DUKTIG (meaning: good, well-behaved) is a line of children's toys, OSLO is a name of a bed, BILLY (a Swedish masculine name) is a popular shelf, DINERA (meaning: (to) dine) for tableware, KASSETT (meaning: cassette) for media storage. One range of office furniture is named EFFEKTIV (meaning: efficient), SKÄRPT (meaning: sharp or clever) is a line of kitchen knives.
A notable exception is the IVAR shelving system, which dates back to the early 1970s. This item is named after the item's designer.
Because IKEA is a world-wide company working in several countries with several different languages, sometimes the Nordic naming leads to problems where the word means something completely different to the product. While exotic-sounding names draw an attention, e.g., in anglophone countries, a number of them call for a snicker. Notable examples are "Jerker" desk, "Fartfull" workbench, or "Lessebo" sofa. The products are withdrawn, probably after someone pointed at blunders, but not before generating some news. Similar blunders happen with other companies as well.
Company founder Ingvar Kamprad, who is dyslexic, found that naming the furniture with proper names and words, rather than a product code, made the names easier to remember .
The catalogue is distributed both in stores and by mail. Most of the catalogue is produced by IKEA Communications AB in IKEA's hometown of Älmhult, Sweden where IKEA operates the largest photo studio in northern Europe at 8,000 square metres in size. The catalogue itself is printed on chlorine-free paper of 10-15% post-consumer waste.
According to Canadian broadcaster, CTV, "IKEA's publications have developed an almost cult-like following online. Readers have found all kinds of strange tidbits, including mysterious cat pictures, apparent Mickey Mouse references and weird books wedged into the many shelves that clutter the catalogues."
In conjunction with the card, IKEA also publishes and sells a printed quarterly magazine titled IKEA Family Live which supplements the card and catalogue. The magazine is already printed in thirteen languages and an English edition for the United Kingdom was launched in February 2007. It is expected to have a subscription of over 500,000.
The IKEA corporate structure is divided into two main parts: operations and franchising. Most of IKEA's operations, including the management of the majority of its stores, the design and manufacture of its furniture, and purchasing and supply functions are overseen by Ingka Holding, a private, for-profit Dutch company. Of the IKEA stores in 36 countries, 235 are run by the INGKA Holding. The remaining 30 stores are run by franchisees outside of the INGKA Holding.
INGKA Holding is not an independent company, but is wholly owned by the Stichting Ingka Foundation, which Kamprad established in 1982 in the Netherlands as a tax-exempt, not-for-profit foundation. The Ingka Foundation is controlled by a five-member executive committee that is chaired by Kamprad and includes his wife and attorney.
While most IKEA stores operate under the direct purview of Ingka Holding and the Ingka Foundation, the IKEA trademark and concept is owned by an entirely separate Dutch company, Inter IKEA Systems. Every IKEA store, including those run by Ingka Holding, pays a franchise fee of 3% of the revenue to Inter IKEA Systems. The ownership of Inter IKEA Systems is exceedingly complicated and, ultimately, uncertain. Inter IKEA Systems is owned by Inter IKEA Holding, a company registered in Luxembourg. Inter IKEA Holding, in turn, belongs to an identically named company in the Netherlands Antilles that is run by a trust company based in Curaçao. The owners of this trust company are unknown (IKEA refuses to identify them) but are assumed to be members of the Kamprad family.
In Australia, IKEA is operated by two companies. Stores located on the East Coast including Queensland, New South Wales, and Victoria are owned by INGKA Holding. Stores on the Western side of the country including South Australia and Western Australia are owned by Cebas Pty Ltd. Like elsewhere, all stores are operated under a franchise agreement with Inter IKEA Systems.
In 2004, the last year that the INGKA Holding group filed accounts, the company reported profits of €1.4 billion on sales of €12.8 billion, a margin of nearly 11 percent. Because INGKA Holding is owned by the nonprofit INGKA Foundation, none of this profit is taxed. The foundation's nonprofit status also means that the Kamprad family cannot reap these profits directly, but the Kamprads do collect a portion of IKEA sales profits through the franchising relationship between INGKA Holding and Inter IKEA Systems.
Inter IKEA Systems collected €631 million of franchise fees in 2004, but reported pre-tax profits of only €225 million in 2004. One of the major pre-tax expenses that Inter IKEA systems reported was €590 million of “other operating charges.” IKEA has refused to explain these charges, but Inter IKEA Systems appears to make large payments to I.I. Holding, another Luxembourg-registered group that, according to The Economist, “is almost certain to be controlled by the Kamprad family”. I.I. Holding made a profit of €328 million in 2004.
In 2004, the Inter IKEA group of companies and I.I. Holding reported combined profits of €553m and paid €19m in taxes, or approximately 3.5 percent.
The Berne Declaration, a non-profit organization in Switzerland that promotes corporate responsibility, has formally criticized IKEA for its tax avoidance strategies. In 2007, the Berne Declaration nominated IKEA for one of its Public Eye “awards,” which highlight corporate irresponsibility and are announced during the World Economic Forum in Davos, Switzerland.
Along with helping IKEA make non-taxable profit, IKEA's complicated corporate structure allows Kamprad to maintain tight control over the operations of Ingka Holding, and thus the operation of most IKEA stores. The Ingka Foundation’s five-person executive committee is chaired by Kamprad. It appoints the board of Ingka Holding, approves any changes to Ingka Holding’s bylaws, and has the right to preempt new share issues. If a member of the executive committee quits or dies, the other four members appoint his or her replacement.
In Kamprad's absence the foundation's bylaws include specific provisions requiring it to continue operating the Ingka Holding group and specifying that shares can be sold only to another foundation with the same objectives as the Ingka Foundation.
The INGKA Foundation is officially dedicated to promoting “innovations in architecture and interior design”. With an estimated net worth of $36 billion, the foundation is unofficially the world’s largest charitable organization, beating out the much better known Bill and Melinda Gates Foundation, which has a net worth of approximately $33 billion.
Despite its enormous wealth, the Ingka Foundation does very little charitable giving. Detailed information about its grantmaking is unavailable, as foundations in the Netherlands are not required to publish their records. But IKEA has reported that in 2004-2005, the Ingka Foundation's donations were concentrated on the Lund Institute of Technology in Sweden, and the Lund Institute reported the receipt of $1.7 million grants from the foundation during both of those years. By way of comparison, the Gates Foundation made gifts of more than $1.5 billion in 2005..
Notwithstanding the Ingka Foundation's lack of concerted philanthropic activity, IKEA is involved in several international charitable causes, particularly in partnership with UNICEF. These include:
IKEA also supports American Forests to restore forests and reduce pollution.
More recently, IKEA has begun charging for each plastic bag, while offering a paper bag or no bag for no extra cost. The IKEA restaurants also only offer reusable plates, knives, forks, spoons, etc. Toilets in some IKEA restrooms have been outfitted with dual-function flushers. Most stores only offer paper plates and plastic knives, forks, and spoons.
Some criticisms of IKEA:
They recently paired up with the makers of popular video game The Sims 2 to make a stuff pack called The Sims 2 IKEA Home Stuff. The game features many items that you could find in IKEA and was released on June 24, 2008 in North America and June 26, 2008 in Europe. It is the second stuff pack with a major brand, the first being The Sims 2 H&M Fashion Stuff, which are both coincidentally companies of Swedish origin.