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Founder of IKEA
BACKGROUND OF IKEA
Ingvar Kamprad at the opening of the first IKEA store in Älmhult, Sweden
During that period, Ingvar Kamprad was no longer a miracle child of Småland. He
turned into a confident, sleek and dangerous competitor, whose methods sometimes
were perceived with contempt and resentment.
In the early 60’s, Kamprad made a cognitive trip to the United States. There he first
saw how the Cash & Carry trade system worked. He liked that form of trade where
customers paid in cash and carry the goods away themselves. In 1965, the largest
31,000 square meters IKEA Kungens Kurva store was opened near Stockholm.
Things were arranged there taking into the account the American experience,
however, they were creatively improved. First, the store was opened in a suburb.
Rental land costs there were much lower, and there was built a spacious car parking
lot. Second, to reduce the transportation costs, the company ordered ready-to-
assemble furniture, where every detail was placed in a flat package. It was easier and
cheaper to transport it and customers had to assemble the furniture themselves.
Kamprad had noticed that people actually liked to self-assemble cabinets and sofas.
Especially, if the assembling process was so simple thanks to the detailed instructions.
Also, Ingvar knew that a car boom began in Sweden and he realized that people were
ready to go shopping to distant lands. To encourage customers to go shopping in
IKEA, they started selling them roof racks for cars for a knockdown price. Thanks to
this policy the company’s turnover has doubled in one year.
The largest store in Sweden looked like The New York’s Guggenheim Museum,
which Kamprad found very attractive. However, when Ingvar Kamprad opened it, he
did not take into account one thing: a possible shortage of goods on the store’s
shelves. A huge number of people literally swept the IKEA products from the store’s
shelves. Thirty thousand Swedes would certainly want to buy furnishings at low
prices. And even in such large store there weren’t so many goods to sell and a
considerable part of them left at warehouse unpacked.
IKEA Logo
In 1986, Ingvar Kamprad retired from Group Management and became an advisor to
the parent company INGKA Holding B.V. Anders Moberg was assigned as the
President and CEO of the IKEA Group. In 1990s, the IKEA Group developed and
introduced the first an environmental policy to make sure that the company and its co-
workers take environmental responsibility for all activities conducted within its
business. Anders Dahlvig replaced Anders Moberg and became the President and
CEO of the IKEA Group. In 2000, IKEA realized how Internet was important and
introduced its customers e-shopping in Sweden and Denmark. Since then many IKEA
stores launched online shopping in many other countries.
Ingvar Kamprad has been married twice. His first wife was Kerstin Wadling who
born him a daughter, Annika Kihlbom. However, it was his second wife Margaretha
Kamprad-Stennert who helped him to fulfill the dream of IKEA. His wife passed
away due to an undisclosed disease in 2011 at the age of 71. She born him three sons:
Peter, Jonas and Mathias.
Peter Agnefjäll, President and CEO
Further history of IKEA cannot be called cloudless as there are many competitors
such as Argos (Italy), Ilva (Denmark) and others. But Ingvar Kamprad knows that his
stores offer customers everything essential where they can get visual and tactile
sensations and the real pleasure of being there. Ingvar Kamprad net worth is $3.8
Billion as of November 2014. The current IKEA Group’s President and CEO is Peter
Agnefjäll, who was assigned on this position on September 1, 2013 and who gained
deep and broad knowledge, experience from IKEA.
Vision
“To create a better everyday life for the many people”, this is the IKEA vision. Our
business idea is “to offer a wide range of well-designed, functional home furnishing
products at prices so low that as many people as possible will be able to afford them”.
We work hard to achieve quality at affordable prices for our customers through
optimizing our entire value chain, by building long-term supplier relationships,
investing in highly automated production and producing large volumes. Our vision
also goes beyond home furnishing. We want to create a better everyday for all people
impacted by our business.
Mission
The store is where our visitors meet IKEA face to face. We want to give our visitors
plenty of ideas, solutions and inspiration. It should be fun and easy to shop and the
customers should be able to do most of their shopping by themselves. When a visitor
needs assistance, a well-informed and friendly co-worker should be on hand to attend
to his or her needs. Achieving our high standards in this respect requires a keen and
skilled team in each store, from motivated and responsible managers and team leaders
to enthusiastic staff at the loading bay, warehouse, sales, checkouts, restaurant,
administration and display.
We must also ensure that banned chemicals such as formaldehyde and phthalates
don’t exceed IKEA requirements. IKEA has a third-party accredited test laboratory
that is certified each year by external auditors and third-party accredited test
laboratories perform random tests. IKEA requires suppliers to order certified products
testing by third party auditors.
Furniture retailer IKEA said growth in its sales channels aided the slight rise in its
fiscal 2014 net profit, as increased spending on employee programs and price
reductions weighed on operating income.
The maker of low-price build-it-yourself furniture said demand remained high in
North America and continued to recover in Europe, reporting record revenue as
customers turned to less-expensive products amid the global economic slowdown.
IKEA said net profit for fiscal 2014 rose 0.4% to €3.33 billion ($3.79 billion).
Revenue grew 2.8% to €29.29 billion, from €28.5 billion a year earlier.
Increased costs related to employee programs and larger price reductions compared
with fiscal 2013, however, weighed on operating income and gross margin. Operating
income for fiscal 2014 declined 5.8% to €3.79 billion and gross margins slipped 0.4%
to 42.9%.
“North America performed well and while the challenging economic situation may
not be over, Europe continued to show improvements,” IKEA said. “An especially
positive sign was the growth in most of southern Europe where Portugal did
particularly well and the situation in Spain is improving quite quickly.”
The furniture maker now has 315 stores in 27 countries. It plans to open 25 in India.
IKEA, which generates most of its sales from Europe, said it grew in nearly all of its
markets. It said its fastest-growing regions include China and Hungary.
The furniture maker is facing a slowdown in Russia, a key market where it owns 14
Mega-brand shopping centers. The collapse of the ruble in December resulted in
Russian customers stockpiling IKEA products, pushing the company to halt sales for
a few days and go against form by raising prices. IKEA said it received 270 million
visitors to its Russian shopping centers in fiscal 2014, 10 million more than in 2013.
“Fiscal year 2014 was a good year for IKEA. I am happy to see increased growth in
all our sales channels; in existing stores, in the opening of new stores and in e-
commerce,” Chief Executive Peter Agnefjäll said.
For the fiscal year ended in August, IKEA opened 12 new stores in 10 countries,
including its first store in Croatia and its first city-center store in Germany. In
December, it also opened its first store in South Korea.
The company cut prices by an average of 1% in fiscal 2014, compared with a price
reduction of 0.2% a year earlier.
Planet Retail analyst Niklas Reinecke said the annual report shows IKEA is sticking
to its strategy of lowering prices, expanding in more markets and broadening its e-
commerce offering. He pointed in particular to Italy, where the company has recorded
largely flat revenue of around €1.5 billion since 2010, yet has continued to open new
stores including one in Pisa in fiscal 2014.
“IKEA is showing commitment to its markets in a challenging environment,” Mr.
Reinecke said.
The furniture maker invested €1.7 billion in stores, factories, renewable energy and
shopping centers and now has 315 stores in 27 countries. Visits to IKEA’s website
jumped 15% in fiscal 2014 to more than 1.5 billion, while physical store visits rose
4.7% to 716 million from a year earlier, IKEA said.
The company reiterated its goal to increase revenue to €50 billion by 2020 and said it
was moving ahead with plans to open more stores in emerging markets, including 25
in India.
Risks to strategy are usually long-term risks that impact the ability of the
organization to maintain the core processes concerned with the development
and delivery of strategy. The organization needs to confirm that the risks
embedded in strategy are the risk it is willing to take and that they are justified
by the potential rewards.
Risks to operation are usually short-term risks that impact the ability of
maintain efficient core processes concerned with the quality, continuity and
monitoring of routine operations. The organization needs to confirm that the
operations will run smoothly, compliantly and without inefficiency or
unplanned disruption.
Risks to compliance can be associated with the long, medium, and short-term
activities and processes that can impact the ability of the organization to
maintain compliance within these activities and processes. The organization
has to confirm that adequate compliance can be achieved and maintained in
relation to strategy, tactics and operation.
Risks to tactics are usually medium-risk that impact the ability of the
organization to maintain effective core processes concerned with the
development and delivery of strategy. The organization needs to confirm that
the risk embedded in strategy are the risks it is willing to take and that they are
just justified by the potential rewards.
CONCLUSION
The problem of this study is that IKEA expands too fast. More and more quality
problems influence the customers’ feelings and the image of the company. The hard
situation makes it difficult for them continuing to guarantee the quality of the
products. According to the literature review, some theses were found to help us with
thoughts and theory. They support this thesis.
The value of this thesis is firstly; it provides empirical knowledge about the
relationship between price and quality for IKEA products. Secondly, it shows that the
development path of IKEA and give suggestions to the future development and
thirdly, it contributes to the field if large-scale companies are suitable to expansion
and how fast it should go.
. People were divided into three groups and in each group were 60 people divided
after income. Then the chi-square test was used to prove the relevance. The most
important part is analysis and discussion. In these two parts, the main thinking and
idea were introduced. We used a scientific way to analyze why IKEA expands too fast
and we also gave our suggestions to IKEA. Firstly, slow down the expansion steps,
and turn back to have a check; what have been done, what have not. Secondly,
improve the corporate to suppliers. Test the quality in every single step. Don’t leave
this job to customers. Customers’ feelings decided how far you could go forward and
thirdly the board of directors should not give too much pressure to the company.
Otherwise, the managers of the company only care about the target instead not caring
about the success of the company. Adjust the policy from the top manager in order to
change the management pattern. Put the key point on not only the profit but also the
quality.
WE want to advise them not to expand too fast and always remember that the:
customers are the best tester.
CORPORATE RISK
MANAGEMENT
(PFS 3173)
GROUP 1
PREPARED BY:
MUHAMMAD NAIM BIN MOHD NASIR
(4134007611)
BACHELOR OF FINANCE
PREPARED FOR:
EN. ZULKIFLEE BIN ABD RAHIM @ AB RASIM