Sounds + Food 'n' Retail

Just some finishing up on the IKEA-book. Following graph describes the structure of IKEA's business, as far as I understand it.

1: Stores - The way the company expands horizontally, is through a tightly controlled franchising system. This both saves costs and minimises international risks.
2: Sales & service - the company is tightly integrates its sales- and service-operations with customers, the latter taking over 80% of the work (and loving it). Huge cost-savings, also benefiting customers.
3: Supply, manufacturing, design - The company is equally well-integrated back up the value chain, with suppliers, manufacturing, and design, and has—since the 90s—been expanding its operations in that direction. Some cost-savings by introducing savings up the logistics-chain, and more flexibility in manufacturing.
4: Management structure - non-public virtual entity that licenses the IKEA brand and is able to offset international tax-differences by being located in Belgium/the Netherlands and changing the terms of licensing-agreement as needed.

You can draw your own conclusions from that, together with what I've written before.

Things that stuck out from the book included:

• Ingvar Kamprad, the founder, who has both a trader's mentality and is at the same time a community-person;


• Sweden, IKEA's country of origin, whose restrictive tax policies actually resulted in pushing the business to become a global company;


• IKEA's cost-philosophy, which is very frugal and part of the company-culture, and also transmitted to the supply side and to customers. Some problems retaining top-employees as wages are not competitive;


• Its franchising-system, which somewhat surprised me, can be explained by the scientific way in which IKEA's operations has been built up. The more rational, the "easier" (a relative term) to replicate. It's also in line with the business's rapid global expansion and its drive to push down costs;


• It's a private company, which makes it less visible and (relatively) less accountable to the public.


• Its vertical integration with suppliers and customers, enabling it to quickly respond to new trends and problems, as well as introduce higher cost-savings than its competition.