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IKEA Group: Profitable growth through diversity

IKEA Group: Profitable growth through diversity

Introduction

IKEA is one of the world's most renowned and successful retailers, as well as a leader in its field of furniture and homewares. Central to this success has been the company's ability to diversify and expand, both geographically and in terms of its product offering, while maintaining a firm handle on costs.

Features and benefits

  • Outlines IKEA's recent financial performance and explains the reasons for it.
  • Analyzes IKEA's global business model, looking at growth markets and areas of concentration.
  • Assesses IKEA's growth prospects as it looks to expand in existing markets, enter new ones and roll out new, innovative product lines.
Highlights

IKEA exhibits a high degree of vertical integration with interests across the entire value chain. This is crucial to the company's success, helping it to better control the quality of inputs and profit margins. The company's presence at the end of the value chain takes the form of very large, out-of-town megastores that also serve as warehouses.

Key to IKEA's success is its global footprint. The company continues to exhibit some degree of reliance on the European market, but is continuing to expand in to Asia's high-growth markets. The company is not just geographically diversified in terms of sales but also supply, with products or raw materials originating from five continents.

There remain markets where IKEA is not present and its stores remain concentrated in an out-of-town megastore format. The future therefore holds further geographical diversification via entry in to new markets, potential new 'Citystore' formats, a furthering of its retail network in established markets, and the roll out of new product lines.

Your key questions answered
  • How has IKEA performed in financial terms in recent years? What are the driving factors behind these numbers?
  • What is IKEA's vertically integrated business model and how does the company benefit from it?
  • Where does IKEA operate?
  • What may the future hold for company?


OVERVIEW
Catalyst
Summary
VERTICAL INTEGRATION KEY TO BUSINESS MODEL
Ownership structure facilitates vertical integration
Stichting INGKA Foundation is the ultimate head
Stichting IKEA Foundation: The philanthropic arm
INGKA Holding B.V.: The parent of The IKEA Group of Companies
The IKEA Group of Companies: IKEA's nuts and bolts
IKEA Industry: Major supplier helps control inputs & margins
IKEA Group Retail: Global network, wide-ranging inventory
Large stores, diverse offering
Building an e-commerce presence
Effective inventory cost management
Profitable growth in recent years
IKEA performs well compared to competitors
GLOBAL SUPPLY, GLOBAL SALES
IKEA's global sales footprint spans four continents
Sales concentration in Europe remains
Asia the company's big growth region
IKEA not neglecting core markets
Sourcing from around the globe
NEW MARKETS, PRODUCTS & STORE FORMAT
Continued geographic expansion program
Indian entry a certainty, South America a possibility
New stores in China and South Korea
Continued expansion in established core markets
Technology and energy at forefront of new product lines
Wireless charging furniture now on the market
Renewable energy potential new revenue stream or CSR image booster
Smaller store format to reach new demographics
CONCLUSIONS
Diversification key to success, both past and future
APPENDIX
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