What are the secrets of IKEA’s success?

I should think you will have visited the store at least once and will have formed some ideas about the firm’s winning business formula. The business continues to grow rapidly. The Economist has an article discussing this point and identifies several key components of their approach, outlined here.

In the article we read about:

- Marketing, where careful attention has been paid to product styling combined with ultra-low prices. IKEA’s strong brand and low prices helped it to weather the downturn, even though 80% of its sales are in crisis-hit Europe. As with any firm selling inexpensive products there are some suspicions as to how the goods are so cheap (with related allegations of child labour and other unethical practices).

- A focus on lean production, where packaging is cut so far that significant cost savings can be made (and passed to customers). There’s the additional bonus of selling this approach as an environmental benefit - IKEA presents itself as a green company with a social mission. This isn’t just PR: 40% of the company’s 200 top managers are women.

- Management styles are egalitarian and inclined towards employee empowerment and some limited decentralised decision making. The flipside is that ownership and control of the firm is very hazy to outsiders. It has a complex structure, but remains a private limited company, making it immune to takeover. There are clearly tax advantages too. The firm’s (legal) tax avoidance strategies are infamous.

The business is trying to defuse criticism by providing more information on its finances. Last year the firm published detailed figures on sales, profits, assets and liabilities for the first time ever. The firm believes is more competitive as a privately owned company. Instead of sweating to meet the quarterly targets the stockmarket demands, it can concentrate on long-term growth. IKEA plans to double the pace of store openings in China, where they already has 11 outlets. More growth is planned in Russia and China – and even the UK.