IKEA
IKEA is a multinational corporation of Swedish origin, headquartered in the Netherlands, dedicated to the manufacture and retail sale of flat-pack furniture, mattresses, electrical appliances and household items. It was founded in the province of Småland (Sweden) in 1943 by Ingvar Kamprad. By 2015, IKEA had 328 stores in 28 countries and employed 155,000 workers, and its success in the world of operations is a case study in business schools. Its headquarters are in the Swedish city of Älmhult.
The company is controlled by INGKA Holding B.V., together with one of its furniture founders, which is controlled by a non-profit, low-tax charitable foundation. Its intellectual property is controlled by a series of corporations leading as far as the Netherlands Antilles and the Interogo Foundation of Liechtenstein.
The word IKEA is formed by the initials of its founder Ingvar Kamprad (I.K.) plus the first letter of Elmtaryd and Agunnaryd, which are the farm and the village where he grew up, respectively. The IKEA brand belongs to a foundation established in the Netherlands.
History
Ingvar Kamprad grew up on a farm in Elmtaryd near Agunnaryd in Sweden. In 1943, at the age of 17, he started a mail order business. His idea was to sell items that covered various needs at affordable prices. So he started selling pens, wallets, frames, watches, jewelry, nightstands, cosmetics and nylon stockings.
In 1947 he expanded his business to selling furniture and four years later he published the first catalog with IKEA's own furniture designs. He then decides to focus exclusively on home furnishings. Ikea will launch in the fall of 2021 a book-tribute with decoration ideas that will put an end to the traditional distribution of the catalogue.
By 1953, IKEA only sold by catalog, but competition with its closest rival led to a price war that squeezed margins and jeopardized quality. With the idea of achieving a closer relationship between his products and his customers, Kamprad decided to open his first showroom that year in Älmhult, a city in southern Sweden.
The idea of making furniture that can be assembled to facilitate transport led to the idea of flat packaging, which further reduced the final price for the customer. The new packaging system reduced storage space as well as labor costs and prevented transport damage.
In 1963 the first IKEA store outside Sweden was opened, in neighboring Norway, on the outskirts of its capital Oslo.
In 1965, a 45,800 m² IKEA store opens in the capital of Sweden, Stockholm, in a circular shape inspired by the design of the Guggenheim Museum in New York. The success created huge capacity problems to serve customers, so customers were allowed to serve themselves. An important characteristic of the firm then arose.
In 1969 a new store opens in Denmark, and in 1973 the first store outside Scandinavia is opened in Zurich, Switzerland. This store will be key to IKEA's rapid expansion in Germany, which is today its largest market.
Later would be stores in Japan (1974), Australia (1975), Hong Kong (1975), Canada (1976) and Singapore (1978). In 1978 the first store was opened in Spain, in Telde, on the island of Gran Canaria. In 1981 the store in Tenerife was opened, in 1985 the first stores were opened in the United States and in 1992 in Mallorca, in 1996 it reached the Iberian Peninsula with its store in Badalona, in 1998 in China, in Israel in 1999 and in Russia in 2000.
On March 30, 1994, IKEA premiered on open television in the United States the commercial entitled Dining Room, considered the first of its kind in that country that openly featured a gay couple.
In 2015, the IKEA Foundation carried out the Shelters for Refugees project in cooperation with UNHCR to produce 17.5m² huts with solar energy that can replace the cloth tents that the UN has deployed in various parts of the world. The cabins are packed in flat boxes and can be assembled in four hours. In Europe, different communities have also purchased these cabins to serve refugees.
IKEA's entry into Latin America
On April 8, 2021, it opens its first store in Mexico to the public at the Oceania shopping center in Mexico City, marking the first step towards its expansion throughout Latin America after having opened its doors in the Dominican Republic on April 17. February 2010.
The first store in Chile and South America opened its doors on August 10, 2022 in the Open Kennedy shopping center, in Las Condes, Santiago. On August 11, 2022, the second store in Mexico was opened in the shopping center Vía San Ángel, in Puebla. The second IKEA store in Chile was inaugurated on December 14, 2022 in the Mallplaza Oeste shopping center located in the commune of Cerrillos.
Corporate structure
IKEA is owned and operated by a complicated range of for-profit and non-profit companies. The corporate structure is divided into two main parts: operations and franchises.
Inter IKEA Systems is owned by Inter IKEA Holding BV, a company registered in the Netherlands, formerly registered in Luxembourg (under the name of Inter IKEA Holding SA). Inter IKEA Holding, in turn, is owned by the Liechtenstein-based Interogo Foundation. In 2016, INGKA Holding sold its design, manufacturing and logistics subsidiaries to Inter IKEA Holding.
In June 2013, Ingvar Kamprad resigned from the board of Inter IKEA Holding SA and his youngest son, Mathias Kamprad, replaced Per Ludvigsson as president of the holding company. Following his decision to resign, the 87-year-old founder explained: "I see this as a good time to step down from the Inter IKEA Group board. With that, we are also taking another step in the generational change that has been going on for some years". After the company restructuring in 2016, Inter IKEA Holding SA no longer exists, having been reincorporated in the Netherlands. Mathias Kamprad became a board member of the Inter IKEA Group and the Interogo Foundation Mathias and his two older brothers, who also have leadership roles at IKEA, work on the company's overall vision and long-term strategy. corporation.
Kamprad control
In addition to helping IKEA earn non-taxable profits, IKEA's complicated corporate structure allowed Kamprad to maintain tight control over the operations of INGKA Holding, and thus the operation of most IKEA stores. The five-person executive committee of the INGKA Foundation was chaired by Kamprad. He appoints an INGKA Holding board of directors, approves any changes to the INGKA Holding bylaws and has the right to preempt new share issues. If a member of the executive committee resigns or dies, the other four members appoint his replacement.
In Kamprad's absence, the foundation's statutes include specific provisions requiring the INGKA Holding group to continue to operate and specifying that the shares may only be sold to another foundation with the same objectives as the INGKA Foundation.
Financial Information
Net profit for the IKEA Group (which does not include Inter IKEA Systems) in fiscal 2009 (after paying franchise fees to Inter IKEA Systems) was €2,538 million on sales of €21,846 million. Because INGKA Holding is owned by the non-profit INGKA Foundation, none of these profits are taxable. The foundation's non-profit status also means that the Kamprad family cannot earn these benefits directly, but the Kamprads do raise a portion of the profits from IKEA sales through the franchise relationship between INGKA Holding and Inter IKEA Systems.
Inter IKEA Systems collected €631 million in franchise fees in 2004 but reported pre-tax profits of only €225 million in 2004. One of the highest pre-tax expenses Inter IKEA Systems reported was €590 million. euros of "other operating charges". IKEA has refused to explain these charges, but it appears that Inter IKEA Systems makes large payments to I.I. Holding, another Luxembourg-registered group that, according to The Economist, "is almost certainly controlled by the Kamprad family". I.I. Holding obtained a profit of 328 million euros in 2004.
In 2004, the Inter IKEA group of companies and I.I. Holding reported combined profit of €553 million and paid €19 million in taxes, or approximately 3.5%.
Public Eye (formerly known as Erklärung von Bern, literally The Bern Declaration), a Swiss non-profit organization that promotes corporate responsibility, has formally criticized IKEA for its marketing strategies. tax avoidance. In 2007, the organization nominated IKEA for one of its "awards" Public Eye, which highlight corporate irresponsibility and are announced during the World Economic Forum in Davos, Switzerland.
In February 2016, the Greens / EFA group in the European Parliament issued a report entitled IKEA: Flat Pack Tax Avoidance on IKEA's tax planning strategies and their potential use to avoid taxes in various European countries. The report was sent to Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, and Margrethe Vestager, European Commissioner for Competition, and they expressed the hope that it would be useful to them in their respective roles "to promote the fight for tax justice in Europe".
Collaborations with other companies
Since 2007, IKEA has collaborated in Spain with Bruguer to sell paint. Additionally, since 2012, IKEA began to sell televisions manufactured in collaboration with TCL in Europe under the UPPLEVA brand.
In 2018 IKEA signed an agreement with the Falabella Group to represent its franchise and open stores in Chile, Peru and Colombia, along with managing its online channel; this represents an investment of US$600 million. The first store in Chile opened on August 10, 2022.
Business model
The company designs its own furniture and products, which are manufactured by more than 1,500 suppliers in more than 50 countries. Ikea reformulated the furniture manufacturing and marketing model so that most of the products it sells are collapsible; they can be stored and transported in flat and uniform packaging, which is supposed to lower costs and prices.
Its line of products aims to cover all household needs and different ages. It offers furniture, mattresses, electrical appliances and household items at a relatively low price, but claims not to renounce its commitment and social responsibility with the environment, production processes (such as the prohibition of child labor in its products) and administration (claims to manage a policy of equality between employees, granting men and women the same salary to those who have the same position).
Franchises have allowed you to grow at a low cost but have required greater control. Its largest markets are Germany (20% of sales), the United Kingdom (12%), the United States (11%), France (9%) and Sweden (8%). It also makes sales by mail or internet.