How did the boy who sold matches build the IKEA empire?

IKEA is famous as a company that allows consumers to take “inconvenience” with confidence.

Let's take the time to get to know the company, following in the footsteps of Ingvar Kamprad, the founder of Ikea.

Ingvar Kamprad, a boy who sold matches, founded IKEA after choosing a capitalist as his role model.

Ingvar Kamprad was born in Sweden in 1926.

In the 1930s in Sweden, a businessman named Ivar Kruger, who founded 'Swedish Match' and accounted for 60% of the global match market, was famous.

Ingvar Kamprad, Founder of Ikea: “Everyone has been talking about Kruger. At that time, I wanted to make money like that.”

Kamprad, an immigrant from Germany, was greatly influenced by the harsh economic outlook of his grandmother, who took charge of the household on behalf of his grandfather. His grandfather committed suicide due to pessimism in the economy.

He learned the basics of buying cheap and selling everything from matches that were idol products to belts, wallets, and watches.

And by the time he graduated from school in 1943, he had already saved enough money to start a small company.

According to his records, there is a story that he received start-up funds from his father.

Anyway, his names are ‘I’ and ‘K’ for Ingvar Kamprad and ‘E’ for Elmta Reed, a farm run by his parents. A mail order company called ‘IKEA’ was established after ‘A’ for the administrative district where the farm was located.

It was a company that sold all kinds of miscellaneous goods that made money through newspaper advertisements and flyers.

How to survive ‘bullying’ startups

The early 20s. Ingvar Kamprad establishes two rules of business.

When it comes to product sales, ‘emotion’ is the most important thing.

He made the first chair sold by Ikea a huge success by naming a girl 'Root'.

It was much easier for customers to remember than part numbers like Chair-008.

Second, we establish a lifelong business strategy of supplying low-cost but not bad products.

It is obvious, but furniture at the time was a very expensive product, and it was a “property” that passed down from generation to generation.

Kamprad creates a new category of ‘low-cost furniture that did not exist at the time, such as copying popular furniture to save design costs.

As a result, existing furniture makers treated Ikea as a vagrant who did not follow the rules of the game and threatened not to give the goods to companies that supplied products to Ikea.

When it becomes difficult to obtain products in Sweden, Kamprad takes the very extreme choice of making products from Poland, a communist country at the time.

“Initially we did plan smuggling. It was a burning desire for profit.”

After a long struggle, Kamprad signed a formal long-term contract through a Polish bureaucrat and was able to receive goods at a much cheaper price than Swedish products.

Considering now, IKEA can be compared to startups that destroyed the market in order to survive. And existing companies to be “large companies” lagging in innovation.

A design that cannot be used is meaningless

“I have no taste. I don't even know where to put the furniture in my room.”

It's hard to believe the words of the head of the world furniture culture.

IKEA adheres to the strategy of setting the price of the furniture it sells and thinking about the design accordingly.

“It is easy for a furniture designer to make a desk worth 1 million won”

“But only the best designer can make a practical and good-quality desk for 50,000 won”

Kamprad said that he had visited a furniture fair in Milan in the early days of IKEA's business. The furniture displayed at the fair was colorful and expensive.

However, the high prices made it difficult for ordinary Italian workers to even put a modest table at home. Kamprad could hardly accept this reality.

“You need furniture that’s not just nice to look at, but designed for mechanical mass production right from the start, and you can make it cheap!”

Forcing customers to feel uncomfortable

IKEA first distributed the catalog in Germany, 1974. Which read as:

“If you can read the letters, you can understand our building instructions too”

“It costs a lot to treat customers like kings. In the end, we have to bear the cost of the entire palace together.”

“We are not going to get rid of this palace and make our customers king. Now is the time for customers to do their own thing.

From the point of view of most (outwardly) customer supremacists, this is insane.

Before IKEA entered the market, Germans had a habit of buying the whole furniture when buying a house and passing it on to the next generation.

IKEA said, “You shouldn’t try to pass down the furniture you used to your children. Children should also have fun decorating their own homes.”

This kind of marketing gained a lot of support from young people. The authoritarianism of the older generation at the time inflamed the youth.

In addition, IKEA was able to quickly grow into a company that matched well with the DIY (Do IT Yourself) culture that rapidly spread in the West in the 1960s and 1970s.

Now, IKEA customers around the world are willing to voluntarily walk around the expansive stores, pick up heavy prefab furniture, drive their own cars, take them home and assemble them.

In addition, making products in this way gives me pride that I made them myself. I have positioned these products as ‘Legos’ for adults.

IKEA stores sell Nordic sensibility

IKEA first tried a furniture store in Stockholm in 1971 in the form of buying prefabricated furniture by bringing a car.

The company also started servicing snacks in the IKEA stores around the world, for customers hungry from walking around large stores and carrying heavy items,

Sweden is a good country to live in.
A 'just country' awarded the Nobel Prize
The image is strong.

“Outside Scandinavia, IKEA should be ‘typical Sweden’”
IKEA stores are not just a furniture store, they are enticing customers with a comfortable Nordic theme park for families.

Is IKEA, really a Swedish company?

I pay taxes but my company doesn't. But is IKEA, really a Swedish company?

Inca Holdings, which owns the IKEA Group, has its headquarters in the Netherlands.

'Stitching Inca Foundation' owns the Inca Holdings, founded by Kamprad in the Netherlands in 1982.

Inter IKEA Systems hold the IKEA trademark rights and licenses for sales methods. Their Headquarters are located in Delft, southern Netherlands.

They say they don't know who the owner of this company is -_-;

In addition, the actual Inter IKEA Systems is said to be operated in Waterloo, Belgium.

And as shown in the figure above, it is speculated from the outside that IKEA's governance structure is complicatedly intertwined with unlisted companies established in Liechtenstein, Luxembourg, and Switzerland.

As an unlisted company, we strictly keep the corporate governance structure and controlling shareholders a secret except as stipulated by law.

Is IKEA a publicly or privately traded company?

The general view is that Ingvar Kamprad created this complex governance structure to evade Sweden's harsh taxes.

“In Denmark and Switzerland, I pay 40-70% tax of my income. In Sweden, I don’t care if I have to pay more”

“But my company, IKEA, is different. I need to save on taxes and maximize profits to invest in the expansion!”

There is also a story of how he created such a complex governance structure to take advantage of the strengths of a privately held company and pass it on to his sons.

In fact, in 2013, Kamprad handed over the presidency to his youngest son, Matthias Kamprad. However, Kamprad argues as to why IKEA remains a privately held company.

“When a publicly-traded company strives to generate profits for its shareholders, Ikea has been able to sell its products to consumers at low prices.”

“If we were a publicly-traded company, would we have taken risks and entered Russia or China aggressively?”

Even IKEA had a crisis

In the 1990s, IKEA was troubled because of its product supply routes around the world. In a bookcase made in former East Germany, excessive amounts of the toxic substance 'formaldehyde' were detected, causing measles. Also, a video of Pakistani children making IKEA products went viral, damaging the company's image.

And above all, Ingvar Kamprad's past political orientation became a big problem.

After Ingvar Kamprad's grandmother moved to Sweden from Germany, she became an ardent supporter of Hitler. This influenced Kamprad and he became active in Sweden's fascist party during his youth.

Articles were exposing Kamprad's activities, and criticism continued that IKEA's corporate culture was similar to the ideal home-making code of conduct of the Nazi "Third Reich" in Germany.

“When will an old man like me be forgiven for his childhood mistakes?”

“Is it a sin that I grew up with a German grandmother and a German father?”