Winnipeg Free Press - PRINT EDITION

IKEA's business model includes social responsibility, Allen wrench

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2In this business book, a former IKEA CEO points to the company's strong vision and social ambition as a plausible and profitable platform for spectacular growth.

Winnipeggers will soon get their own taste of a better everyday life filled with Billy bookcases, Swedish meatballs, Allen wrenches and self-assembled bedroom suites.

The legion of IKEA fans, many of whom exhibit cult-like enthusiasm, might be intrigued by the business gospel according to Anders Dahlvig.

The Swedish-born retail mastermind has written the recipe for total vertical integration as a business model, especially when spiced with liberal dashes of social contribution. The book is an intriguing read for the executive suite and for business students, but really not for the majority of IKEA fanatics.

An IKEA shopper might be mildly interested in the book for enlightenment, but only at a "so that's why my Ektorp sofa is so reasonably priced" level. Stay away if you are looking for home decor tips or the passion of home design. Dahlvig is all business model, not floor model.

Like the price of IKEA furniture, the book is based on "four cornerstones of a good business." Dahlvig leads with "a vision of social responsibility" and strikes a fundamental chord in what businesses should and could be in society.

The public is increasingly jaded from the economic crises precipitated in part by more than a few unethical, greed- and profit-only-oriented corporate entities. IKEA's vision, according to Dahlvig, includes a social agenda based on diverse corporate culture, an environmental and social platform all with a customer focus, to deliver the best price.

The quintessential elements of the IKEA business model are well covered, as are the three phases of the Swedish furniture phenomena's growth.

Uniqueness of the product range, the store design, the supply chain, the stores and the "go to market" approach are given short but efficient coverage, much like the business model itself.

Dahlvig's personal anecdotes are rare. A few more might have injected a welcome breath of passion into this relatively dry read.

Dahlvig was at the centre of launching IKEA into the new millennium when he assumed the CEO role in 1999. The crafting of "10 Jobs in 10 Years" under his leadership, while not replacing or intending to push aside founder Ingvar Kamprad's "Testament of a Furniture Dealer," was the centrepiece strategy that enabled double-digit growth in a tumultuous economic decade for the iconic home furnishings giant.

Dahlvig displays humility throughout his writing; the book is not about him, it is about IKEA during his leadership.

Still, an undercurrent of superiority occasionally sweeps in, and one may ask why not? The numbers are there, so the accomplishment is clear.

Dahlvig walks the reader through the global expansion. Germany and Sweden accounted for 67 per cent of IKEA's worldwide sales in 1983. By the end of his tenure in 2009, those two countries represented only 22 per cent of top line revenues. Europe was swept, the U.S. was tough and bumpy, Asia all right and Russia almost impossible.

The totality and focus of IKEA's vertical integration drive is a story within a story. It is about location close to raw materials, close to manufacturing capabilities, close to transportation corridors and close to customers. Find it, build it and sell it all in the same place if you can.

Dahlvig gives lots of statistics on what is bought and sold in the same country or geographical region. (China has 50 per cent of sales volume sourced in the country, 40 per cent in Russia, not so much in the U.S., and Canada not mentioned.) Economic opportunity for Canadian resource and manufacturing sectors? Not likely.

What he leaves unclear is quality, the question that keeps Swedish design out of a number of homes. The enviable twin accomplishments of cost reductions and retail price reductions are well documented, but not elevated by equally compelling statistics on customer satisfaction, product returns and Allen key excellence.

Well, Winnipeg, in a few short months the evidence of Dahlvig's leadership and IKEA's dominance in home furnishings comes to town. You might want to pick up Dahlvig's book to read while you linger over Swedish meatballs from Wisconsin.

 

Michael McMullen, a senior manager with IKEA North America from 1985 to 2001, is now Winnipeg-based executive vice-president, Northern Canada retail, with the North West Company.

The IKEA Edge

Building Global Growth and Social Good

at the World's Most Iconic Home Store

By Anders Dahlvig

McGraw Hill, 191 pages, $29

Republished from the Winnipeg Free Press print edition March 12, 2012 J10

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