Ch 12 case study | Management homework help

Ingvar Kamprad—Wealthy Man, Frugal Man, Entrepreneur Extraordinaire

Although Ingvar Kamprad, the founder of Swedish-based IKEA, is one of the wealthiest individuals in the world, he nonetheless lives quite frugally. Kamprad avoids wearing suits, flies economy class, takes the subway to work, drives a ten-year-old Volvo and frequents inexpensive restaurants. “It has long been rumored in Sweden that when his self-discipline fails and he drinks an overpriced Coke out of a hotel minibar, he will go to a grocery store to buy a replacement.”

Kamprad was “born in Småland in the south of Sweden – a region known as home to many entrepreneurs and hard-working people, who are adept at using efficiently what …limited resources they have.” Kamprad developed an entrepreneurial spirit in his youth. As a youngster, Kamprad rode his bicycle throughout the neighborhood, selling matches, pens, and Christmas cards to the local residents. Then in 1943 when he was only seventeen years old, Kamprad used a cash gift from his father to form a company called IKEA. The name IKEA was derived from Ingvar Kamprad’s initials plus the first letters of the farm and village where he grew up (Elmtaryd and Agunnaryd).

Initially, IKEA was a catalog company that sold pens, picture frames, wallets, and other bargain goods. “Kamprad used his village’s milk van to deliver his products when he first started the business. In 1951, IKEA began selling furniture made by local carpenters; six years later Kamprad opened the first IKEA store in Sweden. In 1985 the first U.S. IKEA – which measured three football fields long – opened in a Philadelphia suburb called Plymouth Meeting.” By 2010, IKEA had grown to 316 stores around the world with 699 million visitors, in-person and online. IKEA “has stores in thirty-three countries, while continuing to expand markets in China and Russia.”

As stated on the company’s website, “[t]he IKEA vision is to create a better everyday life for many people. We make this possible by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them” and to do so without compromising quality. “Consistent with the Swedish lifestyle, the IKEA product range is functional, attractive, child-friendly and family-centered, covering the needs of all family members.”  “IKEA uses natural materials such as pale wood, natural textiles (linen and cotton), glass, clay and untreated surfaces. The natural character of these products has bestowed on them a universal utilitarian appeal.”

A signature characteristic of the company is that “all IKEA products – from furniture to the now famous mobile kitchens – could be packed in flat, stackable boxes that could be mailed or transported and reassembled at home.” Interestingly, the flatpack idea for furniture arose by accident when an employee took the legs off a table in order to load it into a customer’s car.

“[T]he IKEA way of doing business combines a very Scandinavian embrace of paternalistic employment policies and a social safety net with a hard-core drive for profits and market share that bows to no competitor, anywhere, anytime.” IKEA’s unrelenting quest for profits reflects Kamprad’s frugality. Indeed, Kamprad’s thriftiness is infused into IKEA’s culture; for example, employees become catalog models and managers share hotel rooms when they travel. “Kamprad obviously appreciates what it takes to earn his money and realizes that there are no guarantees to economic success tomorrow apart from hard work.”

Kamprad founded IKEA on the basis of a family business model, and the company’s values are still based on this model. The family business model has special features that differentiate it from other business models. Typically, the owner of a family business has a strong entrepreneurial character, establishes the company’s objectives and operational strategies, and desires to control most, if not all, of the business areas. An important characteristic of the family business model is that the workforce feels that they are members of the family they identify with and are committed to the company, which boosts both their dedication and performance.

As head of the “family business,” Kamprad, like many fathers, leads by example. As Kamprad says: “ ‘If there is such a thing as good leadership, it is to give a good example’ and ‘I have to do so for all the IKEA employees.’ ” Kamprad firmly believes that the best example he can provide for his employees is to work hard and adhere to strict business ethics.

Another characteristic of Kamprad’s leadership approach is a willingness to admit his mistakes and own up to his weaknesses. Even with his long career and extraordinary success with IKEA, Kamprad had his share of challenges. “As IKEA grew, so did Kamprad’s problems – alcoholism, allegations of a Nazi past, deaths at a store opening- but nothing deflected him.” Kamprad describes “his association with the ‘new Swedish’ wartime pro-Nazi party [as] ‘the greatest mistake of my life.’ ”The manner in which Kamprad dealt with the revelation of his involvement with the Swedish pro-Nazi party helped people to “fully accept him as a leader. By showing human weaknesses rather than only strengths, his employees and the general public could ¼ relate to him and learn from his behavior. The episode also …[shows] that Ingvar Kamprad is… a leader who really impacts the people around him in an inspirational and positive way.”

Some of Kamprad’s other leadership characteristics include humbleness, a caring nature for IKEA’s employees, a commitment to simplicity and frugality, and a constant desire for renewal.

At different times throughout his career, Kamprad has become reflective about what he has accomplished and he proceeded to jot down bits of his management philosophy. One philosophical gem is: “By always asking why we are doing this or that, we can find new paths. By refusing to accept a pattern simply because it is well established, we make progress. We dare to do it a different way! Not just in large matters, but in solving small everyday problems, too.” Another of his lofty pronouncements is: “Wasting resources is ‘a mortal sin’.” Kamprad also promises “a better life for many.”

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Discussion Questions

1. In what ways is Ingvar Kamprad a manager? In what ways is he a leader?
2. What are the key leadership lessons provided by Kamprad’s experiences?
3. Use the concepts of transactional, transformational, charismatic, and authentic leaders to describe the leadership of Ingvar Kamprad.