IKEA: Assembling the Future
By: Annie Liu & Maggie Chen
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
IKEA (ee-kay-uh)
Founded in 1943, IKEA is a Swedish multinational conglomerate that specializes in simple, build-it-yourself home furnishings. IKEA currently operates 422 stores in 32 countries and is the world’s largest furniture retailer. The company’s deep understanding of what “home” means across multiple cultural contexts has been a cornerstone of its success; combined with its reputation for simplicity, affordability, and service, this has allowed IKEA to attract 825 million in-store visits at its big blue box centers and four billion website views. Alongside impressive sales and publicity figures, IKEA has an impressive track record of environmental, social, and governance (ESG) campaigns that are among some of the largest philanthropic initiatives in the world. The IKEA Foundation is funded by the INGKA Foundation and donates tens of millions of dollars to charity from its profits each year.
IKEA’s 2025 vision encircles a commitment to creating more sustainable, fair, and inclusive neighbourhoods in cities around the world. Specifically, this means providing meaningful work, promoting equality, and collaborating with partners to create sustainable, child-friendly, and connected communities. For example, the Green Entrepreneurship Initiative grants up to €1.5 million for environmentally-friendly initiatives that create employment opportunities within local communities. From co-creating products with Kids Labs in support of children’s rights to giving the youth an opportunity to realize their designs with the SAGOSKATT initiative, IKEA commits to its belief that children are the most important people in the world. Accordingly, IKEA’s future strategy should consider the diverse social and economic backgrounds of the 2.2 billion children on Earth, and use this opportunity to connect with communities previously unaware of IKEA’s global brand.
In recent years, IKEA has made considerable progress towards its sustainability and social impact goals through refugee skill development programs, investments into renewable energy, and a municipal partnership with Swedish city Helsingborg to envision a sustainable city for the future. IKEA provides work placement for refugees, constructing a diverse and inclusive working environment as well as improving the skills of refugees. The furniture retailer has also partnered with local artisans and female refugees in Jordan, selling their products across IKEA stores in many Middle Eastern markets. This ability to reflect the diversity of local communities in its global operations has been key to IKEA’s growth, and as such, it is imperative the firm broadens its customer base and taps into new markets.
Notably, IKEA has a proven charitable presence in India — as of 2013, IKEA invested €158 million to India through the United Nations Children’s Fund (UNICEF). With a focus on improving the development and growth of the country’s young population, a portion of this donation has been devoted to providing a quality education for children.
A problem with an opportunity
India is en-route to becoming the most populous country in the world, but its progress is significantly hindered in part by an underfunded public education system. The 2018 World Bank Development Report outlines the positive benefits associated with creating an educated population, which include productivity, employability, and economic growth. However, District Information System for Education data reveals that only 53 percent of government schools, which represent the majority of schools in rural India, have electricity. In addition to this, less than 30 percent of the schools are able to provide working computer access for their students, and only 9 percent have an internet connection. Meanwhile, 70 percent of India’s workforce resides in rural areas. The lack of modern education technology, sparsity of rural school locations, and poor infrastructure will affect the students’ quality of life. As such, it is critical for these regions to invest in education infrastructure as a vehicle for positive socio-economic growth.
India is an attractive market for IKEA due to the rising middle class. Nearly 80 percent of households in 2030 are expected to be middle-income, up from 50 percent today. In addition, India’s middle class could be the largest in the world by 2025. However, IKEA has only managed to capture 0.4 percent of the Indian furniture market, with just two locations in Hyderabad and Mumbai. Given that IKEA is the global leader in low-cost furniture, this presents a significant opportunity to grow its market share in an underpenetrated market.
India is a unique market that presents both a large-scale educational problem and rapidly expanding middle class. By entering India with the intention to further pursue IKEA’s environmental, social, and governance goals, IKEA can simultaneously drive positive change in the lives of students in rural communities while growing its brand familiarity and reputation within India.
Delhi-vering to a New Market
Thesis Statement
IKEA should establish an open innovation project with a design institution in India. Successful furniture design proposals from design students will be brought to the mass market with the proceeds donated to educational institutions in rural India.
The National Institute of Design
Established in 1961, India’s National Institute of Design (NID) offers world-class design education at three main campuses across India. Offering a variety of design-based bachelor, master’s, and doctorate degrees, including a furniture design program, the institutions provide students with the opportunity to build a repository of design knowledge, experience, and products. IKEA can partner with the NID schools, offering monetary grants in exchange for furniture designs. This would not be the first time IKEA partnered with a design institution; in 2000, IKEA collaborated with multiple Swiss schools to design furniture for the company. Similarly, IKEA can work with the NID schools to establish a unique product line while giving the design students international exposure. Proceeds from the furniture line will be donated to rural schools across India, in line with IKEA’s philanthropic goals.
Structure of the Partnership
An open innovation project would invite students at NID to create unique designs for a specific type of furniture. Successful students would be rewarded through a grant system, where they could see their proposals transformed into classic constructible IKEA furniture. These products would be sold worldwide, with proceeds directly helping fund education infrastructure in India.
The partnership achieves a joint incentive model. For NID, this partnership would not only bring in funding but also attract international attention and acclaim to its work. Every successful iteration of the partnership could help propel the careers of NID’s design students and faculty. On the other hand, this partnership represents a more direct, sustainable, and transparent mechanism for IKEA to contribute towards this goal compared to its existing donation program, while opening an avenue for its own product teams to work with and learn from a new pool of talent.
Case Study: The (PRODUCT)RED
The (PRODUCT)RED initiative is an existing example of a globally-successful implementation of donating to a cause through profits. Partner companies of PRODUCT(RED) introduce red-coloured variants of their products and donate a portion of proceeds from these sales to the charity, with its most prominent partner being Apple Inc. Throughout the past 15 years, Apple has introduced a wide range of (PRODUCT)RED devices, starting with the iPod Nano in 2006 and continuing today with new iPhone and Apple Watch announcements. This ongoing campaign has raised almost $250 million to fund HIV and AIDS research, providing over 10 million people with care and support services. Apple’s 15-year-and-counting participation in (PRODUCT)RED suggests it sees measurable success through the initiative in improving its brand image.
While the products’ bright red colour scheme indicates an individual’s contribution towards the charity, they are still fundamentally the same well-designed and cutting-edge devices that Apple is known for. A consumer buying a PRODUCT(RED) iPhone receives no less of an end-user experience than if they had bought another colour. IKEA’s partnership would aim for a similar philosophy — furniture shoppers should not have to compromise on design and style to feel good about their contributions to Indian education. The NID-designed products should bring a new twist to the quality, flat-packed pieces IKEA is already known for, while being a transparent way through which consumers can contribute to the cause.
Designing for the Future
NID would be guaranteed autonomy in the design of furniture where students are encouraged to implement innovative designs through its curriculum. This helps it achieve many of NID’s curriculum objectives for students interested in product and furniture design, including providing students exposure to real-life professional design settings and developing a sense of ownership of their own design decisions. Of course, IKEA could provide broad parameters and advice that would guide solutions to some extent, which can tailor proposals to suit IKEA’s current needs. For example, a proposal might request the generation of a new design that would replace an existing, outdated product. However, it is important that the designs themselves are home-grown and as authentic to the designers’ visions as possible to meaningfully differentiate them from existing IKEA product lines.
Once successful designs are selected and prototyped, they would be translated into a flat-packed format for manufacturing and delivered to mass markets around the world. IKEA should promote the program both through traditional marketing channels as well as within the in-store experience. For example, these products can be specially marked in IKEA showrooms with a new logo and a different-coloured label explaining the program. Proceeds would then be regularly granted to rural Indian schools through the IKEA Foundation, IKEA’s existing charitable arm. Importantly, this gives schools the autonomy to use the funds in a high-impact manner rather than narrowly prescribing a use.
In the long term, the partnership also has the potential to strengthen NID’s brand among the global design community. Graduating students may move on to designing for IKEA itself, a company that has seen significant international acclaim for product and furniture design. Beyond the positive impacts of the charitable contributions enabled by the partnership, IKEA’s product teams can learn from exposure and proximity to talented designers from a different culture.
Conclusion — impacts on the rural schools
A strategic partnership between IKEA and NID will improve IKEA’s contribution towards the Indian education sector beyond previous donation strategies. Simultaneously, IKEA can make recurring, sustainable donations to fund much-needed educational development in India while developing its own capabilities and brand image in an underpenetrated market. The transformation of NID students’ talent into tangible impact for rural communities is an opportunity for IKEA to engage in circular value creation.