IKEA Organizational Structure – overview

IKEA has a unique organizational structure. Specifically, “around the globe, a large number of companies operate under the IKEA trademarks. All IKEA franchisees are independent of Inter IKEA Group. A large group of franchisees are owned and operated by INGKA Group. Inter IKEA Group and INGKA Group have the same founder, and a common history and heritage, but have operated under different owners and management since the 1980s”[1]

Figure 1 below illustrates the essence of IKEA organizational structure:

Figure 1 IKEA organizational structure

Inter IKEA Group integrates of a group of companies. The group sets strategic direction for the whole business and connects all IKEA franchisee. The group is formed of three core businesses as illustrated in Figure 1 above:

1. Inter IKEA Systems B.V. is the furniture retailer’s franchisor worldwide. This unit also deals with franchise agreements with 11 franchisees that operate in more than 500 locations.[2]

2. IKEA Range & Supply develops and supplies products for the home improvement and furnishing chain.

3. IKEA Industry produces home furnishing products and it manufactures about 10-12% of the total range.

The present organizational structure of IKEA illustrated in Figure 1 above is the outcome of a major restructuring initiative that was introduced in 2016. To improve the franchise system and clarify roles, IKEA range, supply and production activities were transferred to the new Inter IKEA Group headed by Inter IKEA Holding B.V.  Currently, Jon Abrahamsson Ring is the CEO of Inter IKEA Holding B.V.

The Figure 2 below illustrates the overview of the franchise system.

Figure 2 Overview of the IKEA franchise system[3]

Specifically, IKEA Group sold key subsidiaries for EUR 5.2 billion to increase the flexibility of the business to be able to adapt to changes in the external global marketplace. IKEA management considers this change to be much needed as “new low-margin market entrants and online players like Amazon.com are making life harder for everyone in retail”.[4]

Generally, IKEA organizational structure can be classified as hierarchical, reflecting massive size of the business that integrates 11 franchisees operating in more than 500 locations in 63 countries.[5] Hierarchical organizational structure can be associated with a range of serious shortcomings such as lack of flexibility of the business, poor quality of communication between the senior management and employees and slow speed of decision making. The latest organizational restructuring at IKEA discussed above, is intended to minimize the negative implications of these to a certain extent.

 IKEA Group Report contains the above analysis of IKEA organizational structure. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on IKEA. Moreover, the report contains analyses of IKEA leadership, business strategy and organizational culture. The report also comprises discussions of IKEA marketing strategy, ecosystem and addresses issues of corporate social responsibility.

[1] Our Business in Brief (2017) Inter IKEA Group, Available at: http://www.inter.ikea.com/en/about-us/business-in-brief/

[2] Inter IKEA Holding B.V. Annual report FY21

[3] Sustainability Report FY 2018 (2019) IKEA

[4] Bergin, T. (2016) “IKEA finalizing its biggest overhaul in decades” Reuters, Available at: http://www.reuters.com/article/us-ikea-restructuring-idUSKCN0XC0IA

[5] Inter IKEA Holding B.V. Annual report FY21