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Ingvar Kamprad: Wealthy Man, Frugal Man, Entrepreneur Extraordinaire

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INGVAR KAMPRAD: WEALTHY MAN, FRUGAL MAN, ENTREPRENEUR EXTRAORDINAIRE

Although octogenarian 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 10-year-old Volvo, and frequents inexpensive restaurants.1 “It has long been rumoured 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.”2
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.”3 Kamprad developed an entrepreneurial spirit in his youth. As a youngster, Kamprad rode his bicycle throughout the neighbourhood, selling matches, pens, and Christmas cards to the local residents.4 Then in 1943 when he was only 17-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).5
Initially, IKEA was a catalogue 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.”6 By 2010, IKEA had grown to 316 stores around the world with 699 million visitors, in-person and online.7 IKEA “has stores in thirty-three countries, while continuing to expand markets in China and Russia.”8
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”9 and to do so without compromising quality.10 “Consistent with the Swedish lifestyle, the IKEA product range is functional, attractive, child-friendly and family-centered, covering the needs of all family members.”11 “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.”12
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.”13 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.14
“[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.”15 IKEA’s unrelenting quest for profits reflects Kamprad’s frugality. Indeed, Kamprad’s thriftiness is infused into IKEA’s culture; for example, employees become catalogue models and managers share hotel rooms when they travel.16 “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.”17
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.18 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.19
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.”20 Kamprad firmly believes that the best example he can provide for his employees is to work hard and adhere to strict business ethics.21
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.”22 Kamprad describes “his association with the ‘new Swedish’ wartime pro-Nazi party [as] ‘the greatest mistake of my life.’”23 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 … relate to him and learn from his behaviour. The episode also … [shows] that Ingvar Kamprad is …a leader who really impacts the people around him in an inspirational and positive way.”24
Some of Kamprad’s other leadership characteristics include humility, a caring nature for IKEA’s employees, a commitment to simplicity and frugality, and a constant desire for renewal.25
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.”26 Another of his lofty pronouncements is: “Wasting resources is ‘a mortal sin.’”27 Kamprad also promises “a better life for many.”28
From the mistakes and the successes, what lessons should others⎯current leaders or those aspiring to become leaders⎯take away from Ingvar Kamprad’s experiences?

SOURCE: This case was written by Michael K. McCuddy, The Louis S. and Mary L. Morgal Chair of Christian Business Ethics and Professor of Management, College of Business Administration, Valparaiso University.

Notes

1. C. Daniels, “Create IKEA, Make Billions, Take Bus,” Fortune 149(9) (May 3, 2004): 44; P. Davis, “Billionaire Attributes⎯Modesty: Ingvar Kamprad, IKEA’s Founder & Owner,” http://ezinearticles.com/?Billionaire-Attributes---Modesty:-Ingvar-Kamprad,-Ikeas-Founder-and-Owner&id=274361 (accessed July 17, 2011).
2. C. Daniels, “Create IKEA, Make Billions, Take Bus,” Fortune 149(9) (May 3, 2004): 44.
3. A. Yakhlef, “The Trinity of International Strategy: Adaptation, Standardization and Transformation,” Asian Business & Management 9(1) (March 2010): 47-65.
4. Anonymous, “How He Made His Pile: Ingvar Kamprad,” Management Today (September 2008): 20.
5. C. Daniels, “Create IKEA, Make Billions, Take Bus,” Fortune 149(9) (May 3, 2004): 44; J. Scully, “IKEA,” Time (Summer 2004): 16.
6. C. Daniels, “Create IKEA, Make Billions, Take Bus,” Fortune 149(9) (May 3, 2004): 44.
7. Anonymous, “Facts & Figures, IKEA Stores 1954-2010,” IKEA Web site, http://franchisor.IKEA.com/showContent.asp?swfId=facts1 (accessed July 17, 2011); Anonymous, “Facts & Figures, IKEAs Store Visits 1954-2010,” IKEA Web site, http://franchisor.IKEA.com/showContent.asp?swfId=facts1 (accessed July 17, 2011).
8. P. Davis, “Billionaire Attributes⎯Modesty: Ingvar Kamprad, IKEA’s Founder & Owner,” http://ezinearticles.com/?Billionaire-Attributes---Modesty:-Ingvar-Kamprad,-Ikeas-Founder-and-Owner&id=274361 (accessed July 17, 2011).
9. Anonymous, “Inter IKEA Systems B.V.,” IKEA Web site, http://franchisor.IKEA.com/index.asp (accessed July 17, 2011).
10. A. Yakhlef, “The Trinity of International Strategy: Adaptation, Standardization and Transformation,” Asian Business & Management 9(1) (March 2010): 47-65.
11. A. Yakhlef, “The Trinity of International Strategy: Adaptation, Standardization and Transformation,” Asian Business & Management 9(1) (March 2010): 47-65.
12. A. Yakhlef, “The Trinity of International Strategy: Adaptation, Standardization and Transformation,” Asian Business & Management 9(1) (March 2010): 47-65.
13. J. Scully, “IKEA,” Time (Summer 2004): 16.
14. Anonymous, “How He Made His Pile: Ingvar Kamprad,” Management Today (September 2008): 20.
15. A. Meisler, “Success, Scandinavian Style,” Workforce Management 83(8) (August 2004): 27.
16. Anonymous, “How He Made His Pile: Ingvar Kamprad,” Management Today (September 2008): 20.
17. P. Davis, “Billionaire Attributes⎯Modesty: Ingvar Kamprad, IKEA’s Founder & Owner,” http://ezinearticles.com/?Billionaire-Attributes---Modesty:-Ingvar-Kamprad,-Ikeas-Founder-and-Owner&id=274361 (accessed July 17, 2011).
18. Testervn on HubPages, “Ingvar Kamprad’s Leadership Style,” HubPages web site, http://hubpages.com/hub/Ingvar-Kamprads-leadership-style (accessed July 17, 2011).
19. Testervn on HubPages, “Ingvar Kamprad’s Leadership Style,” HubPages web site, http://hubpages.com/hub/Ingvar-Kamprads-leadership-style (accessed July 17, 2011).
20. Testervn on HubPages, “Ingvar Kamprad’s Leadership Style,” HubPages web site, http://hubpages.com/hub/Ingvar-Kamprads-leadership-style (accessed July 17, 2011).
21. Testervn on HubPages, “Ingvar Kamprad’s Leadership Style,” HubPages web site, http://hubpages.com/hub/Ingvar-Kamprads-leadership-style (accessed July 17, 2011).
22. Anonymous, “History Lessons: Be Persistent, Ingvar Kamprad,” Management Today (April 2006): 13.
23. Anonymous, “How He Made His Pile: Ingvar Kamprad,” Management Today (September 2008): 20.
24. Testervn on HubPages, “Challenges faced by Ingvar Kamprad, great lesson from IKEA,” HubPages web site, http://hubpages.com/hub/Challenges-faced-by-Ingvar-Kamprad-great-lesson-from-IKEA (accessed July 17, 2011).
25. Testervn on HubPages, “Ingvar Kamprad’s Leadership Style,” HubPages web site, http://hubpages.com/hub/Ingvar-Kamprads-leadership-style (accessed July 17, 2011).
26. A. Meisler, “Family Values, Warm and Fuzzy Math,” Workforce Management 83(8) (August 2004): 30.
27. Anonymous, “History Lessons: Be Persistent, Ingvar Kamprad,” Management Today (April 2006): 13.
28. Anonymous, “History Lessons: Be Persistent, Ingvar Kamprad,” Management Today (April 2006): 13.


QUIZ QUESTIONS
1. What would Zaleznik contend that Kamprad’s desire for fresh approaches to problems suggests he is?
a. Leader
b. Manager

2. Trait theory research indicates that Kamprad had the universal, distinguishing attributes of leaders that would have propelled him into a position of leadership no matter when or where he was born.
a. True
b. False

3. Kamprad appears to have concern both for his people and for the company’s production. Which of the Leadership Grid leadership styles describes this combination?
a. Country club management
b. Opportunistic management
c. Team management
d. Authority-compliance management

4. According to Fiedler’s contingency theory, what are the situation factors that would affect the match between Kamprad’s style and the leadership situation?
a. Position power, task structure, leader-member relations
b. Legitimate power, expert power, reward power
c. Follower ability, follower motivation, environmental stability
d. Time, money, connections to those in power

5. According to the path-goal theory of leadership, Kamprad’s choice of leadership approach should be made in order to motivate employees. Which motivational theory underlies the path-goal approach?
a. Reinforcement theory
b. Goal-setting theory
c. Equity theory
d. Expectancy theory

6. What style does Hersey and Blanchard’s Situational Leadership model indicate Kamprad should use when working with employees who are highly capable and motivated?
a. Selling
b. Laissez faire
c. Participating
d. Delegating

7. Which leadership theory suggests that Kamprad is likely to form different types of relationships with followers, some being in the “in-group” and others in the “out-group,” thereby affecting performance?
a. Path-goal theory
b. Situational leadership model
c. Charismatic leadership theory
d. Leader-member exchange theory

8. Kamprad appears to have a conscious and well developed set of values. Which type of leadership characterized by this?
a. Inspirational
b. Charismatic
c. Authentic
d. Servant

9. Which of the following suggests emotional intelligence in Kamprad’s leadership?
a. Admitting his mistakes and weaknesses (e.g., involvement with a pro-Nazi party as a youth)
b. Turning an observation (an employee taking legs off a chair for transport) into a new idea
c. Strategically expanding the company into other countries
d. Changing product mix as the company evolved

10. Knowing about Kamprad’s leadership one can confidently predict that other Swedish business leaders will be similar.
a. True
b. False

  • SubjectBusiness
  • TopicOrganizational Behavior
  • Difficulty LevelCollege/University
  • Answer has attachmentsNo
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