Ingvar's Vision for IKEA and His Sons

IKEA Family Ownership

Introduction

IKEA is a family-owned business with a complex corporate ownership structure that somewhat masks the fact that the company is essentially controlled by the Kamprad family. Founded in 1943 by Ingvar Kamprad as a mail-order business that transitioned into furniture retail, IKEA morphed from a small Swedish company to an international corporation by the 1970s. This paper will present the history and description of the family business, provide a company overview and outline of the family tree and ownership structure of the company, assess the current situation facing the company, and give recommendations and lessons learned.

History and Description of the Family Business

The IKEA family business began in Sweden, and was formed by a young Ingvar Kamprad when he was still just a teenager. A young entrepreneur, he had been working in retail from childhood, first selling matches that he purchased in bulk and re-selling them individually at a low price (but sufficient to turn a profit), and then selling fish, seeds, and other items deemed useful to the locals where he grew up.[footnoteRef:2] His father Franz is the one who gave him the seed money used to start what became known eventually as IKEA as a reward for his hard work in business and in school. [2: Daniel Politi, “The Swedish Entrepreneur,” Slate, 2018. https://slate.com/news-and-politics/2018/01/the-swedish-entrepreneur-who-founded-ikea-ingvar-kamprad-dies-at-91.html]

IKEA began as a mail order catalogue but grew quickly into a worldwide brand offering furniture and household goods. Ingvar made the company a success because he understood the consumer and what the consumer wanted. He did not set out to sell cheap furniture that would not last but rather to help consumers get what they wanted as affordably as possible. Once he had them, he offered them a whole line of products that would meet their needs.

Kamprad’s three sons, Mathias, Jonas and Peter, all have board seats within the various groups under the IKEA umbrella today. The three brothers own Ikano Group, which oversees various investments and businesses such as retail, insurance, and real estate.[footnoteRef:3] However, the sons are very active throughout the entire IKEA organization. For instance, in the late 1990s, Peter gave the annual Christmas speech to IKEA employees in Almhult—a speech typically given by Ingvar in the past, but that by the end of the 20th century was just one of many responsibilities being taken over by the Kamprad children.[footnoteRef:4] By 2013, Ingvar had ceded all control over to his sons and stayed on merely as an advisor, with Peter heading Stitching Ingka Foundation, the parent company of IKEA outlet stores. Brothers Jonas and Matthias would also participate in design and entrepreneurial aspects.[footnoteRef:5] [3: Katie Warren, “Ingvar Kamprad,” Business Insider, 2019. https://www.businessinsider.com/ikea-founder-ingvar-kamprad-wealth-family-net-worth-2019-12] [4: Olivier Truc, “King Ingvar and His Three Sons,” Worldcrunch, 2013. https://worldcrunch.com/business-finance/king-ingvar-and-his-three-sons-inside-the-ikea-family-saga] [5: Olivier Truc, “King Ingvar and His Three Sons,” Worldcrunch, 2013. https://worldcrunch.com/business-finance/king-ingvar-and-his-three-sons-inside-the-ikea-family-saga]

Throughout the transition from father to sons, Ingvar worried that the three sons might begin to compete with one another for total control of the company. To prevent such competition, the sons have been surrounded by various executives who oversee the next generation of Kamprads. Prior to his death, Ingvar was still reluctant to have his sons appear in a very public manner as heads of the company. Peter’s Christmas speech, for instance, was not followed up with another: Ingvar did not like the impression it gave and so Peter and the other two brothers have largely been given roles behind the scenes, according to their own interests and characters.[footnoteRef:6] Meanwhile, the division of the company into various groups and foundations, done for tax purposes solely, serves to mask the fact that IKEA is still very much a family-owned and operated business—just one that happens to be a multi-billion international cooperation. [6: Olivier Truc, “King Ingvar and His Three Sons,” Worldcrunch, 2013. https://worldcrunch.com/business-finance/king-ingvar-and-his-three-sons-inside-the-ikea-family-saga]

Company Overview

Size

IKEA is a multibillion international firm with hundreds of outlet stores around the world. Since the 1960s, sales have increased nearly 50x. The company consists of Interogo, Ingka and Ikano groups, with Ikano serving as the “family-owned” group and Interogo and Ingka serving as foundations. Some stores are operated independently under the franchise model, but the majority of them are owned by the family even still today.[footnoteRef:7] [7: Steen Thomsen, “Foundation Ownership at IKEA,” Copenhagen Business School, 2018. http://www.tifp.dk/wp-content/uploads/2011/11/Foundation-Ownership-at-IKEA.pdf]

Products

IKEA’s products fall into the home goods category, but they primarily consist of wood furniture. All of its products are of the IKEA brand, which means they are produced and sold by IKEA—unlike other retailers such as Target and Walmart, which sell various brands in their stores. IKEA’s outlet stores are also more than just shopping centers: they are more like large malls where shoppers get to experience the entire IKEA range of products, eat food, give their children an opportunity to play at the playground, and browse. IKEA is unique in the sense that it has created a brand identity that links the experience of the consumer with the products it aims to sell.

Financial Performance

IKEA’s financial performance has been strong for years. In fiscal year 2015, for instance, “total sales translated into Euro increased by 11.2% compared with FY14, to €31.9 billion. Adjusted for currency impact, total sales increased by 8.9% and sales in comparable stores grew by 5.1%.”[footnoteRef:8] For Fiscal Year 2020, net income was 1.731 billion EUR, largely because of 2020 lockdowns, which temporarily shuttered hundreds of stores across the world. However, with many countries now moving past COVID concerns, IKEA looks to bounce back in 2021.[footnoteRef:9] [8: IKEA Yearly Summary FY15. IKEA Group, 2016. https://www.ikea.com/us/en/] [9: FY20 Financial Results. IKEA Group, 2021. https://www.inter.ikea.com/en/performance/fy20-financial-results]

Genogram and Family History

Ingvar Kamprad was descended from Franz and Berta Kamprad. He grew up on a Swedish farm and worked as a child at selling. He went to school as well, and it was from his father Franz that he gained enough money to begin his mail-order business that he would name IKEA. Ingvar has three sons (who are active in the company) from his second wife, and a daughter from his first wife, as shown in the genogram below.

Ownership Structure

The organization structure of IKEA is such that it consists of two foundations shown in the chart below along with Ikano Group, which is headed by Ingvar’s sons. The foundations are independent for tax purposes, but essentially it is one large IKEA family-run operation. This structure was created partially for tax purposes, but Ingvar was never keen on the idea of handing over his company to children who had not proven themselves to be effective leaders with a vision and set of values akin to his own. He wanted, for that reason, to make sure IKEA would last and this type of structure seemed to him to be the best way forward.

The Stichting INGKA Foundation shown at the top left of the above corporate structure is a Kamprad founded business that oversees IKEA retail and investments.[footnoteRef:10] Meanwhile, as Thomsen explains, “the Interogo Foundation is governed by a Foundation Council (Stiftungsrat, equivalent to a foundation management board) and a Supervisory Council (Beirat, equivalent to a foundation supervisory board). The Supervisory Council (currently 7 members) appoints, dismisses and advises the Foundation Council (currently 3 members). The Kamprad family is entitled to minority representation on the Supervisory Council, but does not appoint Supervisory Council members. Each outgoing member of the Supervisory Council appoints his or her own successor.”[footnoteRef:11] Moreover, “the foundation donation is irrevocable meaning that neither Ingvar Kamprad nor his descendants can take it back. Moreover, the foundation is excluded from directly or indirectly benefitting the Kamprad family. The Kamprad family cannot constitute a majority of the Supervisory Council, nor can they sit in the Foundation Council. No outside party has any legal claim to the foundation endowment or foundation profits. The Foundation Council is charged with full decision-making power as well as representation of the foundation to the outside world. It may elect a president to chair meetings, but decisions are made by majority vote. In case of deadlock, the vote of the chair is decisive. The Supervisory Council is advisory.”[footnoteRef:12] In this manner, IKEA has been organized so that there is little interference from any one person and groups of people. There is a clear structure of oversight with three branches of power in a sense, much like the American system of government—at least on paper. The Ikano Group, run by Ingvar’s sons, is still the driving force of the company, and it will be here that the future of the company is to be determined. [10: Steen Thomsen, “Foundation Ownership at IKEA,” Copenhagen Business School, 2018. http://www.tifp.dk/wp-content/uploads/2011/11/Foundation-Ownership-at-IKEA.pdf] [11: Steen Thomsen, “Foundation Ownership at IKEA,” Copenhagen Business School, 2018. http://www.tifp.dk/wp-content/uploads/2011/11/Foundation-Ownership-at-IKEA.pdf] [12: Steen Thomsen, “Foundation Ownership at IKEA,” Copenhagen Business School, 2018. http://www.tifp.dk/wp-content/uploads/2011/11/Foundation-Ownership-at-IKEA.pdf]

Assessment of Current Situation

Strengths

Before his death, Ingvar was adamant that the company be set up in such a way that it would not be torn about by family in-fighting, the way other family-run businesses have been, such as Reliance under the Ambani family in-fighting. Ingvar thus created two foundations and gave a third group to his sons to manage. This has allowed IKEA to maintain a degree of self-awareness and independence. It is not in the hands of any one individual or set of individuals who can act unilaterally to drive the company in one direction against the interests of stakeholders. Unlike a company like Tesla, which is primarily driven by the whims of its CEO Elon Musk and his allies who sit upon its board, IKEA has been structured in such a way that it is managed as a corporation with oversight and advisory boards acting in a checks-and-balances type of way.

Furthermore, IKEA’s unique brand appeal and distinct relationship with customers sets it apart from competitors. Consumers go to IKEA because it is a trusted name with trusted products, and there is an experience to be had when one goes to the IKEA store. One is not just going to a Walmart or a Target for an item—one is obliged to immerse oneself into the world of IKEA offerings, similar to the way Apple has developed an Apple universe of products that are interconnected. IKEA wants homes to be IKEA homes, and consumers appear willing to make that happen. The main issue going forward is whether the sons of Ingvar will be able to bring anything dynamic to the company now that he is gone.

Issues/Challenges

The sons of Ingvar have their own interests in IKEA—design, entrepreneurial, and management. Their decisions will shape the future of IKEA because they engage in the control of Ikano but also influence the two foundations as well. As Egloff and Bhalla point out, in a family business, one of the most important challenges that succeeding generations face is how to sustain “the magic” and keep the company’s values and vision alive and strong.[footnoteRef:13] To keep the magic alive, the next generation of family business leaders must have a clear vision, a long-term perspective, firm management grip, and the ability to make rapid decisions.[footnoteRef:14] Ingvar certainly had all of these, and he was well-known for keeping a tight watch over the company in every way, shape and form. [13: Camille Egloff and Vikram Bhalla, “Governance for Family Business,” BCG, 2014. https://www.bcg.com/publications/2014/corporate-strategy-portfolio-management-leadership-talent-governance-family-business] [14: Camille Egloff and Vikram Bhalla, “Governance for Family Business,” BCG, 2014. https://www.bcg.com/publications/2014/corporate-strategy-portfolio-management-leadership-talent-governance-family-business]

Other keys to success are to ensure that the next generation of family business owners has a strong entrepreneurial spirit (and one of the sons of Ingvar specializes in this). Another key is loyalty. Because Ingvar divided the company into its current structure, IKEA is bound up in such a way that even if disloyalty were to break out among one faction or another, the controlling influences throughout the company would not be overwhelmed. The only risk is that with so many involved in the decision-making process, it can impede growth, and IKEA has to think strategically about the coming years and decades if it wants to remain strong as a brand that people know and love. It has to consider how it will manage its supply chain and whether it should be more vertically integrated. It also has to maintain sustainability objectives that will influence how consumers see its corporate social responsibility program.

Thus, the main challenge facing IKEA today is what to do about managing its brand and products. 2020 showed how unstable supply chains can became in a globalized world threatened by a global pandemic. IKEA relies on supply chains to get the materials for its products. Yet it could take steps to rectify that situation by becoming more vertically integrated. It also faces the challenge of living up to its IWAY corporate social responsibility program, which views sustainability as one of the most important issues of the time. Importantly, Ingvar saw with his usual long-term view that IKEA needed to be organized strategically, which explains the current structure. This kind of organization is supported by Egloff and Bhalla, who note that “the essential governance body from a business perspective is the board of directors, including committees responsible for investment and strategy, audit, and compensation.

The board works closely with management teams to determine the portfolio of businesses, major investments in the core businesses, and new ventures to pursue. The board is composed of family and nonfamily members selected on the basis of their ownership share, independence, expertise in specific industries or functions, or a combination of these. To preserve the magic that helped drive the business’s early success, all members need to maintain a long-term perspective.”[footnoteRef:15] The sons especially have to be driving that vision and the set of values that will help the company retain its family- and consumer-centric vision, which Ingvar brought for so many decades. Can it do so when the company is no longer under his guidance and is divided up into two foundations and a group? Certainly there is overlap in terms of oversight—but what made Ingvar unique was that he was involved in every decision that was made. It remains to be seen to what extent the sons will take up the reins of IKEA. It may turn out that they cede control over to the various boards and advisors—and if they do the very unique vision and set of values that has made IKEA such a reliable and dependable brand for decades may end up conforming to industry standards. That in turn could end up being a blow to consumer trust. [15: Camille Egloff and Vikram Bhalla, “Governance for Family Business,” BCG, 2014. https://www.bcg.com/publications/2014/corporate-strategy-portfolio-management-leadership-talent-governance-family-business]

For IKEA to stay strong and healthy as a family firm, it will require the sons to take an active role in the decision-making processes while also accepting the executive insight of members of the boards of the foundations. Together they can couple experience with innovation while remaining true to the vision and core values of the company. Ingvar founded the company as a way to bring quality items to people who could trust the IKEA name. The company, facing supply crunch issues, might be tempted to cheapen its materials so as to reduce costs—but doing so could run the risk of harming its quality reputation among consumers.

Recommendations for Addressing Current/Potential Issues

The best place for the organization to start when it comes to dealing with the future of the organization is how to maintain the unique brand and appeal that IKEA has for customers. Ingvar was very good about making that connection work: he had brought the company to life by engaging with customers directly; that was his method from the beginning—always going out to get an understanding of what customers wanted, from the time when he was just a boy. He learned early on that there was potential in selling matches individually, and from there he learned that one could scale by selling individual pieces of furniture, and from there he learned that he could sell people everything they wanted for their homes. He learned these lessons from being on the streets, meeting people, and getting a sense for the business.

His sons grew up in his shadow, and came into the world at a point where IKEA was already an organizational success. It had not yet turned into quite the global sensation it would become by the 21st century, but it was well on its way. By the end of the 20th century, the sons were old enough to begin taking on some responsibilities in the company and forging their own path—but they essentially inherited a company that they did not start and that they had little to do with in terms of setting up and leading. Moreover, Ingvar was very protective of IKEA and did not want it to be shattered by sons who might bicker over the direction of the company. That is why he separated it into two foundations and another group, each with its own structure. The sons would oversee one group, and boards would oversee the foundations. That way Ingvar believed he could ensure that IKEA would be less likely to succumb to internal pressures and he could limit the risk of family in-fighting over control once he died.

However, external pressures and forces face IKEA today. One of them is the fact that global supply chains have been hurt by the 2020 lockdowns and the ongoing COVID crisis. IKEA has been forced to reassess its strategy going forward. Its main challenge today is to integrate its IWAY focus on sustainability with the demands of production in a world hampered by supply chain constrictions. This is where the sons of Ingvar may be able to shine and lead the way forward for the company. In charge of Ikano Group, it is their job to make sure IKEA is investing in enough forest land to cover its supply needs. The only downside to this strategy is that forests need maintenance and it would require the Group to oversee logging and other activities related to bringing the wood to production facilities. The sons, however, have kept a low public profile in the company and are used to steering the ship out of the public eye. The strategy of IKEA to increase its land holdings so that it is no longer so reliant on third parties for lumber while at the same time meeting its sustainability objectives may be the one way that the sons can carry on the legacy of their father.

At the same time, IKEA has for decades been under the guidance of Ingvar: he is so associated with the success of IKEA that now that he is dead there is no longer a public face or presence behind the brand. As The Economist has reported, “the presence of a founding family seems to be good for a business’s image.”[footnoteRef:16] It is therefore perhaps important that Ingvar’s sons come out of the shadows to take more of a public and executive role in steering the company, so that the public sees IKEA still as a family firm and not so much as a sweeping monolithic international corporation. After all, the name IKEA is taken from the initials of Ingvar’s first and last name and the first letters of the farm where he grew up. Its very name is saturated with a sense of family and home. It would be good for the company’s public image to see a son of Ingvar giving that same sense of family and home to the company. When Peter gave the Christmas speech in the late 1990s, it was a movement in this direction—but Ingvar did not like the impression his son gave, so it never happened again. Two decades have passed since then and it might be time for at least one of the sons to appear more directly in the spotlight. For as Ward notes, it is family values that drive business strategy and continuity.[footnoteRef:17] The family behind the company has to ensure that the same vision and values that served as the core essence of the company in the beginning are maintained from one generation to the next. Otherwise, the company can become lost in a fog of corporate bureaucracy. For the time being, the structure of IKEA is such that it is meant to provide a kind of bureaucratic security—but in the long-run the company is going to need some vision and sense of family in order to make sure it is still in touch with its founders’ values. [16: The Economist, “Business in the Blood,” November 2014.] [17: John L. Ward, “How Family Values and Vision Drive Business Strategy and Continuity,” Universia Business Review, 2011.]

Because 70% of family businesses only last a single generation it is especially important that the sons of Ingvar assume some public responsibility as IKEA looks to secure its position and continue its growth strategy in the 21st century.[footnoteRef:18] It is up to them to carry on the family name within IKEA and to instill the kind of values important to the brand and its consumers for years to come. [18: Boris Groysberg and Deborah Bell, “Generation to Generation: How to Save the Family Business,” HBR, 2014.]

Lessons Learned

As George Stalk and Henry Foley argue, “a job with the company shouldn’t be an entitlement. Family members deserve no special accommodation.”[footnoteRef:19] This appears to have been Ingvar’s sentiment exactly. He could have handed power over to his sons without worry—but he examined how ready they were, what skills they brought, and assessed their performance in the spotlight. After his eldest son gave a public Christmas speech usually given by Ingvar himself, the patriarch determined that the time was not right for his son to assume such public responsibilities. Ingvar was not about to allow his sons to change the face of IKEA just because they were his sons. He thus structured the company in such a way that they could not damage it too badly even if they tried. If a family business is going to survive from one generation to the next, therefore, it has to be because the family members of the next generation want it to survive and are willing to be as committed to it as the generation before them was. Ingvar gave his whole life to guiding and growing IKEA—and after he died, it was up to his sons to determine how involved they would or could be. Each son had his own interests—one in management, one in design, and another in entrepreneurial work. None of them showed the kind of all-seeing zeal that their father had, and their father, understanding this, did not pass off total control to them but instead created a structure in which various boards would take part in the decision-making process. This has helped to ensure that the family members of Ingvar are not just awarded top positions because they are sons: they have to earn the respect of the board and bring the same vision and set of values that Ingvar had if they want to remain embedded in the organization. [19: George Stalk and Henry Foley, “Avoid the Traps that Can Destroy Family Businesses,” HBR, 2012.]