Managerial Economics Analysis of IKEA's Market Structure

MANAGEMENT
ECONOMICS- 2

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Introduction of company.............................................................................................................1
Analysis of market......................................................................................................................3
Different market structure...........................................................................................................6
Suggestions for the company operate in a different market structure and the government
interventions................................................................................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Concept of managerial economics focuses on solving issues of entity and decision making
with implementation of models related to microeconomics and macroeconomics. It uses multiple
tools which belong to various disciplines that are statistics, production, human resources and so
on (Zhang and et. al., 2018). In a business, it aims to provide effective framework to make
decision that are focussed for maximising outcomes and profits. It highlights enhancement of
efficiency of organisation by employing all possible resources which increases output as well as
decrease unproductive practices. To gain insights about managerial economics, IKEA is chosen
company which is a conglomerate specialised in designing as well as selling ready to assemble
home accessories, furniture, kitchen appliances and other home services. It was established in the
year 1943 by Ingvar Kamprad.
The project highlights about the company, its products and past. It further analyse market
structure wherein the business is operating since inception. It also discusses characteristics of
past market structure and suggestions for intervention of government.
MAIN BODY
Introduction of company
IKEA is largest retailer of ready to accumulate home accessories, furniture along with
various home related products and services. It was founded at Sweden by Ingvar Kampard in
1943 with the vision of creating better everyday life for various people(Dehghani and Yoo,
2020). The company work with mission of offering wide category of well-designed and
functional home furnishing goods at lowest prices so that many people are able to afford them. It
has modernist designs for ample kinds of appliances, furniture addition to its interior designs
work is related to eco-friendly simplicity. In the year 2019, the company has earned revenue of
approximate € 41.3 billion. It serves at global level including key areas of Europe, Southeast
Asia, Middle East, Oceania, North Africa and so on. It has presence at more than 445 locations
worldwide. At present, IKEA range includes 9500 home furnishing articles that are designed for
functional as well good looking, while at low prices.
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Figure 1: Retail sales share of IKEA worldwide. 2021
(Source: Retail sales share of IKEA worldwide. 2021)
From the presented graph, it is determined that product line of IKEA is huge. In the year
2019, living room based products of the company held around 19% that is second highest retail
sales share. At same time, outside of other category with 19% of IKEA’s international retail
sales. Moreover, its other products including bed & bathroom was accountable to 22%, food to
5%, kitchen & dining to 15% and children to 5% shares in the industry.
In the year 1943, IKEA was established as mail order sales business. It began to sell
small household products such as wallets, pens along with frames for pictures initially and
opened first store at Älmhult, Småland in 1958. In 1963, IKEA’s first store at global level was
launched in Norway and Denmark in 1969 to sell furniture products. In 1970s, stores of the
company spread to another parts of Europe following Switzerland in 1973 and West Germany in
1974(Cretì and Fontini, 2019). Later the decade, stores of the business were established in
Japan, Australia, Canada, Hong Kong and the Netherlands. The company had biggest market in
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