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Ikea boss promises more openness

Ikea chief executive said it would be more open after a wave of scandals.

Story highlights

  • Ikea's chief executive defended its culture after spying and bribery problems.
  • Mikael Ohlsson said the privately owned flatpack furniture retailer would continue to open up
  • Ikea has been buffeted by scandals in recent years including accusations of spying in France
  • In Russia two years ago it fired two senior directors for allowing a contractor to bribe an official

Ikea's chief executive said the privately owned flatpack furniture retailer would continue to open up as he defended its culture after spying and bribery problems.

Mikael Ohlsson told the Financial Times the Swedish group would talk more about its actions and strategy only two years after it first started disclosing annual profitability and sales.

Asked if Ikea was secretive, he said: "I know it has been perceived like that. A lot of that is disappearing. We have focused always on our customers, on our range, on our suppliers. We have spent very little time to make interviews with the Financial Times."

He added: "We show [products] in reality rather than talk about things. I hope we will always focus on reality first. But gradually we are describing more what we are doing ... We have maybe been a bit shy."

Recent weeks have seen a flurry of activity from Ikea. The Swedish group, the world's largest furniture, announced that Mr Ohlsson would step down as chief executive next year.

At the same, it also disclosed that the sons of Ingvar Kamprad, the founder, had more prominent roles within the group than previously realised. And it unveiled plans to invest up to €20bn by the end of the decade as it seeks to more than double the pace of store openings. That came after a sister company of the retailer said it would start building budget hotels.

    Ikea has been buffeted by scandals in recent years including accusations of spying in France earlier this year that caused it to suspend three senior managers, including the former head of the country. In Russia two years ago it fired two senior directors for allowing a contractor to bribe an official.

    That scandal in part caused the company to slow the pace of its expansion but Mr Ohlsson said its strong focus on values would protect it.

    Clues on how parts of the company fit together

    Understanding Ikea in the past has been a little like trying to build one of its pieces of furniture without an instruction manual.

    In recent weeks and years, however, the Swedish group has provided pieces of information on how some parts of the company fit together.

    Spurred by revelations about its tax structure, unearthed by investigative journalists in Sweden, and a fiercely critical book from a former top manager, Ikea slowly revealed the complex way in which the empire of furniture retailers is knitted together with companies that control its brand, properties and the investments of the founding family.

    More recently, Mikael Ohlsson, the chief executive who is due to step down next September, published the furniture retailer's results for the first time since it was founded in 1943. In 2011, sales rose 7 per cent to €25.2bn and operating profits were up 15 per cent to €3. 6bn. Now he is prepared to discuss Ikea's strategy up until 2020, and hints that more openness could come.

    His plans -- which will be carried on by his successor, Peter Agnefjäll, currently head of Ikea in Sweden -- involve a remarkable expansion as Ikea tries to break into new markets such as India and rapidly boost its presence in China.

    Store openings will be hiked from seven last year to an annual rate of 20-25, Mr Ohlsson says. "We have had a few years when we have built a bit fewer stores and invested heavily in existing stores. Now we are gradually increasing the establishment pace again. It is very exciting."

    He wants to open three stores a year in China, up from one currently. He is even looking to expand in economically stricken Spain and Italy.

    "For most people the home is the most important place in the world. Most people need to have good and functional solutions: that is universal," he explains of plans for new stores in the likes of Barcelona, Valencia and Pisa.

    Ikea, privately owned by a web of interlocking foundations and companies, has an idealistic creed "of creating a better life for people". But it strives for this lofty aim through the concrete practice of continually lowering prices by squeezing out every cent from every process from design and packaging to transport. Prices fell by 2.6 per cent in 2011.

    Mr Ohlsson says more is to come: "We want to drive unnecessary costs out of the system and price the products lower and lower. I see very big opportunities going forward when it comes to industrialisation to help the cost picture and it will help the quality even further. We will keep the direction but amplify it."

    As it expands into more countries, Ikea has kept its stores remarkably similar in terms of design and what is inside. Mr Ohlsson says there will continue to be a core range, but adds that there will be some variations -- and even entirely new products -- in certain markets.

    Mr Ohlsson is adamant that the rapid expansion of Ikea will not come at the expense of its values, despite recent scandals and allegations, including The Truth about Ikea, a book by former manager Johan Stenebo which claimed the company was controlled by a cult-like dictatorship.

    "The uniqueness of Ikea is that it is value-based where, independent of role or level, you are responsible for being part of the success. That is why people stay so many years in Ikea," says Mr Ohlsson.

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