8 Years With IKEA: How Has the Corporate Giant’s Opening Impacted the Economy?

The corporate giant IKEA entered the Lithuanian market on 14 August 2013. Prior to its landmark opening in Vilnius, those living in the Baltic States as a whole had mixed feelings about its arrival.

Small business owners, particularly those closest in proximity to IKEA’s selected location, feared personally adverse economic changes in the form of market domination. In other words, many small business owners were concerned about losing customers and revenue due to the store’s highly competitive presence.

Conversely, other Lithuanians felt optimistic about IKEA‘s newest geographic expansion and welcomed its presence in the country. They anticipated a favorable economic boost and posited both the corporate giant and small businesses would be able to coexist in a mutually beneficial manner.

Initial Economic Impact

Three months after the store’s opening, the first economic figures were publicly announced. According to Statistics Lithuania, the country’s national statistics agency, the market sector of furniture, lighting appliances, and household items grew by EUR 7.5 million. Third quarter revenue in 2013 totaled EUR 34.5 million, whereas the previous year’s third quarter figure sat at EUR 27 million.

Moreover, the sector’s growth was not limited to IKEA; it also included small businesses. In fact, small businesses nearest to the store—the businesses locals were most concerned about—experienced the greatest economic boost. Along with this boost in sales, two hundred new jobs were created as a result of the store’s opening, resulting in further economic gains.

Business professionals believe this somewhat unexpected side-by-side growth came as a result of the differences between IKEA’s products and the products of Lithuanian furniture manufacturers, namely in terms of quality and pricing.

Lithuanian furniture manufacturers tend to produce higher quality items; and while many of these items have higher price tags, prices are overall much more flexible than IKEA’s fixed costs. Local producers additionally offer numerous unique, one of a kind items, which have their own market appeal over the corporation’s mass-produced stock.

Today’s Economic Impact

The IKEA store opened in Vilnius remains in business today and continues to favorably contribute to Lithuania’s economy. Local business owners have additionally been able to maintain their competitive edge against the giant, and thus continue to ensure a market for furniture and household items produced by Lithuanian manufacturers.

As a result of this success, IKEA formally invested in furniture manufacturing outside the country’s capital in late 2017. Seeking to double production capacity, the corporate giant set its sights on Kazlų Rūda, a small city surrounded by forests, and announced plans for the construction of a manufacturing center. This manufacturing center has since been completed and is currently operational.

Prior to the announcement and construction of this additional center, IKEA quietly purchased roughly 38,000 hectares, or 94,000 acres, of forest across the Baltic States. With this purchase in mind, the corporation seems to have plans for additional manufacturing centers in Lithuania, Estonia, and Latvia.

Moving Forward

Increasing production capacity may offer further economic gains to the country, and potentially the region as a whole; however, the environmental and ecological ramifications have yet to be thoroughly navigated and articulated by the corporation.

That being said, IKEA remains a current source of economic prowess in Lithuania, with more and more individuals, both domestically and internationally, becoming interested in buying stock. For those interested in learning about the process of buying stock in IKEA, be sure to check out this comprehensive resource. Learn the ins and outs and explore the pros and cons of buying stock in IKEA before taking the leap; and for more information about stocks in general, visit www.thestockdork.com.