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IKEA vertically integrates with new purchase
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By: Teri Bernstein

 

 

 from the LA Times

 
Swedish home furnishings company, IKEA--famous for its meatballs as well as its assemble-it-yourself bookshelves--recently signed an agreement to purchase TaskRabbit. TaskRabbit is a San Francisco company that provides a platform by which various services can be arranged with independent contractors.

When a company buys another company like itself, it is horizontal integration. When it buys its suppliers, distributors, or servicers, it is vertical integration, which applies to the TaskRabbit purchase. We can't get all the details of the purchase, however. IKEA--which is controlled by a trust based in Holland--has purchased a corporation that previously had been funded by private venture capital. Because IKEA is also not publicly traded, it can choose NOT to disclose the price it agreed to pay for TaskRabbit.

The deal is expected to be completed sometime in October, but TaskRabbit will continue to operate autonomously. 

 

Source: "IKEA enters "Gig Economy" by Acquiring TaskRabbit," by Tiffany Hsu, New York Times, September 28, 2017.

 

Discussion:

  • There are marketing hurdles to overcome when any new product is introduced. What are the hurdles for a tasking service? Check out this TaskRabbit link. How do they mitigate this "new product" hurdle? What do they fail to address?
  • How do you think that the relationship with IKEA will affect TaskRabbit--both in terms of its management and its customer demographics? Any downsides?
  • What does IKEA stand to gain?
  • Describe IKEA's unusual capital structure.