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Ikea Case Study

2482 words - 10 pages

BACKGROUND INFORMATION

IKEA is an internationally known home furnishing retailer. It has grown rapidly since it was founded in 1943. Today it is the world's largest furniture retailer, recognized for its Scandinavian style. The name IKEA comes from the first letters of IKEA’s founder Ingvar Kamprad and the names of the farm and village where he grew up Elmtaryd Agunnaryd. Although the soil was thin and poor in Ingvar’s village, people had the reputation for working hard making the most out of limited resources. Ingvar applied the lessons learned from his village to the home furnishing market.
Nowadays, IKEA’s vision is “to create a better everyday life for the many people by offering a ...view middle of the document...

g. beds and kitchen wear)
- Vulnerability in dollar to Swedish crown exchange rate
- Local imitators benefited from the introduction of the Scandinavian’s design from IKEA
The US market is not a standalone case for IKEA although it was beneficiary because they learnt a lot from this experience. So in their endeavor to conquer the giant markets we think that symptoms of the same nature may emerge again, so they have to find alternative ways to proceed.
What strategy should IKEA follow in its effort to expand globally?

SWOT ANALYSIS

A very important tool in strategic decision making for the companies is SWOT analysis. Therefore in this case analysis, the SWOT model will be used to help IKEA choose the right strategy to expand globally.

Internal analysis
Strengths:
- IKEA has a strong global brand which attracts key consumer target groups, promising the same quality and price levels worldwide.
- IKEA developed a business model that enabled it to keep low unit cost and benefit from economies of scale.
- IKEA’s association with Scandinavian design is a point of differentiation.
- IKEA’ product offer reaches an ideal balance between function, quality, design and price.
- Supply chain management and the excellent international procurement process. IKEA’s suppliers stretch to 2,300 in 2005 and were located in 67 countries. IKEA creates long-term partnerships with its suppliers. It provides them with leased equipment and technical advice and commits them with exclusive long term contracts in order to achieve large volumes in low cost.
- IKEA has launched its stores as a “complete shopping destination” where consumers besides furniture, they can try and buy Scandinavian grocery products.
- Flat management structure enables fast decision making.
- The firm’s private ownership helps to avoid stock market pressures.
Weaknesses:
- The size and scale of its global business Makes very difficult task to control standards and quality.
- IKEA is a European company trying to sell to a non European audience – with different culture and tastes. So, it is difficult to adapt to local peculiarities.
- The IKEA’s business model dependence on low unit cost can evolve to a handicap when addressing large scale new markets with peculiarities.
- IKEA’s approach to jump into new big markets “feet first” without any prior market research and studies or joint ventures with local players can backfire easily.
- The group is over-dependent on the European market (85.8% of total sales fiscal year 2004) as most of its revenues arise from Europe. Geographic concentration increases the group’s business risk.
External analysis
Opportunities
- There is growth prospect for emerging markets’ economies.
- Globalization smoothes the differences between cultures and companies can address different countries around the world with similar product portfolio.
- Globalization gives companies the opportunity to produce around the world. So, they can...

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