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International Business Environment of IKEA

   

Added on  2020-01-23

11 Pages4201 Words347 Views
INTERNATIONAL BUSINESSENVIRONMENT

GLOBAL EXPANSION IN BRIC COUNTRIESGlobalisation has developed high scope of business development within the economy.Companies are enhancing their commercial operations beyond the geographical limits in order toattain high growth and profitability measures (Grabowski, Stevenson and Cornell, 2012). Thishelps a business unit in creating a wide growth impact in terms of profitability of the business.Increasing market competition has enhanced price wars and quality issues for products andservices. Every business is thus focussing on expanding the business operations in countries toattain a competitive edge by winning cost efficiency within the market. The economy is filledwith examples of the companies which has focused on business expansion and attain hugesuccess within economy. McDonald's started its commercial journey with a small burger outletand developed and enhanced its operations in the industrial market and has become a marketleader in the current market. Similarly, food chain of KFC generated from an individual idea andrecipe however today the organization has more than 18500 outlets across the globe. Liberalization is the policy which has developed the world market into one big market.This policy has faded the power geographical boundaries on business expansion measures.Globalization on the other hand has developed a process of interaction and integration ofbusiness operations. Currently the developed economies are facing a major issues of marketsaturation. The demand and supply gap within developed market is at par which has caused amajor cause of concern for the organizations. Businesses are thus targeting new and emergingmarkets to expand their businesses (Hillbom, 2011). This strategy is useful for the company as ithelp businesses in managing its cost and production rate while focusing on sales enhancement aswell. International expansion is chosen by the companies in order to take varied benefitsregarding cost, sales or growth for the organization. Present study is focused on a UK based furniture company which is presently operatingits business operation in the UK market and is planning to expand its operation in the Asianmarket to attain high sales and growth prospects. IKEA is a British furniture retailer which isefficiently operating its operations on the national and international basis. The company hasnumber of outlets in UK and other countries but it is presently focusing on expanding itsoperations in India. Although firm has operation in India but it has decided to explore some othercity of India. The organization has developed a well established infrastructure and supply chainmanagement within the country. It has an effective online store infrastructure in UK. The current

aim of the company is to establish its manufacturing unit in India in order to gain cost advantageand enhance sales as well (Holtbrügge and Baron, 2013). Indian market is vast and highprospects for growth and development of the country. IKEA will develop high growth anddevelopment measures in the new market focusing on these measures. These are various tools and models that companies use in order to explore its growthoptions within the market. The strategic business development is one of the major aim for everybusiness unit. Ansoff's matrix of the company are defines four major growth measures which thecompanies may adopt for enhancing growth and profitability of the company. Market penetrationis the most effective and commonly used strategy. It enhances the growth and development ofthe business in the current market (Jin and Ryan, 2011). However, UK market has low scope ofgrowth and development thus the company will not adopt this strategy. Product developmentstrategy is another growth perspective which focuses on enhancing the sales by providing a newproduct in the current market. This strategy is not effective for the business as the productdevelopment strategy will be risky and costly for the business. Market development is anothermeasure where the company develops its market reach and focuses on selling the current product

in new market. This strategy will help the company in attaining its business objective and willcreate an effective impact ion the organizational growth as well. On the basis of above selected strategic IKEA will seek new and effective strategies formarket development. The focus of the organization is to establish a new manufacturing plant inIndian market (Kamau, 2014). The possible options available to the company for entering a newand emerging market includes variety of options. The study will analyse and determine the mosteffective and suitable option for the cited company. Exporting is one of the most common and easy form of market entry. This traditionalapproach is the most common and effective means of market development. Direct exporting isthe strategy whereby the company focuses on selling its products and services in the new marketthrough directly. Companies such as Sony, Samsung, Apple etc. are the few examples for thesame. It involves the use of agents or distributors. This strategy is effective and most commonfor the business units which seeks to sell the finished products within the new market (Kaustiaand Knüpfer, 2012). Moreover, unit helps the companies in expanding the business reach anddevelops a new and effective prospect for sale as well. It is highly supported by the governmentIllustration 1: Strategies of market entry

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