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Global Business Expansion Strategies

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Added on  2020/01/21

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This assignment delves into the complexities of global business expansion. It examines various essential factors that businesses must consider before venturing into international markets. These include thorough market research and analysis, understanding legal and regulatory frameworks in target countries, navigating cultural differences, managing logistics and supply chains, and implementing effective marketing strategies. The assignment also emphasizes the importance of corporate social responsibility (CSR) in global business operations.

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Business Project

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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Factors considering when trading across borders.......................................................................4
Considerations should IKEA look at when trying to create Social Impact.................................8
Consideration for enhancing business performance of IKEA. and applications of academic
discussion and theories..............................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................17
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INTRODUCTION
Global business expansion is an activity in which a business starts operations into other
regions throughout the world. Global expansion is far more beyond than an investment in an
outside; as it’s a concept of creating and maintaining actual presence of business in such
countries. In the present era, international business has significantly gained attention throughout
the corporate world as many companies are looking for unique and cost effective ways to expand
company’s business in the overseas markets. This became possible due to globalization which
has improved trade, boosted labor market and capital mobility as well as enhanced the level of
technology and its use. The factors have significantly influenced leaders to expand business in
entering markets. The growth of multinational companies depends on various factors affecting
entry of business into new areas. In the present scenario, multinational companies are finding
new ways to expand business in profitable foreign markets to gain economies of scale.
Nonetheless, there are some trade barriers which are still exists in various marketplace and
affects the growth and international expansion of companies. The business report herewith aims
at carrying out various aspects of international expansion of a leading MNC, named IKEA. This
is a well-known Swedish furniture manufacturer founded by Ingvar Kampard in 1943 in Sweden.
The corporate entity manufactures and sells home furnishings and accessories with unique
designs.
The products of IKEA are offered at low prices so it can be afford by middle class
people. The vision statement of IKEA is to create a better life for society and in this way
company designs furniture’s and offer it at the lowest prices. The business idea of IKEA is to
offers rage of designer furniture products at the competitive and low prices to create a unique
brand image in the marketplace. The major market of IKEA are the people of middle income
level and wants to live a stylish life, therefore, it designs unique, cheap and affordable furniture
so as to carter the needs of people who cannot afford designer products.
In present scenario, IKEA is emerged as a powerful brand throughout world in terms of
designer and affordable furniture seller. The company has successfully expended its markets into
various emerging markets now it is looking for untapped markets so as to expand business
operations. The low cost leadership strategy is incorporated with IKEA’s unique business model
so as to carry effective business practices in different markets. At present, the company is
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operating in Europe, North America, Asia and Australia and in future it is planning to expand for
expanding business in emerging markets such as Latin America, Africa and so (Case Study –
IKEA. 2016). The report herewith is going to deal with number of factors which are to be
considered by IKEA when trading across borders. The different factors are to be considered at
the time of business expansion across borders and these are discussed here. The company has
expanded its business globally and is looking for further business expansion which is a major
reason for choosing this multinational company. Further, this unit is going to discuss on the
considerations which should company look at when trying to create social impact. Various
academic theories and models have been used which relates to international business and
corporate social responsibilities considered when to expand business in overseas markets.
Factors considering when trading across borders
In the modern setting, it is constitutional for organization to modify their services and
products and to deal their products across the boundary line so that they can deliver the goods in
the competitive environment (Ryan and Mulholland, 2014). Moreover, in the globalized period
of time trade among assorted economic system plays vital role within the organization as it
assists in enhancing their market share with the certain increase in their profitability ratio. In
order to become the leading furniture company in the market IKEA must ensure delivering their
quality furniture products across the borders. Globalization process is consider as an integral and
integrated concept whose main perspective is to exchange the merchandise and services outside
the national frontiers. As per the view of Kayser and Peress (2012) trading across borders will
help the furniture company in increasing and enhancing their sales and profits with boosting the
prestige of company so that they may easily attract the customers towards their furniture
products. Moreover, trading across the border also benefit the furniture company in exchanging
the technical know-how that will benefit the company in producing the quality furniture of
different styles that results in increasing their efficiency. On the other hand, Koh Fichman and
Kraut (2012) has also stated that while trading across the borders it benefit the company in
improving the quality of their furniture products. Through setting up or establishing the IKEA
manufacturing store in the developed countries it results in availability of low cost of labour that
will benefit the company in lowering the cost of production (Busse, Hoekstra and Königer,
2012). On the contrary, there are also some disadvantages of trading across border that is with

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the emergence of leading furniture company in the new region that will affect the production of
local furniture company.
There are several opportunities that is available for furniture company while spreading
their activities in the new marketplace (Beck, 2015). Moreover, these opportunities support the
IKEA company attaining their global marketing objectives. In the contemporary scenario, there
are various goals that need to be accomplish by IKEA to become the leading company across the
globe that is-
1. Another global objective of IKEA is to increase or enhance the profit margin that will
promote the establishment in targeting new region for enlarging their businesses.
2. Furthermore, another objective of trading across the borders of IKEA is that they need to
achieve the contending edge through attaining competitive advantage over their
competitor furniture companies (Baylis, Smith and Owens, 2013).
3. The key global objective of IKEA organization to pursue and render the quality factory-
made furnishing and other household interior items such as chairs, sofas etc to fulfil the
requirement of geographical customers through trading across the nation.
4. Last objective of enabling trading across the border is to ensure powerful brand image of
furniture company among their customers (Pieterse, 2015).
Therefore, for accomplishing the global objectives IKEA furniture company must engage
their activities across the border. Further, there are certain factors that need to be considered by
the IKEA furniture company when they are going globally that mainly include- Financial factors- The foremost factor that need to be consider while trading across the
border include determining that how must financial investment is needed by IKEA
furniture company to trade or deal their products across the national boundaries.
Financial factor is the significant factor that will support the furniture company in
establishing and setting their new premises within the international market (Eriksen,
2014). Moreover, for going in the global market it is essential for the company to
consider immense financial capital that would support them to succeed in the new market
and even to maintain their foreign distribution network of their furnishing products.
According to De Marchi Di Maria and Ponte (2013) if the company is financial stable
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and possess sound financial factor then in such situation it will benefit the company to
trade across the boundary line. As compare with the domestic activities to deal furnishing
and furniture products across the national boundaries IKEA company requires greater
degree of investment. On the contrary basis Lihra, Buehlmann and Graf (2012) has also
stated that with the low financial condition IKEA would not able to trade across the
border as company requires huge financial investment to successfully implement the
activities in international market (Akhter and Fernando Pinto Barcellos, 2011). Cultural factors- Another factor that need to be considered by IKEA furniture company
to trade across the border include assessing cultural factor of the market under which they
are trading their furniture items and products. The cultural factor mainly include taste and
preferences of the customers, customer habit, age and demographic element etc. trading
in international market may be difficult for IKEA company because of changing taste and
preferences of the customers (Grzegorzewska, Niziałek and Olkowicz, 2014). The citied
furniture company focuses on selling customized furniture but while dealing the furniture
products in the new region the customers mainly prefer to opt modern type of furniture
that is ready to assemble. As, the ready to assemble furniture is portable in nature and it
can be easily shifted from one place to another. Cultural factor also include assessing the
age ad demographic element of the international market where they are trading their
products. For instance; in UK the ratio of old age or senior personnel are higher. Thus,
furniture company must develop their products according to the need of demographic
customers in order to satisfy their requirement. Therefore, to successfully trade in the
international market IKEA company consider the cultural factor. Economic factors- Another factor that need to be considered by IKEA furniture company
for successfully trading across the borders include measuring the economic condition so
that they can easily determine the feasibility of trading their products across the
boundaries (Capello and Perucca, 2015). The economic factor include measuring the per
capita income of the country that would support in determining the condition of potential
target market and they conditions regarding purchasing the high quality products.
Economic factor also include assessing the relevant class structure present with the
country that class structure mainly have upper, middle and lower class customers. Thus,
assessing the class structure of the region would support the IKEA in determining the
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actual requirement of customers that further support them in producing the required
furniture products according to the class (Nicolai'dis, 2014). For instance, countries like
UK have large population that belong of upper class structure therefore, they requires
quality and modern ready to assessable furniture as compare to the customized furniture.
Political and legal factors- In order to trade successfully across the borders IKEA
company must also focus on different political and legal factors as the political factor
include devising different laws that would impact the business activities of furniture
company. For example in Thailand the law specify that foreign individual or company
can possess more than 49% of business thus, for trading their furniture products in
Thailand IKEA company must formulate partnership with other company (Narula, 2014).
In addition to this, company must also measure the international taxes of region under
which furniture company is operating and selling their furniture products. Taxes mainly
affect the activities of company and even it impact the ratio of selling and profit as with
the high tax rates company would higher the prices of their furniture products. Thus, it is
essential factor that need to be considered by the IKEA furniture company to successfully
trade across the national boundaries.
In addition to this, there are some other factors that need to be considered by the furniture
company so that they can successfully trade their furniture products as well as household
furnishing items across the domestic boundaries (Xu and Julian, 2014). The factor include
assessing the market conditions of furniture items that is measuring the demand and supply of
furniture products in the market where company want to trade their products and services. The
effectual market condition will support the company to engage international trade of their
products as the furniture and other household items are purchased by the customers. On the other
hand, if market conditions are not in the favour of furniture company that is there is no demand
and supply of furniture products in such situation company would not trade their products in
such region or area. In addition to this, IKEA must also consider the technological factor while
trading across the domestic boundaries (20 Factors to Consider Before Going Global, 2016).
Technological factor in the present scenario is consider as the vital factor that need to consider
by the firm to market their products in the other region. It basically support the organization to
perform their business activities in the effective and effectual manner. With the help of
technological equipment and tools in the international market it will benefit the furniture

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company in manufacturing and producing the quality furniture according to the requirement and
needs of the customers. The technological factor also support the firm in reducing the production
cost as well as it also reduce the usage of labour for producing the furnishing items. In addition
to this, technological factor is also consider as key factor that would support the IKEA in
promoting and marketing their furniture products and services so that it may attract large number
of customers. Furthermore, for trading across the domestic market IKEA furniture company must
also consider resource availability factor (Factors to Consider For International Marketing,
2015). With the proper and adequate resource availability in the international market IKEA
would carry out their activities across the border. With the proper availability of resource in the
international market would support the IKEA in producing and manufacturing the parts of
furniture as well as it also assist in producing the customized furniture for different customers.
Considerations should IKEA look at when trying to create Social Impact
Within today’s century, Companies are becoming more responsible to do business in a
manner to create social impact of business and to lead market positions. The forward-thinking
strategy of IKEA helps company to be the leader in selling low cost furniture. The customers
have become more concerned towards socially responsible companies and wants to consume
products of such companies (Purgał–Popiela, 2012). This aspect has pressurised IKEA to
conduct ethical and environmental friendly practices and to be more social. Now, business has
operations in 48 countries+ companies, however, it also has having 384 stores. The company
always focuses on growth strategies nonetheless, some specific factors are to be considered for
creating a social impact of business in community where it operates to ensure sustainability in
long run. The corporates entity’s topically believes in becoming socially responsible towards
society and environment, but do not creates more publicity. The corporate entity discussed deals
with manufacturing and selling of designer home and corporate furniture at the lowest prices.
The major criteria of creating social impact of business is win consumer faith in sustainable
practices, stylishness, function and prices (Rexhepi, Kurtishi and Bexheti, 2013). The corporate
entity is specifically known for selling products at the lowest prices in both home and
international market but the social impact is to be created by minimizing negative impact of
business practices on the environment. The cited company is committed to reduce environmental
impacts so as to it approaches towards innovative practices all through supply chain. Following
points are to be considered by IKEA look at when trying to create Social Impact
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Risk assessment and extensive product testing
The company deals in products so that it has to carry out proper risk assessment of
manufacturing product in each country in which business has manufacturing unit. This is because
to assess that manufactured products must be safe in all aspects. The business has to evaluate and
detect problems are risks with products so as to eliminate potential hazards (Freeman and
Hasnaoui, 2011). At the time of product development there must be specific tests that must
further carried out in accordance with international safety and quality standards. The in-depth
research into IKEA’s operations carried out the facts IKEA has Test Laboratory in Älmhult,
Sweden which keeps eye on IKEA’s designs and ensures that products must reduce environment
and social impact. In each country, the products may be distributed after proper laboratory test.
The products must not harm the environment for this business must conduct proactive risk
assessment and extensive testing.
Sustainable product development
During the manufacturing process, IKEA uses chemicals but, it should consider that use of
chemical must not put negative impact on environment and society. The raw material used for
products must include safest possible chemicals that must not harm individuals and society. The
organization is significantly responsible to lead and support sustainable practices at the time of
creating value chain activities (Elliott, 2012). At the new manufacturing site, company has to
arrange trainings for product developers, technicians and other staff for minimizing the wastage
of water, energy, etc. IKEA launches a program named as “IKEA Sustainability Product Score
Card” to create more sustainable product development practices. The corporate entity should for
effective use of production techniques so as to carry out the lowest possible emissions.
Efficient use of available resources
The major way to create social impact of business is to make effective and sustainable
use of available resources. At each manufacturing plant, IKEA must go for efficient use of
energy as well as the lowest water consumption which make it socially responsible (Dominelli,
2012). The mentioned entity is focused towards renew and recycle of materials. In the
manufacturing process, IKEA uses good quality of wood, cotton and glass and the raw material
used for minimizing environmental impacts. The corporate entity is committed to economizing
resources and to make more from less resources.
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The sustainable use of resources by IKEA’s is evident in the form of hollow legs on
furniture for the purpose of saving wood. In addition to this, during the manufacturing process,
IKEA uses blend cotton so that negative impact of material can be reduced (Grusec and Lytton,
2012). However, the negative effects on quality can be overcome by the ways of securing raw
material and its negative impacts to environmental and social concerns.
Implementing legislation against handling of logged wood
In order to create social impact IKEA furniture company must consider implementing the
various legislations and laws related with handling the logged wood (Grzegorzewska, Niziałek
and Olkowicz, 2014). The company is engaged in cutting woods from forests therefore to
overcome the forestry challenge company is constantly reviewing the various techniques so that
they may acquire achievable return from the tree trunk. Countries like US, EU, Australia,
Switzerland etc. have already centred on implementing different legislation related with
preserving the environment and avoiding handling of illegal hogged wood for manufacturing or
producing the high quality furniture items and products (Bishop and Pagiola, 2012).
Furthermore, the supplier of IKEA would also implement the legislation within their activities
and forestry practices so that they can easily supply the quality wood volumes. Therefore, to
overcome the forestry challenge IKEA company can also cooperate with the forest manager so
that they can easily access the availability of wood and other raw material in the proper manner.
Striving for more efficient supply chain
Furthermore, IKEA furniture company should also consider the effective supply chain
factor in order to create social impact. The supply chain of furniture company basically include
variety of services such as procurement of raw material, production activities, Distribution
activities etc (Ghai and Vivian, 2014). When consumers visits the furniture retailer like IKEA,
they generally focuses on looking variety of products that are presented and available within the
store. Moreover, the customers are not awake that before the furnished product reach to the
ultimate customers the raw material is move through certain stages so that ultimately it results in
direct selling. Thus, the company require to focus on ethical and serious activities so that
products may not harm the environment. For this, IKEA company strive towards enabling
effective supply chain so that it may not harm the overall environment (Dempsey and et.al.,

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2011). The company has hired their own vehicles for the transportation thus they use the
transport system that is environment friendly in nature.
For the efficient supply chain IKEA company also focuses on the smart packaging of
their products. It is considered as the most effective way that assists in reducing the
environmental consequence from the transport of goods and services. In addition to this, for
modifying the filling rates that company must engage in the effective packaging of their
products. Furthermore, the trucks or loading containers plays significant role in creating the
social impact as well as it will also assist in preserving the environment factor (Vallance,
Perkins and Dixon, 2011). The loaders that are purchased by the IKEA must meet the
environmental requirement that engaged in reducing the carbon emission rate that affect the
environment.
Following IWAY (IKEA Way on Purchasing Home Furnishing Products)
It is consider as an IKEA code of conduct that basically focuses on undertaking or
defining the minimal requirement that shows concern towards protecting or preserving the
environment as well as working condition of the company in order to create social impact. In
addition to this code of conduct contain different provisions and requirement that would support
the furniture company to engage in the ethical and fair practices. However, this code of conduct
need to be focused by the wood product suppliers so that they may not supply the wood from the
forests that have been illegally harvested (Cambero and Sowlati, 2014). This code of conduct
also ensure that wood is also not acquired from the woodland that is harvested in Intact Natural
Forests or in the geographical High Conservation value forests (HCVF). In addition to this it also
prohibit the supplier to take wood from the natural forest that are within the tropical and sub-
tropical region.
Creating efforts on active partnerships
Another consideration that is used by IKEA furniture company in order to create social
impact is forming partnership with different organizations instead of making charity or
donations. The contemporary social project focuses on meeting the requirement and needs of the
customers therefore, the company would collaboratively work with the partners such as UNICEF
or other organization for developing the society (The IKEA Group approach to sustainability
How we manage sustainability in our business, 2011). With the group action of WWF and IKEA
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company they focuses on the environmental projects in order to preserve or protect the
environment. Furthermore, with considering the partnership among different NGO's they would
outcome in overcoming the illegal activities within the premises such as child labour activities
for producing the modern day to day furniture.
Engages in the community
IKEA furniture company plays progressive role within the society and community under
which they perform and operates their manufacturing activities. The leading furniture company
take part in a wide scope of activities that are operated locally, nationally and globally. With the
help of partnership firm or other organization company designed the furniture according to the
needs and requirement of customers (Elliott, 2012). Through engaging within the community
IKEA furniture company can easily assess the requirement of individual within community they
would prioritized the different social issues those are related with the children or victims if the
natural disaster. So, that they can engage in providing and uplifting the individual within the
community.
Consideration for enhancing business performance of IKEA. and applications of academic
discussion and theories
In order to enhance the business performance of IKEA furniture company in regard with
the trading across borders and creating social impact company often use two different academic
theories such as Carroll's Pyramid model of corporate social responsibilities and EPG model for
trading across the border (Orlitzky, Siegel and Waldman, 2011). In order to explain the social
impact of IKEA practices Carroll's Pyramid is taken into the consideration-
Carroll's Pyramid
Corporate social responsibility in the general term is define as company possess various
responsibilities towards their stakeholders and society that would assist them in enhancing the
performance of furniture organization (Grusec, and Lytton, 2012). The Carroll's Pyramid model
is framed by Carroll that basically focuses on the four heads that is economic responsibility,
ethical responsibility, philanthropic responsibility and legal responsibility. According to
Dominelli (2012) the present scenario ensure that company must avoid generating profit
maximization rather than they must focus on attaining the CSR activities towards their different
stakeholders (Dominelli, 2012). Further, this model plays significant role in understanding the
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different internal and external environment as well as certain responsibilities towards their
different stakeholders (Freeman and Hasnaoui, 2011). The foremost responsibility of the
company is related with economic that ensure company to be profitable and earn the higher
profit. Under this responsibility IKEA provide attractive and sound return to investors for their
investment (Pyramid of Corporate Social Responsibility, 2010). Another responsibility is related
with legal perspective that ensure furniture must obey or adapt the law that are framed or set by
society within their operations and activities so that they may easily satisfy and meet the
requirement of their stakeholders (Renouard, 2011).
In consideration to the IKEA furniture company they must also focus on philanthropic
responsibilities that is it ensure that company must ensure to be good citizen that results in
contributing the activities towards social benefit, educational and cultural purposes etc.
moreover, the last type of responsibilities for the IKEA include ethical responsibilities that
ensure company must engage in the ethical practices and activities to meet the needs of different
stakeholders. Therefore, the business must on managing their practices and acidities under the
moral criteria or standard (Rexhepi, Kurtishi and Bexheti, 2013). In the present context with the
growing demand of corporate social responsibility company merely not engaged in the donation
programme but the company has become more awake towards attaining the environment
sustainability through using the method and tools that minimal impact the overall environment as
well as it also assists in enabling the human welfare.
EPG model of international business
The present organization mainly concentrates on identifying the conformable
development and growth in the performance of organization through taking different steps.
These steps will further benefit the organization in enhancing the sales turnover with attaining
the market share in the international market (Purgał–Popiela, 2012). In order to expand the
business activities within the international market management of IKEA furniture company must
focuses on enabling active participation of their staff and employees. For enabling the proper
trading of furniture products across the national boundaries the company mainly focuses on the
EPG model.
EPG (Ethnocentrism, poly-centric and Geocentric) approach is mainly framed by
Howard V. Perlmutter in 1969 that basically focuses on three different models that will support

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the overall organization to engage in the successful practices in the international market. In order
to accomplish the immense growth within the international market IKEA furniture company
mainly focuses on using this model (Storgaard, Tienari and Piekkari, 2014). Thus, it will also
support the organization in devising the effectual strategy for the organization. In order with this,
furniture company can also improve their activities and practices through recovering the barriers
while expanding the international activities. The model include three elements that is-
Ethnocentrism
In order to expand the business IKEA can use the ethnocentric approach under which the
company design strategies and plan according to the trends of home country (Felbermayr, Prat
and Schmerer, 2011). Under this approach management of company focuses on measuring the
similarities of international and domestic countries so that they can effectively outcome in
allocating and assigning the resources in the effective manner.
Polycentric
The approach of enlargement direct on local development and demand of community and
used by establishment deals with changing requirement of customers (McAusland and Millimet,
2013). Whenever IKEA wants to grow their activities in the home country, this conceptualization
can be applied to increase the profitability ratio with capturing he large market share.
Geocentric
Geocentric is another approach in which organization center upon Global Bound and
concentrate on more investigation and development to gain profitability through choosing
effective methods and strategies for distributing quality furniture products and services
(Kostovski and Klisarovska, 2011). This approach is expensive and riskers or the IKEA
company as it may possess higher chances in yielding losses.
CONCLUSION
From the aforementioned report has summarizes that in the present scenario,
globalization is consider as the significant concept that support the organization in providing
opportunities to exchange their products and services across the national boundaries without any
tariff and barriers. Thus, with the help of globalization it will benefit the IKEA furniture
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company to trade among the different region and boundaries and thus it assists in gaining the
international market share. Moreover, the above report has also concluded that there are several
factors that IKEA company must considered when they are trading their furniture products and
services across the domestic boundaries within the international marketplace. The different
factors that need to be think by the organization include cultural factors, change in the political
and legal factors, technological factors, economical factors etc. that support the overall
establishment to trade and deal their products across the national boundaries. While trading
across the borders the company can easily enhance their performance and image in the global
market and thus, it keep attracts the individual towards purchasing their modern ready to
assemble furniture and other household furnishing items. It is also summarizes that globalization
positively benefit the establishment in spreading out their furnishing activities and also assists in
increasing profits ratio. Further, it will also benefit the companies through capturing or targeting
the large market customers and rewarding their needs so that they can yield their sales volume.
In addition to this, it has also summarizes that in the contemporary environment company
need to maintain or create their social impact in regards with protecting the society and
environment under which operates their activities. The corporate entity is generally known for
merchandising furniture products at the last prices in both domestic and international
marketplace but the societal effect is to be created by minimizing or reducing the negative
impact of enterprise activity on the environment. The cited company is committed to reduce
environmental impacts so as to it approaches towards innovative practices all through supply
chain. It has been measured with the help of enabling risk assessment technique or product
testing approach company can focus on minimizing the situation of hazard or risk within the
company at the time of manufacturing the furniture products. With the help of striving for
effective supply chain activities company can focus on the friendlily transportation and delivery
of their products to the ultimate customers.
Moreover, the report has measured that two different academic theories that is Carroll's
Pyramid model for creating the social impact. The model is mainly focuses on different
responsibilities towards their stakeholders and society under which they operates their activities.
On the other hand, another academic theory that is being used is EPG model that is being used
by the company while they are trading across the borders. The EPG sands for Ethnocentrism,
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poly-centric and Geocentric approach that is commonly used by the organization to enhancing
their business.

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