International Business - Sample Assignment

Running head: International Business
International Business Environments -IKEA
Student’s name
Name of the Institute

International Business
Executive Summary
The report discusses Swedish furniture giant IKEA and its expansion strategy. IKEA has
marked its presence in many countries and are appreciated by customers. The strategy it follows
is trans-national. It mostly follows two modes of entry either direct or through franchising. The
report stresses on the point that it is necessary for IKEA to expand its reach because its two
major markets i.e. North America and Europe are facing economic downturn. The company
looks on multiple aspects before entering into any country. The paper discusses its entrance into
four major potential countries: Brazil, Ukraine, Estonia and Vietnam. The customers in these
countries might get IKEA product through indirect channels. But still there is no store presence
in any of these regions. The discussion highlights the furniture and flooring industry overview. It
also discusses the opportunities and threats in each country followed by countries’ comparison
through PESTLE Analysis and Porters’ 5 force model. The cultural aspects are analyzed through
Hofstede’s cultural dimension model. In the end, modes of entry of IKEA are discussed for the
countries. The paper finally concludes the discussion with analyzing pros and cons for each
country.

International Business
Table of Contents
Introduction........................................................................................ 3
Analysis................................................................................................ 4
Industry Overview........................................................................................4
New Markets................................................................................................5
Brazil................................................................................................................................ 5
Ukraine.............................................................................................................................. 6
Estonia............................................................................................................................... 7
Vietnam............................................................................................................................. 8
PESTLE Analysis..........................................................................................9
Political and Legal Environment............................................................................................... 9
Economic Environment.......................................................................................................... 9
Social Environment............................................................................................................. 10
Technological Environment................................................................................................... 10
Environmental Factors.......................................................................................................... 10
Porter’s 5 force Model...............................................................................11
Brazil.............................................................................................................................. 11
Ukraine............................................................................................................................ 11
Estonia:............................................................................................................................ 12
Vietnam........................................................................................................................... 13
Hofstede’s Cultural Dimensions................................................................13
Modes of Entry...........................................................................................15
Conclusion......................................................................................... 15
References......................................................................................... 17

International Business
Introduction
IKEA is Swedish Company and is one of the world’s largest furniture retailers. The
company’s main focus is on marketing products at low prices. IKEA has brought up innovations.
For example flat packs which helps in reducing production and transport costs (Johanson &
Mattsson, 2015). Another is the “showroom-warehouse” concept which provides reduction in
retailing costs. IKEA relies on long term relationship with its suppliers. Currently, IKEA’s
supply network is spread across entire world. It has become increasingly complex with time. Its
main strategy is to design and purchase products that lead to low production and transportation
cost. Along with low cost, other major goals for IKEA are reasonable quality, adequate product
functionality and appealing designs (Fragouli, 2016). IKEA depends on the functioning of its
entire network of suppliers.
IKEA follow transnational strategy in order to maximize global strategy. The factors like
deregulation, economic growth, high disposable income and rising housing market have created
opportunity of growth for IKEA (Khamis, 2016).. It is also necessary to understand, its two
major markets i.e. Europe and North America have fierce competition in furniture retail industry.
There is growing pricing pressure and increasing customer demand environmental awareness. In
order to reduce such risks associated with such regions, it is necessary that IKEA considers
diversification strategy into other markets efficiently and promptly. By doing this, IKEA can
take advantage of opportunities present in the new markets which are no longer present in the old
market. IKEA generally follows franchising model to enter into new market. Ukraine, Estonia,
Brazil and Vietnam are some regions on IKEA’s expansion radar. There exist both opportunities