Managing International Business: IKEA's Business Strategies Report

This report provides a comprehensive analysis of IKEA's international business operations. It begins by examining IKEA's existing business model, which emphasizes network marketing and low costs, supported by core competencies such as outsourcing, an efficient supply chain, economies of scale, and differentiation. The report then explores various market entry strategies that IKEA could adopt, particularly in the Chinese market, including direct exporting, licensing, partnering, strategic alliances, joint ventures, franchises, and greenfield investments, recommending strategic alliances, franchise, and greenfield investments. Finally, the report delves into the typology of national cultural differences, highlighting the importance of understanding cultural nuances for successful international business operations. The report underscores the significance of adapting business strategies to align with cultural contexts for achieving global success.

Managing
International Business

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
IKEA’s existing business model and their core competencies...................................................1
TASK 2............................................................................................................................................3
Market entry strategies can be adopted by IKEA.......................................................................3
TASK 3............................................................................................................................................5
Typology of national cultural difference.....................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
.......................................................................................................................................................10

INTRODUCTION
In the present era, organizations freely trade their business operations in all over the
world without any boundaries and communication barriers. When an enterprise perform their
activities in more than one country then it is known as international business. Companies offer
their services to all people in domestic as well as global market (Tian, 2016). Through this, their
image is get enhanced in more effective manner that can lead them towards success. When the
firm offer their services at global level then they can gain market share due to the less
competition. The present report is based on IKEA which perform their operations in retail sector.
They are more focusing on their international marketing strategies so that they can increase their
market share. In this context, it explain the existing business model of an entity and their core
competencies. Along with this, it focuses on the market entry strategies so that the firm can
perform their operations in more effective manner. Furthermore, it focuses on the national
cultural framework in detail.
TASK 1
IKEA’s existing business model and their core competencies
Business model is a kind of way through which an enterprise will be able to enhance their
growth in the market and they can also generate high revenues. When any plan is made by the
company then first they have to identify their model on the basis of that they perform their
operations. There are variety of models that can be used by the organizations so that they can
perform well than their competitors (Forsgren and Johanson, 2014). There are three types of
models such as traditional business, franchise and direct sales. In traditional business model, an
individual start their own business so that they can fulfil the demands of the people. In the
another method that is franchise model, a person buy the strategy of an another firm so that they
can perform better then their rivals. There are some of the advantages that are associated with
this that company take the ownership of another successful brand and offer the products to
consumers. On the contrary, in the last model an enterprise offer their goods and services to the
end users directly so that they can improve their brand image.
The business model which is followed by IKEA is network marketing and low cost in
which an enterprise offer their services to the customers directly. Through this, they will be able
to maintain their relationship with their consumers by establishing the two way communication
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(Welch and et. al., 2011). Along with this, they also identify the views and opinion of the people
regarding their services so they will be able to enhance their brand image. Under this model,
some of the practices are performed by the organizations which are as follows:
Outsourcing: It is a kind of practice which is used by the organizations in order to
maintain the level of cost by transferring some work to outside suppliers. On the basis of this,
overall productivity can be increased in a more efficient manner and it is more cost effective
approach as through this IKEA will be able to perform their operations at global level. By using
this, an enterprise will be able to perform better that can lead them towards success.
Supply chain: It is a kind of approach which is used sin order to distribute the products
among all the people (Pandey, 2012). IKEA is more focused on this as they are using direct
selling business model. By adopting this, retail industry will be able to gain the attention of
people towards their services and achieve the competitiveness in the market. If supply chain is
effective then business organization will be able to maintain their position sin the market.
Economies of scale: This is a kind of economics which explain the benefits that large
organizations have as compare to other small firm. It is more focused on the cost of product.
There are two types of economies of scale one is internal and another one is external. Internal
can be controlled by the firm on their own but external economies are managed in an efficient
manner.
Differentiation: This kind of practice or approach is followed by the company when they
want to make their distinctive image at the marketplace as compare to their competitors. For
example, IKEA offers more designed or innovative products to their customers at global level so
due to this their brand image is get increased (Doz, 2011). Through this,they will be able to
sustain their competitive advantage in the market.
The overall operations of IKEA is based on their core competencies which support their
low cost business model. As on the basis of these, they will be able to achieve profitability and
revenues so that their overall performance can be improved. These helps an enterprise in
sustaining the competitive advantage and delivering the quality values to the customers. Some of
these characteristics are like establishing the focus, provide motivational support, emphasis on
teamwork, manage overall change, communication should be good so that overall objectives and
goals can be achieved.
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The furniture industry can perform their activities and operations in more effective
manner by adopting these kind of core competencies (Birkinshaw, Brannen and Tung, 2011).
These should be improved on continuous basis so that operations can be performed at the
international level. Furthermore, they trade can be established with number of countries so their
global image is get improved. These kind of models and characteristics are enforced by the
people so that they will be able to perform better and growth can be improved.
TASK 2
Market entry strategies can be adopted by IKEA
There are some of the market entry strategies that are adopted by retail industry and
through these they can establish their business in another place. The international management
consultant of IKEA has to adopt an appropriate strategy so that they can perform well as not
every entry method is good for every organization (Dunning, 2013). These are used by an
enterprise in order to make the plan that how products and services can be delivered to the new
target audience. At the time of establishing the business, the firm faced many issues and problem
that might degrade their performance.
Here, the retail industry is going to start their business in china so that they can enhance
their market share. China is a biggest exporter and importer so due to this there relationship is
maintained with the other countries. In order to establish business in such as country, business
organization can use some of the market entry strategies and some of these are like:
Direct exporting: It is a kind of approach or method that is used by an enterprise in order
to directly sell the products to the end users (Sheng, Zhou and Li, 2011). Some of the companies
works as a agent and perform their operations. They distribute the goods into another country so
that they can enhance their brand image in more effective manner. Some of the advantages are
associated with this strategy is that an entity can easily enter into the market and there is low
risk. But on the other hand, there are some limitation of this is that due to transportation
environment can be negatively affected.
Licensing: In this type of market strategy, companies can enter into another country by
taking the license from another so that they can use their manufacturing process, trademark and
so on. This is more beneficial for the firm when they have large market share then only they will
be able to sustain their competitive advantage. In this, licensor has to follow all ethical practices
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so that they will be able to maintain the brand image of company (Birkinshaw, Brannen and
Tung, 2011). Through this, the firm can take the entry fast, low cost is attached with low risk.
Partnering and strategic alliances: In this, companies are perform their operations
together and this is useful for IKEA in order to enter into the new country. Here, two different
companies make a contract with each other in order to accomplish the overall goals and
objectives. On the basis of this, they will be able to offer more innovative and quality services to
their customers (Olson and Wu, 2011). Through this, risk can be reduced but higher cost is
attached with this kind of strategy as compare to other.
Joint venture: In this, two companies are jointly perform their operations so that they can
achieve their goals or objectives in more effective manner. Along with this, organizations are
agreed with each other in order to perform their activities in particular market. For example, all
profits and risks are equally distributed among the partners. IKEA can make a venture with the
other retail industry so that they can offer quality and more innovative products to their
customers.
Franchise: An enterprise can use this kind of marketing entry strategy so that they will
be able to enhance their brand image. In this, a franchiser gives the rights to franchisee and the
person have to follow all code of practices so that their brand image can be improved (Peng,
2012). IKEA can offer some goods and services to the people in order to avoid the large
investments. In this, an organization who take the rights, they have to maintain their image so
that their overall brand image can be improved.
Greenfield investment: In this kind of approach, an enterprise have to invest more in
order to buy the services and establish the business so that overall goals can be achieved.
Through this, IKEA will be able to increase their knowledge related to the domestic market
condition so that high revenues can be generated.
IKEA can use some of the market entry strategies such as strategic alliances, franchise,
joint ventures and greenfield investments (Luo and Shenkar, 2011). By adopting these, the retail
industry will be able to perform their operations in more effective manner and market share can
also be increased. It has been analysed that cost and risks are reduced in the strategic alliance
approach and company will be able to generate the higher returns. Through this, they will be
able to enhance their performance and growth.
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If retail industry adopt the franchise approach then there is less risk and cost is attached
so due to this company will be able to enhance their performance in more successful manner.
Apart from this, an enterprise can use this in order to generate the higher returns so this may lead
them towards success. They can also follow greenfield investment approach in order to
established their business in China market. Less cost and risks are associated with this as IKEA
will be able to know about their domestic market (Wu, Guo and Shi, 2013). When their
knowledge about the local market is gets increased they can target their customers and their
demands can be fulfilled. Through this, they will be able to achieve the success in the market.
So, by adopting these kinds of market entry approach IKEA will be able to enhance their
market image at the global level. Along with this, they will be able to attract the customers from
international as well as local market. Furthermore, the relationships can be improved with the
other countries and due to this foreign trade can be established in more effective manner.
TASK 3
Typology of national cultural difference
The cultural differences also play a vital role in the success of an enterprise in a particular
country. When any business organization offer their services in the market then they have to
identify the cultural differences in between the nations so that they will be able to fulfil the need
of different service users (Lin and Ho, 2011). There are some of the issues and problems are
faced by an individual like leadership, managing workers who came from different backgrounds
and so on. There are two types of frameworks that can be used by an enterprise such as
Trompenaar and Hofstede. IKEA can adopt an appropriate framework such as Hofstede so that
overall problems can be resolved in more effective manner. The firm have to identify the factors
that impose them in establishing their business in China.
IKEA uses framework in order to develop the cross cultural communications so that their
overall performance and growth can be improved at the global level. Through this, they will be
able to know that in what manner they have to perform their operations. When cultural and
values differences are get reduced in between different countries then due to this relationship can
be maintained among the people (Hofstede, 2011). By identifying the behaviour of people, they
will be able to know that how cultural differences can be resolved while establishing the business
in China. Hofstede study is based on some of the dimensions such as:
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Power distance index: In this, it is explained that people who are working in the
organization at lower level they accept that power is distributed unequally. The power should be
divided on the basis of the hierarchy and it is the responsibility of top executives so that they will
be able to perform well.
Individualism vs collectivism: In the individualism, it is related to the people that at what
extent they are involved into the groups as in the society people give emphasis on their family.
But on the contrary, in collectivism an individual related to their family members and other
people also. A person who is in collectivism, they all support to each other so that overall
conflicts can be resolved.
Uncertainty avoidance index: This is related to the society that to what extent societies
tolerate the ambiguity. People are following some of the laws and acts that are made by the
government so that they will be able to know about the cultural differences and values. If society
will not follow regulations so environment is free flowing (Minkov and Hofstede, 2011). IKEA
will be able to perform better in order to achieve the objectives.
Long term oriented and short term oriented: This type of dimension is related to the past
and future actions that are performed by the organizations who are performing their operations in
more effective manner. Short term oriented explains that a country kept their traditions and
believe into that while on the other hand, long terms focuses on the adaption (Dunning, 2013). A
nation which is based on the long term they are continuously developing so it is beneficial for
retail industry.
Indulgence and restraint: These are related to the happiness and joys. Indulgence is
related to the extent to which a society allows a person for gratification and other human desires
so that people can enjoy their life. On the contrary restraint is defined in the extent to which
society impose some norms on gratifications and other desires.
Masculinity vs femininity: This dimension of Hofstede national cultural framework state
that the success of the organization is based on these two factors. Masculinity is related to the
degree to which society is based on the preferences, achievement and rewards in order to achieve
competitiveness in the market as compare to other nation (Welch and et. al., 2011). On the other
hand, femininity is based on the modern views of both men and women. China is highly
masculinity society which give more preferences to men rather than women.
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So, IKEA can perform their business operations in more successful manner by adopting
the national cultural framework. Through these, they will be able to know that how they will be
able to enhance their performance in an efficient manner. The retail industry will be able to know
that how they will be able to perform well at the global level. Furthermore, the firm able to know
about the different culture and values of china so that the performance of an entity can be
enhanced in successful manner.
As per the view point of Doz (2011) IKEA can establish their operations in China by
adopting the Hofstede framework. Through this, companies will be able to know about different
culture and values that is followed by a particular country. From this current framework, it can
be analysed that people in China are individualistic, long term oriented, indulgence so that their
overall growth can be enhanced. It has been criticised by Birkinshaw, Brannen and Tung, (2011)
that if a country follow short term oriented approach then they will not be able to perform well
with the other nations. China is a masculinity society that means people are highly competitive
and they can perform well so in this manner success can be achieved. Different number of index
are allotted to the people so that they will be able to enhance their growth in more effective
manner.
According to the views of Pandey (2012) when an enterprise able to know about the
different cultural standard then they have to offer services as per the need of the people. Through
this, they will be able to attract number of people towards their services which can help them in
enhancing their brand image. For this, an enterprise will also be able to conduct a survey in the
market of China so that they will be able to know about the different requirements of people. It
has been analysed by Tian (2016) that by adopting this kind of approach they will be able to
achieve success in the market so that they can achieve success.
CONCLUSION
From the above carried out analysis it has been concluded that now it become easy for
organizations to perform their business at the global level. There are some of the business
organizations which uses models in order to generate more profits and revenues. Along with this,
they also uses some of the strategies so that new business can be established into another
country. For this, IKEA uses strategic alliances, franchise and greenfield investment so that their
overall risks can be reduced and goals can be achieved in more effective manner. Furthermore,
the organization can use Hofstede national cultural framework so that their overall growth can be
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improved. By identifying the different dimensional values, they will be able to perform well in
the particular country.
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REFERENCES
Books and Journals
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close and grounded: Reclaiming a place for qualitative methods in international business
research. Journal of International Business Studies. 42(5). pp.573-581.
Birkinshaw, J., Brannen, M.Y. and Tung, R.L., 2011. From a distance and generalizable to up
close and grounded: Reclaiming a place for qualitative methods in international business
research. Journal of International Business Studies. 42(5). pp.573-581.
Doz, Y., 2011. Qualitative research for international business. Journal of International Business
Studies. 42(5). pp.582-590.
Dunning, J.H., 2013. Multinationals, Technology & Competitiveness (RLE International
Business) (Vol. 13). Routledge.
Forsgren, M. and Johanson, J., 2014. Managing networks in international business. Routledge.
Hofstede, G., 2011. Dimensionalizing cultures: The Hofstede model in context. Online readings
in psychology and culture. 2(1). p.8.
Lin, C.Y. and Ho, Y.H., 2011. Determinants of green practice adoption for logistics companies
in China. Journal of business ethics. 98(1). pp.67-83.
Luo, Y. and Shenkar, O., 2011. Toward a perspective of cultural friction in international
business. Journal of International Management. 17(1). pp.1-14.
Minkov, M. and Hofstede, G., 2011. The evolution of Hofstede's doctrine. Cross Cultural
Management: An International Journal. 18(1). pp.10-20.
Olson, D.L. and Wu, D., 2011. Risk management models for supply chain: a scenario analysis of
outsourcing to China. Supply Chain Management: An International Journal. 16(6).
pp.401-408.
Pandey, V., International Business Machines Corporation, 2012. Method and apparatus for
managing, configuring, and controlling an I/O virtualization device through a network
switch. U.S. Patent 8. 265,075.
Peng, M.W., 2012. The global strategy of emerging multinationals from China. Global Strategy
Journal. 2(2). pp.97-107.
Sheng, S., Zhou, K.Z. and Li, J.J., 2011. The effects of business and political ties on firm
performance: Evidence from China. Journal of Marketing. 75(1). pp.1-15.
Tian, X., 2016. Managing international business in China. Cambridge University Press.
Welch, C. and et. al., 2011. Theorising from case studies: Towards a pluralist future for
international business research. Journal of International Business Studies. 42(5).
pp.740-762.
Wu, J., Guo, B. and Shi, Y., 2013. Customer knowledge management and IT-enabled business
model innovation: A conceptual framework and a case study from China. European
Management Journal. 31(4). pp.359-372.
Online
Introduction to International Business. 2017. [Online]. Available
through:<http://www.managementstudyguide.com/international-business.htm>.
[Accessed on 20th May 2017].
Market Entry Strategies. 2016. [Online]. Available through:<http://www.tradestart.ca/market-
entry-strategies>. [Accessed on 20th May 2017].
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