BUSS 5300: IKEA Case Study - Global Business Expansion Report

This report provides a comprehensive case study analysis of IKEA, a multinational furniture and appliance company. It begins with an executive summary and an introduction to the field of strategic management, highlighting the importance of effective business operations and the role of IKEA as a global leader. The report then delves into the company's background, describing IKEA's origins, business model, and global presence, including its online sales. The case study focuses on IKEA's global expansion, identifying key issues such as misalignment between product offerings and customer demand, and the strategies employed, including differentiation and customization. The report identifies critical issues like high expansion costs, differentiation and customization expenses, pricing conflicts across different markets, and competitive pressures. The assessment section explores the impact of these issues, particularly the financial implications of customization and differentiation strategies, and the challenges of entering new markets. The report concludes with recommendations for addressing these challenges, emphasizing the need for cost management, effective pricing strategies, and competitive advantage creation.

Running head: IKEA
IKEA
Name of the Student
Name of the University
Author Note

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Executive Summary
The report follows a comprehensive format whereby the case study of IKEA has been adopted.
In association with this, it is effective to consider that, at present although IKEA is an effective
enterprise, it needs to ensure that it is resolving the different issues being faced by it. In line with
this, the study aims to provide a resolution to the different problems being faced by the firm
which mainly relates to expansion as well as the pricing issues.

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Table of Contents
Introduction......................................................................................................................................3
About the company: IKEA..............................................................................................................3
Case summary..................................................................................................................................4
Key issues identified........................................................................................................................5
Assessment of the issues..................................................................................................................7
Outcomes the firm seeks to achieve................................................................................................9
Recommendations for the firm........................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
The field of strategic management can be rightfully defined as the manner in which the
business generally tends to function (Ansoff et al. 2018). In relation to this aspect, it can be
essentially stated that all organizations who are involved in the industry may be required to
engage in considerate initiatives and steps with the help of which, they will be successfully able
to fulfill their organizational vision and ensure effective operations. In association with this, it is
critical to mention that, the main company which has been chosen for the analysis can be
mentioned to be the IKEA. The IKEA is a global firm which has expanded globally but often
faces certain issues and problems in this regard. With association to this, it is critical to note that,
the various businesses would be required to consider relevant and effective strategies applying
which their overall goals can be attained accordingly. Hence, this report has been formulated
with the aim of understanding how the issues which are being essentially faced by the firm can
be resolved. In line with this, the report will discuss the issues of the company, outline the
recommended solutions and present the manner in which the business has been facing
operational problems. These recommendations will be helpful for the enterprise and will assist
them in meeting the overall entrepreneurial goals in an effective manner.
About the company: IKEA
The IKEA can be described as a multinational group which has originated in Europe. In
consideration with this, the firm sells various kitchen appliances as well as furniture’s which are
very popular amongst the different target market individuals. In association with this, it is
effective to understand that, the firm was found by Ingvar Kamprad at a young age and has
become a global leader since the year 2008 (Ikea.com 2020). The form of the business can be

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taken to be a private company. In association with this, the popularity of the company is based
on the modern designs of the various appliances, furniture’s and the detailed interior designs as
well. In line with this, the firm also tends to offer simplicity with ecofriendly aspects (Gallus and
Frey 2016). Hence, the firm is being controlled by various foundations and runs on a complex
organizational culture. At present there are 433 IKEA stores in more than 50 countries around
the globe. Moreover, the firm is also interested in selling products online and has a designated
online website as well. The company sells 12000 products and more than 2 billion individuals
visit the commercial product wood consumption. Hence, the company forms a good market
share.
Case summary
The case study on IKEA states that, although IKEA has been relatively very successful in
carrying out its expansions and related activities it has to be understood that, while expanding
globally, IKEA has been facing certain issues and problems as there is a misalignment between
the product offering and the customer demand. The firm tends to follow two basic strategies
while it chooses to expand in the future (Evans 2015). These strategies can be mentioned to be
the differentiation strategy along with the customization strategy. In association with this, it can
be mentioned that, the firm offers the differentiation strategy in various domains such that,
product design, the materials used, the prices and accordingly. In association with this, in relation
to the customization strategy, the company adapts to the needs of the different countries and
designs the different products accordingly. In consideration of this, it is relatively critical to
understand that, this strategy is very helpful for the enterprise in engaging in a successful growth
as well as the marketing strategy. According to Ansoff et al. (2018),, the differentiation strategy
is a useful strategy for the different enterprises which are spread globally and aim to ensure

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successful operations. In line with this, when the different enterprises have global operations
then in such a scenario, they are required to ensure that their operations are aligned in a manner
such that, the firm can come up with a variety of operations and offerings and considering this,
the needs of the target market are being met with accordingly. Through the customization and
the differentiation strategy, IKEA has aimed to ensure that it is successfully being able to provide
affordable yet simple designs to the different users. The case described that, the company faced
considerate backslash in Europe due to its American designs which were not accepted by the
Americans. In association with this, it is relevant to mention that, in other countries like Africa,
China and India as well the company has received various pricing issues which thereby lead to a
barrier in the expansion plans of the firm (Dogan 2015). Hence, in this scenario, it needs to be
the aim of IKEA to provide adequate services as well as the pricing strategies to the different
customers. In line with his, it becomes very effective for the different enterprises to consider that,
it provides adequate utility to the participants and in consideration of this, the business goals are
achieved. The target segment which the firm has aimed to serve in all markets can be mentioned
to be 20 to 40 years of age.
Key issues identified
As mentioned earlier, all enterprises who engage in global business tend to engage in
various challenges as well as issues while they perform in the different countries. In line with
this, when IKEA tends to expand in the various countries, it tends to face certain issues which
then make the expansion of the firm very difficult. In association with this, it becomes essential
to mention that, IKEA as an enterprise faces certain issues which can be mentioned to be as
follows:

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High costs of the company while implementing the expansion strategies: The costs as
incurred by the enterprise can be mentioned to be very high while the firm plans to expand to
other countries. This can be present due to the different regulations to be fulfilled, cost of labor,
and cost of infrastructure and additionally cost of the social investment as well. In line with this,
the higher costs as incurred by the enterprise lead to an increased expansion in the long run and
thereby lead to higher investments as well (David and David 2016). In such a scenario, the firm
will be required to plan accordingly so as to ensure that it will be able to perform well and
expand accordingly.
High costs of differentiation: The firm would be required to spend a higher amount of fund
while it plans to engage in the differentiation strategy which can be mentioned to be the main
reason for its overall success. In association with this, it is very effective for the firm to ensure
that it is being able to engage in adequate research and development strategies with the help of
which the firm will be able to ensure that adequate steps can be undertaken. Moreover,
differentiation also leads to increased wastage and increased costs of expertise and materials
which thereby leads to an issue on the side of the enterprise (Bryce 2017).
Customization costs: To align the offerings of the firm with the different members of the target
market, it is important for the firm to engage in effective customization strategies. In relation to
this, it is essential to state that, this customization leads to additional market research, increased
expenses on the design of the product and increased marketing as well as promotional efforts. In
association with this, it is effective to consider that, any firm which aims succeed in the long run
would be required to incur these costs (Baumgartner and Rauter 2017). However, for IKEA this
leads to a dent in the overall costs of the enterprise and its savings.

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Pricing conflicts: Not all countries have a similar earning capability and capacity. In line with
this, it becomes very essential for the enterprise to see to it that it is successfully being able to
balance the prices. For instance, in well developed countries like the United States and the
United Kingdom, the pricing of the company is moderate as per their overall disposable income.
However, in other developing countries such as the China and India, the different consumers do
not have such high income and hence, the prices set by IKEA for their products may be
considered to be relatively very high. The case study mentioned that the enterprise faced
considerate backslash whereby in China, the different customers were baffled by the extremely
high prices and hence, IKEA had to consider this aspect and lower down the prices.
Competition: The IKEA is a leading furniture enterprise and in association with this, it becomes
extremely important for the firm to understand that, the firm looks after the competition which is
present in the particular industry (Hitt and Duane Ireland 2017). In association with this, it
becomes very relative to understand that, other enterprises like the Amazon, Alibaba and the
Walmart will be able to compete well (Barca 2017). In line with this, IKEA has to create a
competitive advantage which will help the firm in performing considerably well and to be a
market leader amongst the different players as present.
Assessment of the issues
Therefore, in the given analysis on the examination of the different issues which are
being faced by the IKEA as an enterprise, it can be successively understood that, IKEA is a
major global brand which aims to provide sustainable services to the different customers. In line
with this, it becomes very effective to ensure that the firm is being able to undertake relevant
steps so as to see to it that the costs of the firm can be managed accordingly (Ikea.com 2020). In

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association with this, the firm engages in various expansion plans and initiatives with respect to
which, it becomes increasingly important for the firm to see to it that it is being able to apply the
differentiation as well as the customization strategy with the help of which the expansion can be
carried out accordingly. Hence, the main issue which was faced by the enterprise can be
mentioned to be the cost issues (Peppard and Ward 2016). Customization and the Differentiation
strategies which are being applied by the various enterprises require considerate costs and
investments in the domains of research and related studies with the help of which the
differentiation and the customization strategies can be implemented accordingly. In association
with this, the cost of entering various new markets can also be considered to be additional costs
which are usually incurred by the different businesses (Ikea.com 2020). When any firm intends
to expand in new country then it will be required to fulfill the different legal regulations and
related costs as well. In association with this, it becomes very critical to note that, while fulfilling
the political, social and related requirements, the firm would be required to ensure that all
requirements are being met with accordingly and the international expansion will be possible
(Johnsen 2015).
The competitive rivalry can be mentioned to be other set of issues which are faced by the
enterprises who perform on a global level. In association with this, it is effective to mention that,
the customer demands have been increasing to a great extent and in association with this; it is
very relevant to understand that, all companies are going to undertake effective steps so as to
ensure that they are being able to deal with the demands of the audience. In association with this,
it is essential to state that, the different participants who are present in the trade often engage in
adequate price wars as well (Rothaermel 2016). They tend to offer varied prices in consideration
of which, it is integral to understand that, all the customers especially in the developing countries

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often consider prices only and not the quality of the item which acts as a disadvantage in the case
of IKEA. Considerate research and development is essentially required on the side of the firm in
order to see to it that the firm is being able to deal well with the different participants. In
consideration of this, it is effective to mention that, an understanding of the partial conflicts and
the different factors affecting the operations is essential (Shujahat et al. 2017). This helps in
ensuring that the firm is being able to perform well and goals are achieved. Ikea further faces an
issue in ensuring that trendy market designs are applied by the firm at considerably moderate
prices. In relation to this, it can be mentioned that the firm needs to target the right audience of
customers and ensure overall market effectiveness.
Outcomes the firm seeks to achieve
All firms function with the aim of achieving certain outcomes which lead to its overall
success. In association with this, it is very effective to understand that, all firms are required to
lay down effective goals with the help of which they will be able to gain outcomes. The
outcomes set by the firm can be mentioned to be as follows:
1. To gain a market share of 45% by 2023
In this aspect the aim of the firm is to attain a market share of 45% by 2023 which will
help them to become a global leader effectively.
2. To ensure successful expansion in Asia and Pacific regions
Another goal or aim of the firm can be referred to be the fact that the firm aims to engage
into the expansion of the Asia and Pacific regions.
3. To grow the firm by 35% by 2024.

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Another aim which the firm has set for it can be mentioned to be to engage in
organizational growth whereby it will be able to become a global leader.
Recommendations for the firm
For the firm`s successful operations the different recommendations which can be
provided to the enterprise can be mentioned to be as follows:
Issues
To meet and resolve the different issues which are being faced by the firm, it is effective for the
enterprise to see to it that it follows a competitive pricing strategy in the different enterprises. In
association with this, it can be considered very important to mention that, if it follows a
competitive pricing strategy, the firm will be able to earn higher revenue (Trigeorgis and Reuer
2017). Moreover, it would be required to see to it that, engaging in prior market research is
essential for the overall success.
Outcomes
Another recommendation which can be abided by the firm can be referred to by the enterprise
can be stated to be the fact that, it needs to ensure that it first conducts a competitive rivalry with
the help of which it will be able to ensure successful expansion. Once the firm aims for the long
term growth, it will be able to attain all outcomes. Prior market research is essential.
Conclusion
Therefore, it can be mentioned that IKEA as a global company would be required to see
to it that it is being able to engage in effective planning activities. In association with this, is

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essential to note that, if the firm would be required to engage in successful market research, it
will be able to ensure adequate operational effectiveness. The report follows a structured format
and lays down the case study of IKEA. The various issues of the enterprise along with the
recommendations for successful outcomes have been provided.