Ms. Soniya Nalawade - Marketing Report: IKEA's International Strategy

This report provides a comprehensive analysis of IKEA's international corporate-level strategy, examining its evolution over time and the key factors that have contributed to its global success. The report begins with an introduction to IKEA's mission and vision, highlighting its focus on providing affordable home furnishing products. It then delves into the company's international corporate strategies, including adapting to local consumer needs, gaining national competitive advantages, and establishing chains in different regions. The analysis covers various aspects, such as product portfolio, marketing tools, brand recognition, and outsourcing. The report also explores IKEA's market expansion strategies, including its approach to emerging markets like India and China. Furthermore, the report examines the influence of the international business environment, including economic globalization and the importance of a diversified workforce. The report concludes by assessing IKEA's prospects for further expansion and its ability to maintain its competitive edge in the global market.

Ms.Soniya Nalawade- 18115691
Marketing
Name of the Student
Name of the University
Author’s Note
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Table of Contents
Introduction................................................................................................................................3
Analysing IKEA's International Corporate-Level Strategy over Time......................................3
National Competitive Advantage...........................................................................................5
Establishment of Chains in Different Regions.......................................................................6
Contextual Conditions in the International Business Environment.......................................8
Identifying IKEA’s Prospects of Further Expansion.................................................................9
Conclusion................................................................................................................................11
References................................................................................................................................12
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Introduction
IKEA is in the business of providing home furnishing products at low prices so that
all most everyone can afford these products easily. The vision of the company is to make the
life of people easy on a day to day basis (IKEA, 2020). The company was started back in the
year 1943 in Sweden, which makes it one of the oldest companies manufacturing home
furnishing products around the globe. It has been identified that IKEA is recognised as the
largest seller of home furnishing products worldwide since 2018. In the current scenario, the
company has 433 stores across 52 countries (IKEA, 20201). The company has adopted a
different type of corporate-level strategy over time for becoming successful, and in the
current assignment, all these strategies will be discussed in an in-depth manner. Moreover,
IKEA's prospects of further expansion are also included in the current assignment for better
analysis in regard to strategies.
Analysing IKEA's International Corporate-Level Strategy over Time
The international corporate strategy that IKEA has developed over time is to provide
goods at low prices to the customers who have helped the company in enhancing the
customer base over time. The company is having several stores located in different countries
such as the USA and China. IKEA faced several issues after starting its stores in the US
because they were using the same strategy they were using in Sweden with a similar product
portfolio. However, over time the international corporate-level strategy of the company was
involved, and now the strategy and product portfolio is developed with the alignment of local
needs of the consumers in which stores are operating.
The main strategy that the company has followed over time is to use different strategies in
different countries because the needs and culture of consumers in different countries are
different. The company offered compact size bed in China based on the needs of the
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customers, whereas, in the US the bed that are offered by the company is of big size based on
the demand of the consumers. Similarly, paper catalogues is used as the marketing tool in the
US and in China, social media is used as a marketing tool because people of China are more
involved in social media. Developing international strategies based on the needs of the
customers has resulted in growing the revenue in the specific countries (Chu, Girdhar and
Sood, 2013). In the contemporary era, consumers have evolved and became aware of the
actual value of the products and the amount they should be paying for any specified product.
In this context, IKEA is offering its products and cheaper prices with good quality which has
attracted the consumers who are looking for the home furnishing products are affordable
pricing.
IKEA has established its presence in Denmark by establishing several stores at
different locations over time and the company has develop a corporate strategy of sustainable
home delivery in order to attract the customer from different regions in Denmark. The
company adopted a strategy to be very focused on the overall business model and strategy of
the company keeping it similar in all the countries but keeping a local taste for making
products more attractive to local customers. Furthermore, patience is known to be one of the
most important international strategies which have helped the company to grow
internationally in different countries. IKEA has opened very fewer stores in the USA over
time because it helps the company in properly handing all the stores because most of the
companies have found to be failed because of opening a large number of stores and could not
able to handle the stores (Shoulberg, 2018).
It has been further identified that the corporate strategy of IKEA has evolved over
time such as in earlier time the company was focused on building big warehouse from where
the customers used to choose the furniture then build that one there one. However, in the
current scenario, the company is changed the international business corporate strategy has
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changed as the company is building more city-based stores and included home delivery and
online shopping website as well.
Unique name of the products has also been a very successful global strategy for the company
over time because most of the customers in the current scenario are easily attracted with
unique names. The main strategy that the company has followed over time is to use different
strategies in different countries because the needs and culture of consumers in different
countries are different. IKEA is one of the most recognised brands around the company has
taken advantage of its brand recognition and adopted it as an international corporate strategy.
In the contemporary era, brand value and brand recognition play a very important role in the
development of the international corporate strategy of IKEA. Another strategy that has been
developed over time by the managers of IKEA is outsourcing products from around the world
which have helped the company in keeping its prices affordable for consumers (Shoulberg,
2018). IKEA has significantly changed its sales strategy in Finland because of the presence of
big online retailers such as Amazon and Alibaba. The company in Finland region has adopted
the strategy of online retailing stores combined with the traditional stores (Mundus
International, 2017). Some of the international corporate strategies that the company is
followed over time include gaining national competitive advantage, establishing chains in
different regions and adoption on the basis of international basis environment and all these
strategies are explained below in detail:
National Competitive Advantage
Gaining national competitive advantage is one of the best international strategies that
have been adopted by IKEA over time. Offering lower prices in comparison to the
competitors provide a competitive advantage to IKEA because, in the current world, most of
the consumers are attracted to the brand as the company is offering products at lower prices.
Technological integration in the various processes helps the company in gaining economies
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of scale, resulting in providing competitive advantage and enhancing the revenue
internationally over time. Increase in the product portfolio also provides a competitive
advantage to IKEA because a great range of products offered by the company to the
consumers help in dealing with the needs of every consumer the market. It has been identified
that in the current scenario, IKEA has a total of 9500 products in its product portfolio, which
helps in fulfilling the need of every consumer (Lutz, 2015). Moreover, the company also
launch high amount of products and change them with an outdated product which has helped
IKEA in gaining competitive advantage in comparison to other companies in the international
market resulting in strengthening the international corporate strategy of the company over
time (Lutz, 2015). In order gain competitive advantage in Sweden the company has adopted
the strategy of offering unique products based on the demand of customers which has helped
the company in growing its business in its home country Sweden.
Competition in the home furnishing is very, and strategic alliances play a very
important part in reducing that competition. It has been identified that the development of
strategic alliances with other successful companies in other field is one of the core cooperate
strategy of the company, which helps in enhancing the competitive advantage (Newsroom,
2017). For example, IKEA's collaboration with Apple for the establishment of augmented
reality in the business model is proved to be a great strategic move which has helped IKEA in
enhancing the brand value over time. Collaborating with apple has helped the company in the
development of augmented reality-based home furnishing, which has resulted in targeting a
specific range of customers (Newsroom, 2017).
Establishment of Chains in Different Regions
IKEA was firstly started in Sweden, and from the starting, the company has adopted
the strategy of expanding its business internationally. The company has aggressively worked
on new market development strategy over time because it has helped the company gaining
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more customers around the globe. IKEA, in the earlier years, has focused highly on the
European market with similar products that the company was selling in Sweden. Establishing
stores chains in different countries has been the core strategy of the company from the start
and for succeeding in such attempt the company has provided the products having unique
attributes in comparison to other local companies' are offering to the customers (Chu, Girdhar
and Sood, 2013).
Figure 1: Market Expansion Strategy
In the current scenario, the company is focused on establishing its stores in India
because it is identified as one of the strongest emerging markets in the world. Diversification
strategy is used by the company in establishing the number of chains in different regions as
the company has developed new products and offered these products in new markets which
have helped the company in enhancing the customer base. The company also operates in
China and decision for expansion in China was taken by the CEO of the company in 1860' at
the time the demand of furniture was very high because of urbanisation was on pace. Most of
the people in 1860' in China were looking for owning a home in urban areas and in order to
complete the interior of house furniture played a very important role, and that is the reason
behind an increase in the demand of the furniture (Inter IKEA Group, 2020). Porter’s five
forces mainly assist to keep close view of the rival companies which would include in their
actions. The factors that affects the competitors might focus on the business environment that
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would be beneficial in making up in their competitive environment. The five forces mainly
help in enhancing the overall profitability along with comparing the product and services
with the rivals.
Contextual Conditions in the International Business Environment
Business environment plays a very important role in the developed international
strategy of any company. In the case of IKEA, the company has developed in international
corporate strategy on the basis of changes in conditions of the international business
environment. Adoption of strategies on the basis of demand of consumers has been one of the
best strategies of the company over time. It has been identified that the consumer in the
current is scenario has become smart and they actually what are their requirement and the
amount that should be charged for the product that the company is offering (Burt, Johansson
and Dawson, 2016). In this context, IKEA has adopted affordable pricing strategy with no
compromises with the quality of the product, which has helped the company in gaining high
popularity in the customers. In the home furnishing industry, every company is offering
almost similar products on an international basis. On this basis, IKEA has adopted the
strategy of offering unique products to customers based on the international business
environment. The corporate culture of IKEA is recognised as one of the best cultures in the
world in a company and most of the employees working in the company are being satisfied
with the treatment. In the contemporary era, it has been identified that it is important for the
companies to have a diversified workforce of these companies are operating internationally.
IKEA has adopted the strategy of a diversified workforce which has helped the company in
gaining a competitive advantage over time and keeping with the international business
environment (Sandybayev, 2017). The economic globalisation mainly highlights the capital
expansion which would shed light on the integration of local as well as national economies.
The unregulated market economy also points out the economic interaction that would focus
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on the international trade along with its ideas and culture. The culture of IKEA has already
recognised as one of the best and for that reason the employees are satisfied with their
treatment.
Identifying IKEA’s Prospects of Further Expansion
In context to the future expansion prospects of IKEA, the company is planning to
establish a dozen new stores in different countries and especially in South America.
Furthermore, the company also has a target to achieve 3 billion customers at the end of the
year 2025. In order to further expand the company is also going to start its own franchisee
naming Falabella which will be starting in cities such as Peru, Colombia and Chile.
The company will be investing $ 1.4 billion for further expanding its business in China and in
changing the outlook of all the stores located in China. Two decades ago, IKEA established
27 stores in China; however, with the increase in completion of revenue from these stores has
reduced over time because of high competition in the Chinese furniture market. China is
identified to be the top 5 markets of IKEA, which the main reason behind investing such a
high amount on reviving all the stores located in China (Molin, 2018). Growth of the
company has reduced over time as in 2016 revenue of the company grown by 19%, and in the
year 2018, it has reduced to 6% only. The main reason behind this scenario is that the
company is currently using big stores format in China, which has become less attractive to
customers with the development of E-commerce over time. IKEA in the recent future is
looking forward to opening stores in cities with the located in a smaller portion of China. The
company is also focusing on the development of new small stores for attracting more and
more customers. Opening its stores in the smaller cities will help the company in enhancing
the customer base and brand value because most of the competitors are only operating in big
cities which will provide a high-level competitive advantage in the future (PYMNTS.com,
2019).
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The company is also looking forward to opening more stores in Paris after an amazing
response they got at the opening of La Madeleine store at the centre location of Paris. It has
been identified that the major future prospects of the company include opening new stores in
different locations and offering new and innovative products to the customers on the basis of
demand. In the future, IKEA will be more focused on the development of sustainable
products which will be totally eco-friendly. Moreover, managers of the company will be
working hard for making these sustainable products affordable to all the consumers. In the
current scenario, the products that are manufactured by the company are 60% made up of
renewable materials. In order to manufacture more and more sustainable products, the
company will be making transformational changes in its supply chain (Newsroom, 2019).
Furthermore, the company in the expansion prospects will open its stores in the remote
locations where no other companies are offering their services which help the company in
gaining competitive advantage to the company over time. The company will also be focused
on developing more innovative products in the future with the help of different collaborations
with big companies from a different field. Furthermore, IKEA will also be offering different
kinds of home furnishing related services in the near future in order to target a high number
of customers who are looking for different services. Affordability is the core strategy of the
company, and in the future, the company will be focusing on making its products more
affordable to the consumers from all the segments. This will also help the company in gaining
competitive advantage and high customer base over time because most of the consumers in
the current world are more attracted towards affordable products with good quality. IKEA in
near future is looking to establishment more stores in Finland due to high demand of furniture
products in the country. (Blake, 2018). Uppsala model also help in describing the
internationalisation process of the organisation which chooses to enter the nearest market for
better benefits. The low market commitment also points out the characteristics of the model
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which might put greater impact on the organisation. IKEA has the planning of establishing
many stores for high demand of their products and that would be beneficial for enhancing
their business.
Conclusion
Overall, it has been concluded from the assignment that IKEA has adopted
international expansion and affordability as the most important international corporate
strategy over time. In the contemporary period, customers have advanced and become
mindful with respect to the genuine estimation of the items and the sum they ought to be
paying for any predefined item. Right now, is offering its items and less expensive costs with
great quality which has pulled in the buyers which are searching for the home outfitting items
is moderate evaluating. The organisation embraced a methodology to be cantered around the
general plan of action and procedure of the organisation keeping it comparative in all the
nations yet keeping a neighbourhood taste for making items increasingly alluring to nearby
clients. Mechanical incorporation in the different procedures helps the organisation in picking
up economies of scale, bringing about giving upper hand and improving the income globally
after some time. Increment in the item portfolio likewise gives the upper hand to IKEA in
light of the fact that incredible scope of items offered by the organisation to the buyers helps
in managing the necessities of each purchaser the market.
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References
Blake, D. 2018. Ikea unveils FY19 expansion plans. [Online]. Available at:
https://insideretail.com.au/news/ikea-unveils-fy19-expansion-plans-201810
Burt, S., Johansson, U. and Dawson, J. 2016. International retailing as embedded business
models. Journal of Economic Geography 16(3), pp. 715-747.
Chu, V., Girdhar, A. and Sood, R. 2013. Couching tiger tames the dragon. [Online].
Available at: https://www.businesstoday.in/magazine/lbs-case-study/how-ikea-adapted-
its-strategies-to-expand-in-china/story/196322.html
IKEA. 2020. Hej! Welcome to a world of inspiration for your home. [Online]. Available at:
https://www.ikea.com/
IKEA.20201. About IKEA. [Online]. Available at:
https://www.ikea.com/in/en/this-is-ikea/about-us/
Inter IKEA Group. 2020. Milestones in our history. [Online]. Available at:
https://inter.ikea.com/en/about-us/milestones/
Lutz, A. 2015. Ikea's Strategy For Becoming The World's Most Successful Retailer. [Online].
Available at: https://www.businessinsider.in/retail/ikeas-strategy-for-becoming-the-
worlds-most-successful-retailer/articleshow/45904642.cms Molin, A. 2018. Ikea Plans
to Expand to a Dozen New Markets in Coming Years. [Online]. Available at:
https://www.bloomberg.com/news/articles/2018-10-10/ikea-plans-to-expand-to-a-
dozen-new-markets-in-coming-years [Accessed on: 07 February 2020].
Mundus International. 2017. IKEA updates its’ strategy. [Online]. Available at:
https://mundus-international.com/ikea-updates-strategy/
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Newsroom. 2017. New collaboration between IKEA and Apple. [Online]. Available at:
https://newsroom.inter.ikea.com/news/new-collaboration-between-ikea-and-apple/s/
5b2e5787-6471-4217-b154-9deb0c1550a4
Newsroom. 2019. IKEA continues to grow while developing for the future. [Online].
Available at: https://newsroom.inter.ikea.com/news/ikea-continues-to-grow-while-
developing-for-the-future/s/2621831f-91ed-45ac-b31e-86f5854d3dc0
PYMNTS.com. 2019. IKEA To Accelerate China Expansion. [Online]. Available at:
https://www.pymnts.com/news/retail/2019/ikea-to-accelerate-china-expansion-with-
investment/
Sandybayev, A. 2017. Strategic Supply Chain Management Implementation: Case Study of
IKEA. Noble International Journal of Business and Management Research 1(1), pp. 5-
9.
Shoulberg, W. 2018. Why Ikea Succeeds Around The World While Other Retailers Falter.
[Online]. Available at: https://www.forbes.com/sites/warrenshoulberg/2018/07/30/put-
another-stamp-on-the-ikea-passport/#3633154c3f7c
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