IKEA's Global Expansion: A Case Study of Market Entry Strategies

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“Investigation of the impact of market entry strategy employed by the multinational business
organisations to enter into the emerging markets: a case study of IKEA”

Table of Contents
INTRODUCTION........................................................................................................................3
RESEARCH QUESTIONS.............................................................................................................3
RESEARCH AIMS AND OBJECTIVES...........................................................................................3
RATIONALE:.............................................................................................................................. 4
LITERATURE REVIEW................................................................................................................ 5
METHODOLOGY....................................................................................................................... 8
TIMELINE OF THE RESEARCH ACTIVITIES..................................................................................9
REFERENCES........................................................................................................................... 11
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INTRODUCTION
Globalisation leads to the removal of many barriers in international trade due to which
several organisations have gained an opportunity to pursue global strategies to gain higher
growth and competitiveness. Some business industries and nations have benefitted more
than the other nations (Cavusgil, et al., 2014). By taking advantage of the globalisation, the
successful business organisations try to expand its business by entering into the new
economy to grow and earn higher revenue. The different business organisations adopt
different market entry strategies according to the nature and type of products (Buckley and
Ghauri, 2015). This research study will mainly concentrate on the market entry strategy of
IKEA. IKEA is a Multinational business organisation based in Sweden. The company offers
ready to assemble furniture, home accessories and appliances. The company was founded
in the year 1943 by Ingvar Kampard and currently is the largest furniture retailer in the
world since the year 2008 (IKEA, 2019). IKEA owns around 355 stores across 29 countries of
the world. Around 424 IKEA stores are operating in the 52 countries. Some of the IKEA
stores are run by franchisees in different countries. This research investigates the market
entry strategies adopted by the IKEA while expanding its business to the new economies.
This would facilitate the other medium and large business organisation in selecting the best
and competitive strategy to enter into the new market.
RESEARCH QUESTIONS
1. What are the key market entry strategies used by the multinational business
organisations to enter into emerging economies?
1. Do the existing market entry strategies of IKEA are effective enough to successfully
enter into emerging market?
2. What are the challenges and risk of entering into new emerging markets?
RESEARCH AIMS AND OBJECTIVES
The main aim of this research is to investigate the impact of market entry strategies used by
the multinational business organisations like IKEA to enter into the emerging market. the
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 To determine the market entry strategies used by the IKEA to enter into emerging
economies
 To investigate the effectiveness of market entry strategy used by IKEA
 To critically analyse the challenges and risk to IKEA faces when entering into a new
market
RATIONALE:
In the present business environment, large numbers of multinational business organisations
are expanding its business in the emerging market due to increased opportunities for
growth and development and liberalised policies of the government. IKEA is one of the most
successful multinational brands in the world that has increasingly entering into new
emerging economies by utilizing the advantage of the global business environment.
Recently, the company has successfully entered into the Indian market with huge customer
response. This research project would support in identifying the market entry strategy and
its influence on success and failure of business organisations in entering into emerging
markets. It would be a good opportunity to know about market strategies and their impact
on IKEA business.
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LITERATURE REVIEW
The typical reason for companies to expand their business in the international market is to
achieve higher growth and competitiveness. According to Verbeke, (2013) International
strategy enables the company to expand and diversify its business to the new market. Most
of the international organisations have rapidly expanded their business during the economic
globalisation to include global clients in their market. Kumar, et al. 2012) has stated that the
overseas expansions help to reduce the cost of operations and increase the profitability of
the organisation. In a similar thought, Forsgren and Johanson, (2014) have proclaimed that
going global can reduce the reliance of the company on the local and national market.
Nielsen and Nielsen (2011) have stated that the market entry strategy of the companies to
enter into the new foreign market differs in the degree of presented risk, desired return on
investment and the required control and commitment of the resources. According to
Cavusgil, et al., (2014) Some of the most common market entry strategy of the multinational
business organisations are direct and indirect exporting, licensing, franchising, joint
ventures, partnering, mergers and acquisitions. According to Tulung (2017), direct
investment is linked with the highest risks as well as the expected rate of return on
investment and highest market control while the direct export and import offer the least
market control and the lowest level of risks. The direct export and import fall under the non-
equity mode of market entry where goods and services are exported to other countries to
earn higher profit.
According to Grewal, et al. (2011) franchising is one of the most common modes of market
entry strategy to enter into the international market. It offers a broader package of rights
and resources and necessary support to the franchise. The key benefits of the franchising
are that it involves low political risks and cost as well as also allows simultaneous expansions
of the business into the foreign market. on the other hand, Twarowska and Kąkol (2013)
have suggested that in order to enter into a very competitive and saturated market, most
relevant market entry strategy is Joint venture where the companies can partner with the
local organisations to increase its presence in an economy. It provides local expertise to the
companies. On the other hand, the direct investment through acquisitions can also be
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proved as an effective market entry strategy for the company as it provides a complete form
of participation in the foreign market (Morschett, et al., 2010).
The literature sources have clearly identified the various modes of market entry and their
relevance to enter into the new market. However, there is a least or no study is found that
analyses how a multinational organisation could successfully enter into the new market and
what is the most promising market entry strategy for a business. Thus, there is a need to
explore and investigate the market entry strategy of a successful business organisation.
IKEA Global Expansion
According to Jonsson and Foss (2011) While considering the furniture industry, the furniture
industry involves huge volume and higher transportation cost that has created a huge
barrier for the industry. While entering into the Scandinavian and European countries IKEA
does not pay significant importance to the adoption of the local preferences that has
allowed the company to keep its cost and profitability. However, while entering into the US
market, the company has to face severe problem due to this approach and has to change its
approach and pay attention to the local needs of the customers.
According to Tarnovskaya and de Chernatony (2011) After 20 years of its foundation, IKEA
has headed to the Scandinavian countries to expand and grow its business since the
company has successfully captured the Swedish market in the meantime. In the 1970s, IKEA
has spread its business in the other parts of the European countries; Germany, Netherlands,
Switzerland, Austria and in Australia and Canada. According to Hultman, et al. (2012) The
company has focused on the strategy of cost leadership by offering low-cost products with
limited customer service by offering easy to assemble furniture products. The company has
focused on innovating with the product designs along with ensuring the lowest
manufacturing cost for the product. While entering into the new economy, the company
emphasises on customising its products to suit the needs and demands of the nation.
IKEA enters a new market only after the exhaustive study of the local culture, needs and
demands of the customers and focuses on tapping into local expertise through joint
ventures, franchising and acquisitions. Jonsson, et al. (2013) has stated that the creating of a
stable supply chain was the most pressing problems for IKEA while entering into the US
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market. IKEA adopts its market entry strategy according to the business environment of the
economy. The company is focusing on adopting liberal trade policies that enable the
company to offer better quality products at a better price to the local customers. According
to the Chu, et al. (2013) in China, the company has formed a Joint venture to meet the local
laws. Through the Joint venture, the company has successfully tested the market, analysed
the needs of the local people and developed its strategies accordingly. The company has
modified its products and store layout to meet the needs of Chinese customers. The
company is focusing on both traditional modern approaches by building new physical stores
along with increasing digital presence (Gillies, 2017).
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METHODOLOGY
The methodology acts as the central part of the research on which the overall research
study is based. The nature and type of research must be considered to select appropriate
methods and approaches for collecting relevant data for the study (Flick, 2015). This case
study research attempts to investigate the market entry strategy of the multinational
organisation with a single case example of ‘IKEA’. The qualitative research would be more
suitable for this research as the study seeks to investigate the effectiveness of market entry
strategies of IKEA. Thus, the mono method where the qualitative technique of data
collection will be used to collect the relevant data for the research. The qualitative research
approach supports in exploring the ideas, perceptions and opinions of the individuals and
groups in relation to a specific event or issues. That tries to investigate to seek the answer to
the research question by using a systematic predefined set of procedures to collect the
evidence. The qualitative research instruments can be flexibly used to categorising the
responses to the questions and describe the individual opinions and perception (Taylor, et
al., 2015). The qualitative approach allows greater flexibility during the research where the
participants can freely share their experiences and thus the researcher could gain an insight
knowledge to the research.
The method of the in-depth interview will be employed for collecting data based on the
personal experiences and histories of the individuals to explore and investigate about the
market entry strategies of IKEA and their effectiveness in the company’s growth. The
interview will be performed among the store managers and senior employees at the
Nearest IKEA store(s). The systematic interview will be performed by structuring around 5-6
open-ended interview questions (Jamshed, 2014). The technique of purposive sampling will
be used o collect the research data. The sample size of the research will depend on the
availability of time and resources for the research. However, at least six interviews are
planned to collect the relevant amount of data for the research. The interview data is
planned to be collected by making the field notes and audio recordings. The collected data
will then record in the textual format (Jamshed, 2014). Each interview is set to last about 20
minutes.
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There are certain risks associated with the application of interview. The key risk of using the
interview method is that it is very time-consuming and requires higher time in setting up,
performing, transcribing and analysing the research. The implementation of an interview
can be costly and there are higher chances that the different interviewees may provide
biased answers to the questions (Silverman, 2016). Moreover, the sample size of the
interview is limited and thus, may also affect the reliability of the research.
The method of thematic analysis will be employed to analyse and interpret the collected
data. It will support in identifying, examining and recording the themes and patterns of
meaning from the collected data (Silverman, 2016). The different themes will represent the
summaries of information related to the research topic.
TIMELINE OF THE RESEARCH ACTIVITIES
A research study is a very long and time-consuming process that requires a large number of
funds, time and other resources. It is important to prepare a research plan that
encompasses all the essential activities of the research and the required amount of
resources and time to perform each activity. For performing the research study within the
desired time, it is essential to schedule each research activity against the estimated required
time (Yin, 2017). This research study is set to be completed within the estimated time of 6
months i.e. 24 weeks.
The time for performing each activity of the project can efficiently be designed and
presented by using the Gantt chart. The Gantt chart serves as a great tool for systematically
planning and scheduling the project activities. The time required to perform different
activities of the project is clearly represented in the below presented Gantt chart.
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Activity/weeks 2nd 4th 6th 8th 10th 12th 14th 16th 18th 20th 22nd 24th
Structuring project title
Formulating project plan
Conducting secondary
research
Analysing and
interpreting secondary
data
Designing interview
questions
Conducting interview
Transcribing ad
analysing interview data
Formulating results and
conclusion
Developing conclusions
and recommendations
Reflecting project and
individual performance
Preparing the final
project file
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REFERENCES
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practice. Routledge.
 Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014.
International business. Pearson Australia.
 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 last accessed on 13th
May 2019.
 Flick, U., 2015. Introducing research methodology: A beginner's guide to doing a
research project. Sage.
 Forsgren, M. and Johanson, J., 2014. Managing networks in international business.
Routledge.
 Gillies, T., 2017. IKEA’s strategy: Stick to the basics, and expand in the US. Online
available at https://www.cnbc.com/2017/01/15/ikeas-strategy-stick-to-the-retail-
basics-and-expand-in-the-us.html last accessed on 13th May 2019.
 Grewal, D., Iyer, G.R., Javalgi, R.R.G. and Radulovich, L., 2011. Franchise partnership
and international expansion: a conceptual framework and research propositions.
Entrepreneurship theory and practice, 35(3), pp.533-557.
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global sourcing: A case study of IKEA. Journal of purchasing and supply management,
18(1), pp.9-21.
 IKEA, 2019. About the IKEA Group. Online available at
https://www.ikea.com/gb/en/this-is-ikea/about-the-ikea-group/ last accessed on
13th May 2019.
 Jamshed, S., 2014. Qualitative research method-interviewing and observation.
Journal of basic and clinical pharmacy, 5(4), p.87.
 Jonsson, A. and Foss, N.J., 2011. International expansion through flexible replication:
Learning from the internationalization experience of IKEA. Journal of International
Business Studies, 42(9), pp.1079-1102.
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 Jonsson, P., Rudberg, M. and Holmberg, S., 2013. Centralised supply chain planning
at IKEA. Supply Chain Management: An International Journal, 18(3), pp.337-350.
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expansion of business groups. Management International Review, 52(2), pp.175-192.
 Morschett, D., Schramm-Klein, H. and Swoboda, B., 2010. Decades of research on
market entry modes: what do we really know about external antecedents of entry
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 Silverman, D. ed., 2016. Qualitative research. Sage.
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 Taylor, S.J., Bogdan, R. and DeVault, M., 2015. Introduction to qualitative research
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