HND Business Strategy Assignment: IKEA Market Entry and Analysis

This report provides a comprehensive analysis of IKEA's business strategy, focusing on its potential market entry into Brazil. The report begins with an introduction and background of IKEA, including its mission, vision, and objectives. It then delves into an external analysis using PESTLE and Porter Diamond models to assess the political, economic, social, technological, legal, and environmental factors influencing IKEA's operations in Brazil. An internal analysis follows, utilizing the value chain and McKinsey's 7S framework to evaluate IKEA's capabilities, structure, and resources. The report highlights IKEA's strategic approach, organizational structure, and operational systems, concluding with a summary of findings and recommendations for the company's expansion strategy. The analysis also includes an evaluation of the Brazilian market and the competitive landscape, providing insights into how IKEA can adapt its strategies to succeed in this new environment.

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Table of Contents
Introduction......................................................................................................................................2
Background of the company............................................................................................................2
Mission, Vision, Objective of IKEA............................................................................................2
External Analysis.............................................................................................................................2
PESTLE Analysis........................................................................................................................3
Porter Diamond Model.................................................................................................................4
Internal Analysis of IKEA...............................................................................................................5
Value Chain..................................................................................................................................5
McKinsey’s 7S.............................................................................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

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Introduction
Expansion of business in the international market creates an opportunity for the company to
grow in an efficient manner. International market include with great opportunities that is required
to be grab by the company to compete its competitors (Ozturk, Joiner and Cavusgil, 2015). IKEA
is one of the leading companies in the market. The company has transnational strategy as they try
to maximize its global strategy of product standardization whilst responding to, local needs of
the consumers. Globalization factors which include growth of economy, deregulation ore
disposable income as well as rising housing market created a great opportunities for growth in
which the company have taken advantage of in many countries. The company is also planning to
expand its business in Brazil (Alange, Clancy and Marmgren, 2016).
In the following report there will be detailed analysis of the Brazil market that will help the
company to set up entry strategy to grow in the market efficiently and effectively.
Background of the company
IKEA is the company of home furniture at the international level that covers wider range of well-
designed as well as functional product that packed in the form of ready-to-assemble. The
company was introduced in the year 1943 by Ingvar Kamprad who was 17 years old at that time
in Sweden. Headquarter of the company is placed in Netherland. The company successfully
expanded its business in the international market. In the recent the company has more than 300
stores in 38 countries. IKEA only sold small home accessories as well as trinkets products in its
home, Sweden (Maťová, Dzian, Triznová, Paluš and Parobek, 2015).
Mission, Vision, Objective of IKEA
Mission and Vision
The company has mission and vision statement “To create a better life every day for many
individual”. Furthermore, the company has a vision to offer wide range of well-designed,
functional home furnishing products at prices so low that as many individual as possible will be
able to afford them. The vision statement serves propose of the statement of mission as well as
vision.

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Objective
The main objective of the company is to provide quality product and service to its consumers
that made them feel satisfied. Moreover, it is the objective of the company to cover wider range
of consumers to enhance its revenue to the maximum level (Hahn and Kim, 2016).
External Analysis
PESTLE Analysis
Political and Legal Environment
The political stability of Brazil does not have the same standard of security as other OECD’s,
however, the political stability of the country is enhancing steadily. The government has
welcomed BDI in Brazil with open arms. Moreover the poverty situation in Brazil is still high, as
the government of Brazil as well as its population is in turn very active when it comes to any
social program. Therefore, the programs will provide an opportunity for IKEA. The company
renounced CSR programs in place. It can certainly work with the partnership of the Brazilian
government. Moreover, the people also acquire more houses; therefore, the demand for furniture
will eventually enhances (Beliveau et al., 2018).
Economical factor
Brazil is one of the countries that provide its population the highest average purchasing power.
Therefore, the country seems very attractive market for IKEA, especially since its furniture
imports have also experienced a growth of 16.27%. The import of furniture in Brazil is majorly
controlled by the United States with more than 38% share, followed by Germany with 36% as
well as Italy with 10%. The company can work with more than 13500 Brazilian furniture
manufactures (da Silva, Batistella, and Moran, 2016).
Social Factor
The growing population in Brazil is approximately 186 million people in which the literacy ratio
is 86%, just as in most of the LDCs; the gap of inequality is still a substantial issue in the
country. The 10% riche people earn 50% of the total income as well as the 10% poorest people

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inly receive 10%. Therefore, the social status is very meaningful especially for the middle
classes. The company is proficient to sell the lifestyle to its consumers (Burdick, 2018).
Technological Factor
As the penetration rate of telecommunication in Brazil is remains low, therefore, the company
cannot rely on the online sales in Brazil in the middle future as well as its online advertising
should be very efficient (dos Santos, Barros and Tiago Filho, 2016)
Environmental Factors
Brazil shelter dense forest in northern regions includes Amazon Basin that can be used for
wooden furniture in which half of the country is covered by forest. However, the concern for the
global warming is increasing day by day among government that caused by MNCs deforestation.
Therefore, the company is required to ensure to the government that its practice is very
sustainable (Gonçalves et al., 2017).
Porter Diamond Model
Michael Porter’s Diamond Model is the framework of diamond shaped that majorly focuses on
explaining why certain industries within a particular nation are competitive internationally
(Riasi, 2015). The Porter Diamond Model of Brazil is explained in below points:

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(Source: Expert Program Management, 2019)
Factor Condition
The country Brazil has started investing huge amount on education system, infrastructure and so
on. Therefore, the skilled labor is increasing day by day in Brazil therefore; the human resources
are easily available in the market of Brazil. Therefore, the cheap labor is available to develop the
economies of the world. Moreover, the country has big forest that provides efficient and
sufficient natural resources to the company efficiently. The country has 600 varieties of palm
threes source of fiber, cattle feed, sacking, fuel as well as oils stand unused.
Demand Condition
The population of the country is increasing at greater level. Therefore, demand for housing is
also increasing in an effective manner. Due to growing consumption as well as education, the
individual of Brazil have also become more informed as well as demanding. Thus, the industries
are under pressure for innovation as well as high quality product.
Related and Supporting Industries
Huge number of furniture is imported in Brazil. The majorly covered countries for import are
US, Germany as well as Italy. The major industries in Brazil are automobile, steel,
petrochemical, accounting as well as construction that covered one third of the GDP of the
country. Such industries are relevant to the abundant supply of the natural resources of rubber,
tree as well as iron ore and so forth.
Firm Strategy, Structure as well as Rivalry
The firms in the Brazil have come more informed as well as structured in the recent scenario. In
order to analyze the recent situation, the country Brazil is considered as the second most
advanced industrial sector in American sub-continent. Brazil is considered as highly diversified
as well as sophisticated service industry with intense growing competition to the certain extent
(Ibusuki, Bernardes, and Consoni, 2015).
Internal Analysis of IKEA

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Value Chain
The company has adopted effective value chain to enhance its services and grow in the market.
The value chain of the company is explained in below points:
(Source: Jurevicius, 2013)
Inbound Logistic: the company manages 42 distribution centers for distribution of products to
the stores. Over 1000 suppliers support in manufacturing around 40,000 items product line to
make the company unique and competitive in nature.
Outbound Logistic: the consumer prefers to transport their product by themselves. The transport
service is also provided to the consumers however, extra charges are applied on that as it will be
provided from the outside source.
Operations: the company operates in more than 4 countries. It is estimated that more than 200
companies operate its stress in 26 countries while the remaining stores operates by franchisees,
the company does not manufacture its own products. They prefer to give their product on order.
Services: the information about the product is provided to the consumers through display as well
as catalogues. Low member of sales assistants in store due to the reason the company provide
self-help service. It has adopted other support activities as well.
Firm Infrastructure: the company has adopted hierarchical organizational structure as well as it
is considered as the large scale stores in size to the greater extent

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Human Resource Management: the employees are provided effective training to enhance their
performance as well as development programs is also held by the company to motivate the
employees to achieve targeted goal of the company in an effective and efficient manner. The
high level of commitment is also done to the HR practice.
Technological Development: the activities related to research and development is initiated in
Sweden. The company also uses information technologies at extensive level in various business
processes as well as research and development process.
Procurement: the company does not use any kind of raw material for its product due to the
reason it does not produces own brand products. The company has also long strategic
relationship with all the suppliers in an effective manner (Bush et al., 2019).
McKinsey’s 7S
(Source: Jurevicius, 2013
Strategy
The business strategy of IKEA is majorly based on the concept of IKEA that it’s built upon the
combination of the quality, function, value, design as well as quality that is always in the mind of

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sustainability. The company offers various products at lower prices. The engagement in new
market development on regular basis constitutes another essential pillar of IKEA’s strategy.
Structure
The organizational structure of IKEA is on hierarchical basis due to the massive scope of its
business operations. IKEA runs and manage more than 300 stores in 28 markets, 22 pick-up
order as well as order points in 11 countries, the company has expanded its business in 41
shopping centers in 15 countries and it also have 28 distribution site in 18 countries at
international level. The company faces some challenges such as slow speed of decision making
as well as immense role of formal titles with the status within the company.
System
The business of IKEA is depends on the set of system. It covers system of employee selection
and recruitment, system of customer relationship management, system of knowledge
management, system of business intelligence as well as other system.
Style
IKEA has adopted directive, supportive as well as participative leadership style in management.
The manager of the company is being active in the expectation of the employees, responsible as
well as autonomous in their behavior. They also highly engaged in their work as shown with the
success of IKEA. The manager of IKEA is also interested in how people feel happy in the
workplace. They consult the issue of employee and try to resolve the on time. It also encourage
the employees to participate in the management through consulting t=with the employees in the
process of decision making.
Staff
The number of employees in IKEA with the retail function amounted to 134400. Furthermore,
the total number of IKEA employees at international level was 149,000 till the year 2017. The
employees of the company are highly educated and well raised in the field of construction that
gives an idea to the company to mold its business accordingly.

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Shared Values
The core competency of IKEA is its unique design capabilities. Such capabilities also results in
offering create value for money to the consumers. Therefore, it is tough for the competitors to
compete with such great design at very low cost that create competitive advantage for IKEA in
an effective manner
Skills
The company does not look for the typical profile of employees for the company. The company
is majorly interest in the people that share its values, the individual who can be inspired by the
organization in an effective manner and the individual that bring something more to the
organization and also support them to grow even more.
Conclusion
From the above analysis it can be concluded that expanding in the international market provide
an opportunity to the company to grow in the international market. IKEA is planning to expand
its business in Brazil. Therefore, while analyzing the external environment of the country, the
company can enter in the market of Brazil due to the reason the country is developing day by day
that will provide an opportunity to the company to target its consumers more efficiently. The
company should not wait to enter in the market due to the reason the level of competition is low
and it has favorable working environment that will provide a new opportunity for the company.
The company has also strong brand image as well as efficient value chain that make them
possible to enter in the market more efficiently and effectively.

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References
Aghazadeh, H. (2016) Sphere of Marketology: Spectrum, Scope, Nature, Stakeholders, Features,
and Functions. In Principles of Marketology, 1 pp. 93-135.
Alange, S., Clancy, G. and Marmgren, M. (2016) Naturalizing sustainability in product
development: A comparative analysis of IKEA and SCA. Journal of Cleaner Production, 135,
pp.1009-1022.
Beliveau, M., Santa-Eulalia, D., Antonio, L., Mosconi, E. and Cadieux, N. (2018) How Can
SME Embark in a Digital Transformation in the Context of the 4th Industrial Revoution?. In 2nd
International Symposium on Supply Chain 4.0 (p. 37).
Burdick, J. (2018) Rethinking the study of social movements: The case of Christian base
communities in urban Brazil. In The making of social movements in Latin America pp. 171-184
Bush, S.R., Belton, B., Little, D.C. and Islam, M.S. (2019) Emerging trends in aquaculture value
chain research. Aquaculture, 498, pp.428-434.
da Silva, R.F., Batistella, M. and Moran, E.F. (2016) Drivers of land change: Human-
environment interactions and the Atlantic forest transition in the Paraíba Valley, Brazil. Land
Use Policy, 58, pp.133-144.
dos Santos, I.F.S., Barros, R.M. and Tiago Filho, G.L. (2016) Electricity generation from biogas
of anaerobic wastewater treatment plants in Brazil: an assessment of feasibility and
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Gonçalves, P.B., Hallal, P.C., Hino, A.A.F. and Reis, R.S. (2017) Individual and environmental
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