Strategic Management, Spring 2011
To: Andrejs Dzedons
From: Nadežda Lakomaja, 031RHV031
Case summary: IKEA
IKEA has a strong international brand recognition built upon a unique philosophy and low product prices, combined with solid sales performance. IKEA’ s famous vision is “to create a better everyday life for many people”. The company maintains total control of its design, pricing and supply of product ranges globally, and thus has a product portfolio that caters for most consumer lifestyles and budgets. IKEA is very much reliant on Europe, with 82% of stores located in this region, European market can be regarded as saturated and in times of economical downturn sales in coming years will are unlikely to be something more than just “modest”.
Whether to continue IKEA expansion to new markets, e.g. Asian market? And how to secure IKEA’s competitive advantage in the future?
First alternative: In order to keep good quality standards of IKEA products, no further extension to new markets in the nearest future
+ It will give an opportunity to preserve well-known global brand and its strong position at European and American market - The company will lose market share
- The sales will reduce
Second alternative: Continue expansion into non-Western markets, including China
+ Sales increase by gaining the market
-The image of IKEA may be weakened as in China it may be very hard to keep with quality standards at the same time offering products for extremely low price
I would recommend to focus more on markets, where IKEA is currently doing its business. Expansion to China’s market with very tough conditions (in terms of price) may change the IKEA forever and even destroy the company, it will be another very cheap and not very qualitative retailer from China, but not IKEA anymore. Having chances for gaining Asian...