Mathieu Chomarat: 06110827Portobello College
International Marketing Strategy
Assignment 2: Ikea Case Study
Lecturer: Carmel GernonRoom: F6
Table of Contents
A Brief Introduction to the essay:1
Macro-environment of Ikea in Brazil:1
Politic and legal environment:1
Market strategy entries:4
Wholly owned stores:4
Strategy recommended: franchising6
Success factors in Brazil7
Know how to attract new customers7
Be able to sell good quality products at a low price7
Adapt the experience in the retailing to a new market8
Understand the reasons that make Ingvar Kamprad reluctant to enter a new market:8 Bibligraphy9
Appendix 1: Brazil maps10
Appendix 2: Diary11
Number of words: 3,324
A Brief Introduction to the essay:
With 237 stores around the world and a turnover of € 17.6 billion, the Swedish company Ikea is the world leader in home furnishings[ Ikea’s Fact and Figures 2006, from Ikea’s website at http://franchisor.ikea.com/] thanks to a DIY concept that enables them to sell well designed good quality products at low prices.
The Ikea Group plans to further their international expansion into the South American Market. Brazil is the largest country in South America and fifth largest country in the world after Russian, Canada, China and USA. It apparently represents the most attractive country to target. The following analysis aims to highlight threats and opportunities regarding to the Brazilian market, as well as providing solutions and recommendations for a successful implantation in this area.
Macro-environment of Ikea in Brazil:
Politic and legal environment:
Even if the political stability in South America isn’t as secure as countries from the European Union for example, the situation remains quite steady as the former president Luiz Inacio Lula da Silva won a second term in a landslide victory at the end of October 2006. Silva who used to show strong leftist rhetoric before acceding to power in 2002, is more seen by observers as a centrist with a conservative economic policy in his first term[ “Brazil’s president wins landslide victory”, Associated Press, 29th of October 2006]. As he is considered more moderate than other South American leftist leaders like Venezuela’s Hugo Chavez and Bolivia’s Evo Morales, his re-election is more than welcome for big companies willing to enter the Brazilian market such as Ikea. Thus, the country doesn’t seem to present a big political risk, as the president promised to boost growth to reach the ranks of developed nations. In fact, the credit insurance company Durcroire specialised in international transactions assesses a risk of two based on a seven levels scale, giving the country a relative poor political risk[ http://www.ducroiredelcredere.be, information from the 02/11/2006].
The government is also quite active for helping its population to have better standards of living. A number of programs such as the “Programa Carta de Crédito Individual e Associativa”, “Habitar Brasil-BID (HBB)”, or the “Programa de Subsídio à Habitação de Interesse Social (PSH)” help people to acquire proper homes, by providing grants and credits to people who are the most in the need. It thus helps them to leave their ghettos. Such programs can be seen as an opportunity, because, when moving into new houses, people are more likely to be willing to acquire furniture as well. Other social programs are profitable for the population and for Ikea as well. For example, the “Crédito Solidário”, helping poor people to send their children to school leads to an increase in the number of educated people who can be seen as the target of Ikea. For instance, they can read the ads, understand Ikea’s buying...