Marketing and Ikea

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Case Study

IKEA: Expanding through franchising to the South American market?


This report is made by four, fourth year IBMS students for a marketing course. This report is based on a case from the book Global Marketing, by Svend Hollensen. The basis of this report is the international operating company IKEA. The main question that will be answered in this report is:

Should IKEA expand further through franchising to the South American market?

To answer this question the current situation of IKEA will be taken into account in this report. Next to this also other aspects like a SWOT analysis and other theoretical information will be used to come to conclusion, recommendation and possible implementation.

Table of content

Current Situation5
IKEA basic information5
The IKEA concept7
IKEA’s vision7
IKEA’s Strengths8
IKEA`s Weaknesses8
IKEA’s Opportunities8
IKEA’s Threats9
Conclusion SWOT analysis9
Marketing Strategy11
Transnational Organization11
Region Centre (Regional headquarters)12
Conclusion Market Strategy13
Entry Mode14
Pros franchising14
Cons franchising14
Strategic Alliances15
Pros non-equity15
Cons non-equity15
Joint venture16
Conclusion entry mode16
Entering the South American Market17
Brazilian furniture market17
IKEA and Brazil18
Short term recommendations19
Long term recommendations21
Sourcing concept IKEA23
Economical and Political Situation Brazil23
Conclusion Sourcing Concept South America24
Overall Recommendations25

Current Situation

IKEA basic information
IKEA is founded in 1943 a small village called Agunnaryd in Sweden. IKEA is a Acronym, composed from the following components: * I (Ingvar) - Founder’s first name
* K (Kamprad) - Founder’s last name
* E (Elmtaryd) - Farm where Ingvar Kamprad grew up
* A (Agunnaryd) - Home village

Today IKEA is present in almost 40 countries worldwide. Within these countries IKEA currently has 301 IKEA stores, the IKEA Group owns 267 of the in total 301 stores. These 267 stores are divided over 25 countries. Next to this IKEA employs over 120,000 employees worldwide. IKEA has over 600 million visitors annually, worldwide. The following map shows the coverage of IKEA store worldwide.

Light orange: IKEA is not present in these countries
Dark orange: IKEA is present with one or more store in this country

The following table shows how the amount of stores has developed over the last years;

Annually IKEA generates around 21,5 Billion Euros. The following graph shows the turnover development of the last years;

Currently five countries are responsible for a large amount of IKEA’s turnover worldwide. These countries are: * Germany (16% of total revenues)
* USA (11% of total revenues)
* France (10% of total revenues)
* Great Britain (7% of total revenues)
* Italy (7% of total revenues)

The IKEA concept
The IKEA Concept is a concept based on offering not only a wide range of well designed, functional home furnishing products. The concept is also based on offering the products at low prices, this so that as many people as possible will be able to afford them. IKEA wants to reach as many people as possible, by offering their home furnishing products at a low price and hereby help people to live a better life in their own home. Next to this the IKEA Concept also sets guidelines for the product design, the manufacturing, transporting and selling process as well as for the assembly of the products by the customers at home. Together these guidelines contribute to putting the IKEA concept into practice.

IKEA’s vision
IKEA’s vision is to create a better everyday life for as many people as possible around the world. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing...
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