Strategy and Study Ikea

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Strategic Planning

BA 411

Case Study

IKEA

IKEA is profiting from global expansion by way of exporting and franchising. IKEA focused its global standardization strategy by keeping the cost of their furniture low, thus gaining profitability. The essence of IKEA’s strategy for creating value by expanding internationally was to strategically place the stores in areas the company felt would attract customers. Once in the store, create an atmosphere where customer needs such as restaurants and child care facilities were available so customers would stay as long as possible and spend more money.

IKEA’s original strategic posture in foreign markets was a more transnational approach. The company achieved the low cost, differentiating products in the beginning, however, economies of scale and local responsiveness wasn’t taken into consideration with the expansion. The strength of this posture was the universal need of furniture stores tailored for the middle class. A particular product they manufactured called the Klippan was popular at all IKEA stores. IKEA determined that it made more sense to work directly with the manufacturer of the Klippan to avoid the costs associated with shipping the product all over the world, allowing them to sell the product a lower cost. A weakness was, the furniture manufactured had to be made to suit the needs of the local economy the company was marketing their products to. IKEA’s strategic posture has changed as a result of its experiences in the United States by adapting its offerings to the tastes and preferences of consumers in different nations. They changed their strategy because the company realized in order to be successful they had to act upon the pressure of local responsiveness and the differences in infrastructure and traditional practices.
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