IKEA Case Study
IKEA’s Case Study 1. How is IKEA profiting from global expansion? What is the essence of its strategy for creating value by expanding internationally?
a. IKEA expands to other markets in order to get new customers and sales. In addition, expanding globally allows companies and firms to increase their profitability. IKEA was able to expand their market for their domestic product offerings by selling those products in international markets.
IKEA applied the following strategy in expanding internationally, by Franchising. When IKEA expanded globally, IKEA had some evaluation criteria based on the market study for selecting franchisees which leads to its long-term strategic expansion plan which sets priorities of future growth. They made sure when franchising in other countries they found the right place of manufacturing for each item by leveraging the low-cost suppliers and proper sourcing strategy. They also made sure that the localization of where the franchises where built were adaptable of its offerings to the tastes and preferences of consumers in different countries. For example in China, “car ownership is still not widespread so IKEA’s stores in China are mainly located near public transportation that way Chinese customers can get their purchases home.”
2. How would you characterize IKEA’s original strategic posture in foreign markets? What were the strengths of this posture? What were its weaknesses?
a. I would describe IKEA’s original strategic posture in foreign markets, is to decrease production cost. IKEA has strategy in order to decrease its production costs since IKEA planned to reduce the price of their products by 2 to 3 percent every year. In fact low prices of the products have been the central part of their business strategy. IKEA strives to consistently find new ways to reduce prices. The aim behind the strategy is to be able to provide low priced but attractively designed furniture and household items to the middle class customers.
a. IKEA expands to other markets in order to get new customers and sales. In addition, expanding globally allows companies and firms to increase their profitability. IKEA was able to expand their market for their domestic product offerings by selling those products in international markets.
IKEA applied the following strategy in expanding internationally, by Franchising. When IKEA expanded globally, IKEA had some evaluation criteria based on the market study for selecting franchisees which leads to its long-term strategic expansion plan which sets priorities of future growth. They made sure when franchising in other countries they found the right place of manufacturing for each item by leveraging the low-cost suppliers and proper sourcing strategy. They also made sure that the localization of where the franchises where built were adaptable of its offerings to the tastes and preferences of consumers in different countries. For example in China, “car ownership is still not widespread so IKEA’s stores in China are mainly located near public transportation that way Chinese customers can get their purchases home.”
2. How would you characterize IKEA’s original strategic posture in foreign markets? What were the strengths of this posture? What were its weaknesses?
a. I would describe IKEA’s original strategic posture in foreign markets, is to decrease production cost. IKEA has strategy in order to decrease its production costs since IKEA planned to reduce the price of their products by 2 to 3 percent every year. In fact low prices of the products have been the central part of their business strategy. IKEA strives to consistently find new ways to reduce prices. The aim behind the strategy is to be able to provide low priced but attractively designed furniture and household items to the middle class customers.