IKEA case study
What are IKEA's firm-specific advantages? Country-specific advantage?
Oversea investing is mainly due to that the transnational corporation has the firm-specific advantage, for example, the brand reputation, production tec., scale economy, marketing strategy, and so on. That is why when firm can’t gain big profits by exporting directly or patent authorization, foreign investment is more comparative within those firm-specific advantages. This firm-advantage is referring to intangible assets. Country specific advantages for the firms can enhance the comparability. These comparative advantages provide the fundamental rational for the existence of international trade. The free trade between two countries results to economic profits to participating countries, so that there are different country specific advantages. There are four factors determine the country-specific advantage. They are factor conditions, demand conditions, related and supporting industries, firm strategy, structure, and rivalry. A. Factor conditions: such as skilled labor, politics policy and so on. B. Demand conditions: depends on the demand of the home country for the industry’s service and products. C. Related and supporting industries: the supplier or related industry of the firm in the home country. D. Firm strategy, structure, and rivalry: the way how companies to establish and manage. And the domestics rivals. * A framework of the evolution of CSA/CSD and FSA/ FSD influenced by home country institutional environment: (Resource: S Marinova, The evolution of country and Firm specific Advantages and Disadvantages in the process of Chinese firm internationalization, www.ceauk.org.uk/2010-conference-papers/full.../Marin-Marinov.Pdf)
* Role of government policies
* Government strategic priorities * Foreign exchange reserves
* Government ownership and control
Macro level influence
Country-specific: advantages/ disadvantages Home country
environment Firm-specific: Advantages/ Disadvantages
Micro/ firm level influence
* Cheap finance
* Availability of land for business development
* Preferential treatment for national champions
* Direct encouragement by key policy
* Support for acquiring local underperforming firms
* There are the IKEA advantages below:
Dedicated supplier network.→ lower the cost→ lower the price IKEA has more than 2,300 suppliers in 67 countries (country advantage), so that they can cut the price for their products, which contribute to low prices, and huge economies scale of retailer stores and production line while maintaining the quality standard.
Low price strategy(30 % lower then rivals)
The commodities in IKEA are quite affordable for public. The low prices of products are concerned by the customers while they make the decision. In order to make them affordable, the designers, purchasers and manufacturers make their best effort into finding solutions to apply that contribute to the low price. On thing is worthy-noticed, the customers also help to lower the price by transporting the products so that reduce the landed cost.
Huge economies scale
Having the wide and bride our-sourcing and connections around the world wide, IKEA is able to experience the world-wild huge economies scale by matching the quality standard of competitors with low price. As a good business reputation, IKEA can limited it's commercial budget but offering the free catalogues to public.
The products from IKEA are actually very different from the other furniture in traditional way. They are, simple in design and all-purpose in function (for the...
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