Options for Ikea in the International Market
Internationalisation project
IKEA enters the South American market
Executive Summary
In this essay, we will discuss an internationalisation option for IKEA: entering Brazil.
IKEA is an established leader in the flat-packed furniture market. Its’ success is based on effectively delivering their value proposition: wide range of products that are well designed, at affordable prices.
This is possible due to economies of scale and scope, shifting assembly from the IKEA value chain to the consumer, and a global network of suppliers. A good understanding of what target clients considered value guaranteed that products were developed to maximise what their clients appreciated the most: not necessarily ‘price’ but ‘good value for money’.
Brazil is a favourable choice for a new market based on both factors inherent to the country and existing operating knowledge IKEA possesses.
Brazil: * 7th largest economy in the world with a GDP per capita of $11,340, concentrated in relatively few, large cities including Sao Paolo, Brasilia and Rio de Janeiro * The GDP growth rate averaged 4.34% over the past 5 years (World Bank 2007) * The middle class is expanding and is encouraged by the government (expanding from 38% in 2002 to 52% in 2012 according to the Brazilian government) * Brazil ranks average in comparison to other South American countries in the business freedom index which measures business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labour freedom. * Few large comparable competitors. * History of international consumer brands succeeding in replacing local businesses (Starbucks, Carrefour, H&M). * 5th largest furniture producer in the world (production opportunities).
IKEA: * IKEA operates in a same language country (Portugal) – this would reduce the regionalisation costs of catalogues (integral
IKEA enters the South American market
Executive Summary
In this essay, we will discuss an internationalisation option for IKEA: entering Brazil.
IKEA is an established leader in the flat-packed furniture market. Its’ success is based on effectively delivering their value proposition: wide range of products that are well designed, at affordable prices.
This is possible due to economies of scale and scope, shifting assembly from the IKEA value chain to the consumer, and a global network of suppliers. A good understanding of what target clients considered value guaranteed that products were developed to maximise what their clients appreciated the most: not necessarily ‘price’ but ‘good value for money’.
Brazil is a favourable choice for a new market based on both factors inherent to the country and existing operating knowledge IKEA possesses.
Brazil: * 7th largest economy in the world with a GDP per capita of $11,340, concentrated in relatively few, large cities including Sao Paolo, Brasilia and Rio de Janeiro * The GDP growth rate averaged 4.34% over the past 5 years (World Bank 2007) * The middle class is expanding and is encouraged by the government (expanding from 38% in 2002 to 52% in 2012 according to the Brazilian government) * Brazil ranks average in comparison to other South American countries in the business freedom index which measures business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labour freedom. * Few large comparable competitors. * History of international consumer brands succeeding in replacing local businesses (Starbucks, Carrefour, H&M). * 5th largest furniture producer in the world (production opportunities).
IKEA: * IKEA operates in a same language country (Portugal) – this would reduce the regionalisation costs of catalogues (integral
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