...Background: IKEA was founded by Ingvar Kamprad who embedded his strongly held values and beliefs in IKEA’s culture. IKEA was created out of Kamprad’s family kitchen selling goods such as fountain pens, cigarette lighters and binders that later turned into a catalog business operations selling furniture. In developing IKEA’s furniture retailing business model, Kamprad was confronted with a cartel of furniture manufacturers that kept prices high by controlling the Swedish industry. This issue later became the vision of the company “creating a better life for the many people”. IKEA also introduced their key feature of self-assembled furniture where customers bought furniture in flat packages and put them together at home. This was known as the “knockdown” concept that allowed IKEA to save on transportation and storage costs. Conflict with the cartel of furniture manufacturers in Sweden forced IKEA to source materials from abroad. To maintain IKEA’s quality and delivery, IKEA taught their processes and provided machinery to their suppliers in Poland. After expanding their suppliers globally, IKEA created a general procurement principle that that stated IKEA should develop close ties by supporting its suppliers with a long-term relationship. By the mid-1990s IKEA worked with 2,300 suppliers in 70 countries. IKEA has 24 trading service offices in 19 countries that monitor production, test new product ideas, negotiate prices, and check quality. Since 1980’s IKEA has been looked upon...
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...Kathryn England Brenna O’Regan John Hudson IKEA’s Global Strategy: Furnishing the World IKEA is a privately-owned international furniture manufacturer known for its low prices and unique style. The company’s vision is to create a better everyday life for its customers by offering a great selection of well-designed, practical home furnishings. Since IKEA has chosen this sort of affordable and distinctive marketing strategy, the company has been very successful in its expansion throughout the world. In 1943, Ingvar Kamprad founded what is now known as IKEA in Almhult, Smaland, Sweden (Johansson, J.K. (2006) p. 85). Initially, the company sold such items as pens, wallets, picture frames, table runners, jewelry, etc., anything that Kamprad thought there was a need for (“IKEA” n.d.). Then, in 1947, furniture was added to their product selection, followed by personally designed pieces in the year of 1955 (“IKEA” n.d.). IKEA is also greatly known for its concept of selling disassembled furniture. Using this sort of strategy, in turn, has considerably reduced costs and their use of packaging, creating another great advantage for the company (“IKEA” n.d.). IKEA continues to use the same warehouse store design and layout as it has in the past. This design consists of “knockdown” inventory kits being stacked on large racks throughout the store, with an assembled version available for display (Johansson, J.K. (2006) p.85). Having their items packaged and stored in...
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...which IKEA has managed its global environment over time. IKEA was founded by Ingvar Kamprad in 1943. Today IKEA is one of the largest furniture chains in the world with three hundred and fifteen stores operating in twenty seven countries. IKEA has managed its Global Environment in the three major ways which has contributed to its great success. These ways are as follows: 1. Ingvar Kamprad was able to identify the changing trend in consumer wants and adapted his products to these evolving needs. Consumers wanted well designed and well-made furniture at an affordable price. IKEA was able to reduce its cost through developing internal departments to complete task which are usually outsourced by its competitors. 2. Developing and maintaining an international reputation that is synonymous with hard works and great values among all of the organizational stakeholders. 3. IKEA has increased the organization’s size and geographical reach through global franchising. 2. How would you explain the rationale behind the success of IKEA’s approach to managing its environment? As listed in Question 1 above, IKEA has attained its success in the global environment through three major strategies. From the very beginning of the establishment of IKEA, owner Ingvar Kamprad was able to identify consumers’ needs for affordable, well made furniture. To be able to satisfy these requirements, the organization had to manage not only the quality of their products but also the cost. IKEA was able...
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...not have the potential of expanding globally. Such a situation will occur since it does not have sufficient raw materials to sustain the conduct of its business activities. Moreover, deforestation has become a global issue, which implies that the company may lack carbon credits. As such, the target market may decline as potential customers become sensitive to the global issue of deforestation. 2. How would you address the challenges you identified in Question 1? The problem lack of adequate supply of wood can be solved if the company can engage in environmental activities, which involve planting of trees. This will ensure that the company has the ability to access its own raw materials, as well as from other sources. Further, IKEA should partner in business and environmental activities with companies that produce wood. As such, it will become easy for IKEA to acquire raw materials. 3. Did it surprise you to learn that both a developed country (the United States) and also emerging economies (i.e., China and Russia) are the fastest- growing international markets for IKEA? Does this fact pose any challenges in the way that IKEA ought to compete across the globe? Why or why not It was a surprise. This poses a challenge to IKEA in terms of marketing strategies. This is because there are several other companies, which have identified the potential of the global markets that are competing for the existing customers. Hence, IKEA has to formulate a marketing...
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...pose the greatest threat? Why? While Ikea is moving from an international strategy to a global-standardization strategy, there is the threat of possible limited resources and the change in consumer taste. Recently there has been an increasing awareness of preserving the forests and a concern for global warming. As a result, Ikea needs to develop an alternative to wood as a source of furniture and goods. The problem is the uncertainty of when that shift will take place. It could be within the next 10 years or maybe the next 100 years. Regardless, Ikea needs to consider these external factors. Currently, they need to focus on how to meet the demands of the customers so they’re able to keep up with competition. From this point the debate could be whether Ikea should look into alternative resources for wood so not only are they able to keep up with the competition, they’re also prepared for future changes. Or, rather put those expenses into finding a new supplier to add onto their current supply to keep up with the expansion. Ikea alone uses almost 1% of all wood used commercially around the world. The company said it plans on becoming “forest positive” by 2020, meaning that, despite its continuing high demand for timber, it intends its business to have overall positive effect on the world’s forest. What does this mean? The commitment of this approach means it will be growing at least as many trees as it uses to make products by 2020. Ikea also intend to become of the biggest and...
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...does not have the potential of expanding globally. Such a situation will occur since it does not have sufficient raw materials to sustain the conduct of its business activities. Moreover, deforestation has become a global issue, which implies that the company may lack carbon credits. As such, the target market may decline as potential customers become sensitive to the global issue of deforestation. 2. How would you address the challenges you identified in Question 1? The problem lack of adequate supply of wood can be solved if the company can engage in environmental activities, which involve planting of trees. This will ensure that the company has the ability to access its own raw materials, as well as from other sources. Further, IKEA should partner in business and environmental activities with companies that produce wood. As such, it will become easy for IKEA to acquire raw materials. 3. Did it surprise you to learn that both a developed country (the United States) and also emerging economies (i.e., China and Russia) are the fastest- growing international markets for IKEA? Does this fact pose any challenges in the way that IKEA ought to compete across the globe? Why or why not It was a surprise. This poses a challenge to IKEA in terms of marketing strategies. This is because there are several other companies, which have identified the potential of the global markets that are competing for the existing customers. Hence, IKEA has to formulate a marketing...
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...strategy. • Understand how firms can profit from expanding globally. • Understand how pressures for cost reductions and pressures for local responsiveness influence strategic choice. • Be familiar with different strategies for competing globally and their pros and cons. In this chapter the focus shifts from the environment to the firm itself and, in particular, to the actions managers can take to compete more effectively as an international business. This chapter looks at how firms can increase their profitability by expanding their operations in foreign markets, the different strategies that firms pursue when competing internationally, and the various factors that affect a firm’s choice of strategy. Subsequent chapters build on the framework established here to discuss a variety of topics including the design of organization structures and control systems for international businesses, strategies for entering foreign markets, the use and misuse of strategic alliances, strategies for exporting, and the various manufacturing, marketing, R&D, human resource, accounting, and financial strategies that international businesses pursue. OUTLINE OF CHAPTER 12: THE STRATEGY OF INTERNATIONAL BUSINESS Opening Case: MTV Networks Introduction Strategy and the Firm Value Creation Strategic Positioning Operations: The Firm as a Value Chain Global Expansion, Profitability and Growth Expanding the Market: Leveraging Products and Competencies...
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...Identification of the Problem Ikea has gained tremendous success in European and Canadian markets, by offering innovative products that found a great welcome in these markets. In addition, IKEA successful advertising campaigns, which were developed with a humors twist, made a very big impact on reaching the target audience in Germany and Canada. However, the company had some difficulties, when entered the US market, as the company was not as successful, as it did in Europe and Canada. There were two reasons for that. First, the products were less adaptive to the American market. Second, more promotions needed to drive customers to visit the stores, as the stores locations are far away from major cities. In order to keep its success IKEA must make some strategic decisions, the company must choose the place to expand its operation, in United States or in other countries. SWOT Analysis *Strength European market success Canadian market success Reasonable pricing Product fit west and east coast's life styles in the US. Products are easy to pick up from stores and assemble at home. Long-term partnerships with domestic suppliers. Provide products that are appealing to local customers. Cater to local tests as much as possible. *Weakness IKEA is a global company, so product standards may be difficult to maintain. Outsourcing most of the products sold in US store. Quality problems due to complex supply chain. Stores locations. Below expectation customers service in the...
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...In the early 1970s, Kamprad stared to worry about what would happen if he died. He decided long ago that none of his sons would ever control the company. Although all three work as Ikea managers, Kamprad was worried that they either sell the company or they might squabble over control of the company, and thus destroy it. So Kamprad has created one of the most unusual corporate structures in the world. He transferred 100% of his Ikea equity to a Dutch-based charitable foundation---Stichting Ingka Foundation as an irrevocable gift in 1984. This is a tax-exempt, nonprofit legal entity that in turn owns owner of IKEA. The Stichting Ingka Foundation owns a private Dutch company, Ingka Holding, which in turn is the parent of almost every other IKEA company. Ingka Holding is a private Dutch company. It owns many of the 287 IKEA stores directly, while the remaining stores are owned by franchisees. Furthermore, separate from this group of companies, another private Dutch company, Inter IKEA system, owns the IKEA trademark and concept. Each IKEA store pays three percent of its sales to this company as a royalty for the use of IKEA’s intellectual property. The royalties paid to Inrer IKEA system are transferred through a chain of similarly named companies and eventually end up being administered by a trust company in Curacao, in island in the Dutch Caribbean, which refuses to name the beneficiaries of the trust. At the end of this chain of transactions, the unnamed beneficiaries have...
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...IKEA: Ecommerce Expansion/ IT Capacity Management Information System Initiative LASA 1 Organizational Structure IKEA currently holds the position as the world’s largest furniture retail chain, with 332 locations, in 32 countries worldwide. IKEA is operated and owned by an array of no-for-profit corporations. The Organizational Structure is divided into two main entities: Franchising and operations. Many of IKEA’s operations, including the manufacturing and design of products, the managerial operations, and the supply-chain processes, are overseen by INGHKA Holding, which is private, for-profit Dutch Corporation. INGHKA Holding currently runs 235 of the IKEA stores, the remaining are operated and ran by franchises that are outside of INGHKA Holding. IKEA has differentiate themselves from their competitors, by satisfying the needs and wants of their consumers, with upholding a value proposition that is center on providing, high-quality products (furniture), at affordable prices. IKEA’s value proposition differentiated them from their competitors, secured competitive advantage and positioned themselves as the leader in furniture retailer, on a global level, by their value-based services, and marketing mix that emphasizes on areas such as: Location, Merchandise, Store Format, Market Communications, and Service and Selling Environment, which produced a remarkable “brand image”; “The essential role of brands is to differentiate a product or service from others in satisfying a...
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...IKEA Research Paper Team Members: Kevin Agbulos Chandni Shah Francis Mendo Raymond Cheng Ting Yu Course: International Business Professor Alex Settles Date: December 5th, 2013 Table of Contents: I. Introduction (pgs. 1-3) II. International Expansion (pgs. 3-5) III. The IKEA Concept and Business Model (pgs. 5-7) IV. Organization and Management (pgs. 7-8) V. SWOT Analysis (pgs. 9-10) I. Introduction In 1943 Sweden, a Swedish 17-year-old man named Ingvar Kamprad established IKEA. IKEA stands for Ingvar Kamprad Elmtaryd and Agunnaryd. Elmtaryd is the family farm’s name and Agunnaryd is the name of the village where the farm is located. It started off as being a retailer for selling matches, seeds and fish and Kamprad slowly added items such as ballpoint pens, furniture and other household designs. As he started expanding his product portfolio, Kamprad started adopting business strategies such as selling his products via mail order, using a milk truck as transportation, making a furniture catalog and hiring a furniture designer. This designer was Gillis Lundgren who also came up with the self-assembly, flat-packaging technique. This flat-packaging design allowed for more efficient transportation as it cut down on unnecessary space and prevented product damage. The self-assembly technique Lundgren had developed allowed IKEA to essentially forward integrate, cutting out outside retailers. Big retailers responded by turning manufacturers against IKEA...
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...IKEA was founded in 1943 by Ingvar Kampard and focuses on stylish but inexpensive Scandinavian furniture targeted at low to mid income families. In 1956, IKEA adopted the concept of self-assembly by opening a self-service open warehouse. Internationalisation began in 1973 and now IKEA is operational in 22 countries with 178 stores, having over 70,000 staff under employment. IKEA is able to maintain low-cost without sacrificing quality and offers great design to keep customers coming back. Instead of having its own manufacturing facilities, IKEA subcontracts manufacturers. and also engages customers as pro-sumers, where they both consume and partake in the production process. Finally, IKEA has one of the most efficient internal production system. In addition, to maintain the cost leadership, IKEA’s suppliers are located in low cost nations with close proximity to raw materials and reliable access to distribution channels. Also, IKEA utilises economies of scale and competitive advantages as they look for suppliers that produce highly standardised products intended for the global market. IKEA is able to keep customers coming back with its effective marketing shown in its eye catching catalogues, good service and strong in stock position as the most popular styles and design trends are continuously anticipated. With these three aspects, IKEA is able to attract its customers, keep the customers coming back and keep the customers satisfied. While there have been successes, there...
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...IKEA in India: An Opportunity for Success James Baskerville, Irina Damianoff, Jacquelynn Mantel, and Teressa Paulus Indiana Wesleyan University Assignment ADM510 Team Project Paper Team Project Paper Rubric: The Team Project report was graded according to the rubric below |Criteria |Points Possible |Point Achieved | |Spelling, grammar and mechanics - Excellent |15 | | |Description of the Organization – good detail |20 | | | Opportunities for Global Expansion – great research |30 | | |Challenges to Global Expansion |30 | | |Expansion Options and Recommendations – team did a great job with the analysis and support |30 | | |APA citations & references page |15 | | |TOTAL |140 | | ...
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...McDonald should develop separate strategy for the heavy user segment of the fast food industry because it is losing business and profits due to their competitors which have a separate segment of burgers. Ans5. To grow sales and profits, Jack Greenberg should create awareness with in store team members of what constitute the true fast food experience. Install a computer –based customer feedback in every restaurant, set up a similar feedback system for drive thru customer. IKEA’s case study Ans1. IKEA's firm specific advantages are clear-cut as the low cost furniture manufacturer and retailer aims to the young and price-conscious consumer. IKEA has been developing innovative modular designs whose components could be mass produced and venturing early into Eastern Europe to build a dedicated supplier network, IKEA could offer quality furniture in modern Scandinavian designs at very low prices. Established exclusive partnerships with independent furniture makers prohibiting them from selling to other stores. Retail layout is a clean and open warehouse setting with attractive...
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...Ikea: Furniture Retailer to the world 1. IKEA’s quality of products was as good as if not better than the traditional Swedish retailers, and the price was much lower. So the publicity made IKEA acceptable in middle class household. Secondarily, IKEA opened up a store that everyone can come and see their product, and they can leave with flat-packed furniture loaded on top of their cars by having a car roof racks they got from IKEA, and they even had a restaurant in their shop, so that customers could shop and relax and refresh themselves while shopping. 2. By 1973 IKEA was the largest furniture retailer in Scandinavia with nine stores. The main reason that Ikea expanded rapidly and was so successful in Europe, compare the other furniture business in the Western Europe with IKEA, the furniture markets were largely fragmented and served by high-cost retailer located in expensive downtown stores and selling relatively expensive furniture, while IKEA had elegant functional designs with clean lines, and lower price, and immediate availability as was the self-service store format. So Ikea was having a better price, a better design, a better quality and a better availability to a customer, why not buy from it? IKEA mainly used their price and stocking advantages in their operations, which was really competitive to those furniture shops that sell furniture in downtown area and with an expensive rent. The other domestic furniture seller also didn’t have much space to store their...
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