Ikea Case Study
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What needs considering when you transfer local to global strategy?
In retailing, the strategy of the product, the price, the location, and the promotion is relatives with the culture of the country. IKEA have to think about tastes and preferences for each country. Having presented the factors that make the growth in retailing abroad difficult, there are specific cultural reasons, which make IKEA’s expansion abroad not easy:
-Cultural specific strategy:
• The use of the Swedish flag
• Swedish style of the furniture
Lack of cultural adaptation:
The main strategic issue at IKEA was the fact that they largely ignored the rule that they needed to tailor the product line. They did this to stick to their founder’s vision of “typically Swedish” products wherever in the world they were going to sell. This strategy proved to work in all other countries except when they entered North America, particularly the United States. I think IKEA trying to stay true to the vision was noteworthy, but they should have definitely followed norm when going global.
• Prior to its difficulties in the US, IKEA didn’t make specific adaptation when it entered into a new market, but followed always the exactly same strategy than in others countries. Certainly, the brand positioning strategy is global consumer culture positioning, the brand is a symbol of a given global consumer culture, as well as foreign consumer culture positioning, the brand has been built around a specific foreign culture, Swedish culture, with the Swedish names of the furniture, Swedish restaurants, the colors of the Swedish flag, etc. All sold expensive products for delivery up to two months after a customer’s order; companies didn’t lead a strategy of expansion. Nevertheless, IKEA, with its competitive advantage, its size and resources, has changed the global markets: many small furniture retailers have departed, and there is now a trend for growth of larger-scale retailers, and for an increased number of international retailers. The mature markets are recharged firstly, with more competition, more critical strategy (promotion, advertisement, distribution strategy), but IKEA has also changed the consumer behavior. One other strong advantage of IKEA that thrilled the market is also the innovation: IKEA innovates all the time, with always new products, new styles, each year a catalogue where all the products are presented is launched, and the innovation is also for the marketing strategy, tools, with recently TV advertisement in Europe for instance. This strategy allowed IKEA to accumulate experience first, before moving into other markets one after the other. In fact, an adaptation of the strategy of IKEA is obviously necessary, therefore, IKEA needs to conduct extensive a market research, and make use of local expertise.
IKEA has to follow the strategy of differentiation and the cost leadership, to keep being the leader of the market, and has to be flexible to adapt itself to the market conditions. To reach this flexibility, IKEA can allow local centers to take its own decisions, to be independent, but in the same time, local stores have to keep following the main concept of IKEA to maintain the global brand.A joint undertaking approach could replace Ikeas franchising concept and increase cultural sensitivity and operational controls through the establishment of strategic networks.
*(www.fratfiles.com )
How can wrong assumptions affect profit?
IKEA entered US market in 1985. Limited success, led to more expansion in 1987. Arrangement for more outlets came from some compromises, namely Europes standardized product strategy, had to be customized for the US. (Ikea adapted 1/5 of the product range, 45% produced locally in the US). Some service adaptations were also made because American customers hate standing in lines, love next-day delivery, etc. Efficient and modern “Scandinavian” style was still achieved. What is really the central part of the IKEA approach was still maintained through mainly (4/5) across the world accepted product range with local slight adaptations. Many of the locally introduced adaptations were later introduced into other countries Ikea outlets worldwide, therefore it can be concluded that they were “pilot-tested” in the USA but afterward widely accepted. IKEA eventually customized their products to represent North American tastes, which entailed making the bedroom chest drawers deeper, selling king and queen-sized beds, and redesigning the kitchen furniture and kitchenware. Once they deepened the drawers on the bedroom chests, sales immediately increased by 30-40%.So,the profit was affected positively despite the minor adaptation of their original approach.
*(www.fratfiles.com )
What market analysis can help avoid mistakes?
Market analysis can take two different forms. First, it is a method used by investors to look at the market and try to determine whether it is going up or down, in order to make investment decisions. Second, it is a field used by marketers to analyze the target market of their clients and determine the best courses of action to take to improve sales and profitability. Although the furniture industry may not be as dynamic as the IT