IKEA is a Swedish-founded multinational organization that designs and sells ready-to-assemble furniture and other home products. IKEA has successfully implemented a global international strategy. A global strategy is an international strategy in which a firm’s home office determines the strategies that business units are to use in each country or region (Hitt et al., 2019). IKEA uses a standardized set of products across the world and has several centralized activities such as packaging and design. IKEA also integrates and centralizes support functions from the value chain which creates economies of scale benefits for the organization. In order for a global strategy to be successful, the organization must have efficient operations. IKEA’s operations are very efficient due to its standardization of product lines, low transportation costs and efficient packaging (J.R. Hagerty, 2018).
Choosing the right entry mode is vital in the firm's internationalization process; a firm's entry mode choice determines the amount of resource commitment required, affects firm control of foreign operations and investment risk. IKEA’s wholly-owned subsidiary strategy is such that the majority of stores’ operations, management, furniture design and manufacturing are overseen by INGKA Holding. IKEA also uses franchising as a mode of entry into some markets, all IKEA stores are franchised (Inter, 2016). The franchisees who use IKEA’s concept and trademarks to run business must pay a percentage of revenue back to IKEA. IKEA uses this strategy to ensure operational control, standardization of products, and smooth entry into new markets.
Something fascinating about IKEA is that though its strategy seems relatively straightforward, competitors have a very hard time copying them. An IKEA executive stated “You might be able to copy our prices, but you need our volume and global sourcing. You have to be able to copy our Scandinavian design, which is not easy without Scandinavian heritage” (Moon, 2004). The X factor that senior-level management brings to Ikea is making the difference. One recommendation that could help Ikea would be to modernize the catalogs customers are getting when entering. Currently, customers are greeted with a tape measure and current inventory catalogs (Solomon, 1991). An improvement here would be to hand customers interactive tablets. They can enter their personal log in or continue as a guest. The data collected from previous shopping experiences with Ikea could assist with the current customer's experience. They could pick up on trends and customers' tastes based on purchases. Make suggestions and even enter their current home's dimensions to assist with proper fitting. Using 3D modeling and overall taking the shopping experiences to the next level.
Hitt, Michael A., et al. Strategic Management: Concepts and Cases: Competitiveness and Globalization. Cengage Learning, 2019.
Inter IKEA Systems B.V. (2016). IKEA franchisees. Available at: http://franchisor.ikea.com/ikea-franchisees/ (Accessed 30 May 2022)
J. R, Hagerty, 2018, Ingvar Kamprad made IKEA a global retailer by keeping it simple, Wall Street Journal, https://www.wsj.com, (Accessed 30 May 2022)
Moon, Y. (2004). IKEA invades America (p. 13). Boston: Harvard Business School.Solomon, B. (1991). A Swedish company corners the business: worldwide. Management Review, 80(4), 10.