Because IKEA promises low priced furniture to its customers, innovation is not seen much because bringing in new designs can disturb the cost structure. Sometimes IKEA fails to understand that one size fits all cannot hold in the line of furniture. Scandinavian designs might be appealing to countries in the Europe and nearby but cannot please the Americans in the same manner.
The stores of IKEA are located outside the cities as per the low-cost strategy. This causes the customers to travel long distances so they prefer to make purchases from nearby stores. We have learned from the given case study that IKEA has chosen cost leadership to be its core aim and strategy but only this one factor is not enough for its survival. It has to have more points of differentiation because when other competitors in the industry bring their prices down and offer quality and superior customer service, then chances are likely that customer loyalty and brand image of IKEA will drop off.
IKEA fulfils the needs of customers who want to buy inexpensive and durable furniture for their homes but when it comes to catering the needs of those who are looking for modern and stylish furniture items, IKEA fails to do the job.
With the use of relevant globalization and internationalization models, analyse and evaluate IKEA’s internationalization strategy. What do you consider to be the key opportunities and threats facing IKEA at the end of the case?
Whenever a multinational company wants to expand its business across the boundary of the home country, it has to undertake one of the four strategies mentioned in the diagram below. IKEA opted for globalization and internationalization.
Companies globalize when there is no room for further growth in their home country. Same goes for IKEA-it was a huge hit in Sweden and when the management saw that for making more profits and growth, they have to cross the boundaries. The most common and fruitful strategy that firms adopt when they want to expand at the global level is through mergers and acquisitions.
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