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IKEA’s Global Strategy Essay

Swedish company IKEA was the world’s largest furniture retailer since the early 1990s. It sold inexpensive furniture of Scandinavian design. The company operated in 55 countries with a workforce of 76,000 (the company referred to its workforce as its ‘co-workers’).

IKEA offered nearly 12,000 items to the home furnishings market worldwide. It sold a wide range of products including furniture, accessories, bathrooms and kitchens at 186 retail stores in 30 countries across Europe, North America, Southeast Asia, Middle East and Australia. IKEA enjoyed high brand equity. | | In 2003, Manhattan US-based Interbrand, a marketing research and consultancy firm, valued the ‘IKEA’ brand at $6.92 billion and ranked IKEA 43rd on its list of the top 100 most valuable global brands, ahead of Nestle, Harley-Davidson, and Apple.3 | Analysts attributed IKEA’s success to its skill in combining good product design and superior quality with an affordable price. IKEA’s low-pricing strategy was aimed at young people.

For several decades, IKEA had looked for international markets, which were culturally as close as possible to the Scandinavian market. The basic assumption behind IKEA’s global strategy was ‘one-design-suits-all.’ Anders Dahlvig, the CEO of IKEA, had once said, “Whether we are in China, Russia, Manhattan, or London, people buy the same things. We don’t adapt to local markets.”| IKEA had, in fact, been quite successful with its ‘one-design-suits-all’ global expansion strategy in many markets. However, industry experts were doubtful as to whether this strategy would translate well into new, culturally diverse and riskier markets. They felt that a higher degree of localization was essential for companies like IKEA to be successful in diverse markets.

The Asian markets, together with the Middle East and Australia, accounted for only 4% of IKEA’s total revenues in 2004. The company was keen to increase this share in the future. Upon entry into the far eastern markets, IKEA faced a number of challenges in terms of varied cultural, demographic and market specific needs.| | IKEA opened its first store in China in 1998. Although the company’s global strategy had worked well in the past in most of the markets it had entered, it quickly learnt that success in the Chinese market required a different strategy in the areas of Marketing and HR. | IKEA also had to alter two of the most important aspects of its time-tested and proven global strategy when it came to China; while elsewhere in the world, IKEA had always located its stores in less expensive areas and sold its furniture on the do-it-yourself (DIY) principle, these elements had to be changed in China. IKEA claimed that it had decentralized most of its functions including HR and stores management in China, but despite this, there was criticism that IKEA was far too bureaucratic with many of its operations being globally controlled and systematized.

Commenting on this, Ian Duffy, IKEA’s China retail manager commented, “We need time to learn and change in the (Chinese) market to become a success.”| IKEA should have many innovations to adapt to the China market. “At IKEA our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”(Our vision and business idea, http://www.ikea.com/ms/en_US/about_ikea/the_ikea_way/our_business_idea/index.html)

It seems not achieved in China market yet. Firstly, IKEA should have greater cooperation with local suppliers to get more competitive advantage of cost leadership. Secondly, according to the specialty of China market, IKEA should have some more adjustment to satisfy so many China picky customers. Thirdly, IKEA should intensify propaganda work to let more customers understand and accommodate the IKEA model. As an outcomer, there is a long way to be the winner in this huge and potential market.After a long time to research the China market, IKEA already understand the China market more than before. With accelerating the speed of expand, the success of IKEA in China market is only the problem of time.

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