Ikea Essay

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In the early 1960s, IKEA realized that the Swedish market was saturated and they decided to expand their business formula outside the Sweden (Frynas, Mellahi, 2011). Therefore, IKEA started to enter into others countries by using the global strategy and this can proved by a sentence from the case which is “one-size-fits-all is the essence of the IKEA business model”. According to Ireland (2009), global strategy is an international strategy through which firm offers standardized products across country market, with competitive strategy being dictated by the home office. The products for Scandinavian countries such as Norway, Denmark, Finland, Iceland and the rest of the Europe countries are standardized (Frynas, Mellahi, 2011). However, necessary changes are allowed to suit the local taste and preference, and the costs will always under control (Frynas, Mellahi, 2011). By doing this, IKEA gains economies of scale from each store as it has a large production quantity and selling the same products all over the world (Frynas, Mellahi, 2011). This also helped IKEA maintain a price advantage over its competitors. Furthermore, the subsidiaries are always following the instructions provided from the corporate head office in Sweden (Frynas, Mellahi, 2011).This strategy seems to work as the IKEA sales in Germany (42.5) were higher than the sales in Sweden (11%)(Frynas, Mellahi, 2011). There are some key success factors for IKEA to apply the global strategy successfully. As most of the products from IKEA are standardized, they will produce in huge quantities and they can gain economies of scale from there (Frynas, Mellahi, 2011). Moreover, IKEA worked closely with its suppliers through those collaborative long-term partnerships (World Resource Instituted, 1998). Besides that, IKEA has a very strong brand positioning among the customers that they are offering quality

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