Ikea entry modes

Kitchen-ware and kitchen areas were another concept developed in this period. China When IKEA first entered into the mainland China, it set up a joint venture with a local partner, and opened its first store in Shanghai with its partner by renting land from government.

Strategic management: Concepts and cases.

Ikea corporate level strategy

IKEA identified the strategic challenges and made attempts to overcome them. IKEA already has had to wait a long time to get permission to open stores in India. Environmental Analysis 7 5. Strategic management: Concepts and cases. The venture served as a good platform to test the market, understand local needs, and adapt its strategies accordingly. Due to escalating demand from buyers, IKEA will continue expanding geographically, opening 50 stores in North America by Caplan, IKEA opened retail stores in the regions that were allowed; Nonetheless, IKEA selected its partner and maintained full management control of their partner Jonsson, The case study goes into informing its target market and pricing strategy, which is already discussed. For instance, the price of its "Lack" table has dropped to 39 yuan less than five euros at current exchange rates from yuan when IKEA first came to the Chinese market. This could make its operations, especially distribution and logistics, a bit challenging. Kitchen-ware and kitchen areas were another concept developed in this period. Bargaining power of suppliers The bargaining power of suppliers is considerably low. Therefore suppliers possess less bargaining power, and can be compelled to meet the terms of IKEA rather than vice versa. This entry mode choice was made passively since a joint venture was the sole way to operate business in China because at that time, and there were many restrictions. Also, it will be difficult for IKEA to find the type of location size, off a highway, with great links to a major metropolis that is crucial to the success of its business model.

The challenges it faced in China, however, were far bigger than the ones in the US. This strategic decision has enabled IKEA to maintain a competitive advantage, and earn above average returns due to leadership in the market.

ikea entry strategy in china

IKEA decided not to react, as it realised Chinese laws were not strong enough to deter such activities. The retail operations are geographically organised with a specific organisation for Retail Europe Company Structure!

Ikea global expansion case study

The greatest challenge is to adapt constantly. Multidomestic Strategy In multidomestic strategy, companies try to achieve maximum local responsiveness. IKEA opened its first store in Hyderabad, firstly because it was easy to get a land there and secondly it was a city of a highly educated population. For instance, the price of its "Lack" table has dropped to 39 yuan less than five euros at current exchange rates from yuan when IKEA first came to the Chinese market. But it had to customize its products based on local needs. IKEA is a strong brand that understands that growing globally requires sacrifices and innovation from global teams, and they are ready to listen, respect and learn from the local environment. Research Thorough Research of the market is always at the heart of a good franchising plan. IKEA demonstrated courage to get the most relevant changes.

It learnt how to design its own furniture, bought raw material from suppliers in Poland, and created its own exhibitions. The rules are so onerous that a mass retailer such as IKEA will find it hard to meet them without penalising customers with higher prices and lower choice.

Ikea case study

The main problem for IKEA was that its prices, considered low in Europe and the US, were higher than the average in China The company realised this and started targeting the young middle-class population. This money was used to start up his own company, IKEA, which stood for his intials and the first letters of the farm and village in which he grew up. The required initial investment is not substantial and economies of scale can be used easily. Its low-price strategy created confusion among aspirational Chinese consumers while local competitors copied its designs. IKEA initially began using a global strategy but after entering the USA market they had to change to cater to their needs. Introduction 2 3. What else could it be doing? Rivalry among competing firms This is a highly competitive industry, characterized by other low priced furniture producers such as Galiform of England and retailers such as Wal-Mart of the United States In addition to local competitors. The furniture is purchased through purchasing operations trading service offices in 33 countries with suppliers in 55 countries. Since , IKEA has cut its prices by more than 60 per cent.
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How IKEA adapted its strategies to expand and become profitable in China