Morgan State University IKEA International Marketing Questions

answer the 2 questions in the bottom about the case study below:

Swedish Takeout

In this mini-case, IKEA is expanding internationally via franchising and other means. This case focuses on efforts in the United States, Europe, and Russia.

Expanding markets around the world have increased competition for all levels of international marketing.

Read the case below and answer the questions that follow.

Fifty years ago in the woods of southern Sweden, a minor revolution took place that has since changed the concept of retailing and created a mass market in a category where none previously existed. The catalyst of the change was and is IKEA, the Swedish furniture retailer and distributor that virtually invented the idea of self-service, takeout furniture. IKEA sells reasonably priced and innovatively designed furniture and home furnishings for a global marketplace.

The name was registered in Agunnaryd, Sweden, in 1943 by Ingvar Kamprad—the IK in the company’s name. He entered the furniture market in 1950, and the first catalog was published in 1951. The first store didn’t open until 1958 in Almhult. It became so incredibly popular that a year later the store had to add a restaurant for people who were traveling long distances to get there.

IKEA entered the United States in 1985. Although IKEA is global, most of the action takes place in Europe, more than 70 percent of the firm’s $36 billion in sales. Nearly one-fourth of that comes from stores in Germany. This level compares with only about $5 billion in NAFTA countries. The firm has stores in more than 40 countries around the world.

One reason for the relatively slow growth in the United States is that its stores are franchised by Netherlands-based Inter IKEA Systems, which carefully scrutinizes potential franchisees— individuals or companies—for strong financial backing and a proven record in retailing. The IKEA Group, based in Denmark, is a group of private companies owned by a charitable foundation in the Netherlands; it operates more than 350 stores. The Group also develops, purchases, distributes, and sells IKEA products, which are available only in company stores.

Low price is built into the company’s lines. Even catalog prices are guaranteed not to increase for one year. The drive to produce affordable products inadvertently put IKEA at the forefront of the environmental movement several decades ago. In addition to lowering costs, minimization of materials and packing addressed natural resource issues. Environmentalism remains an integral operational issue at IKEA. Even the company’s catalog is completely recyclable.

On the day that Russia’s first IKEA store opened in 2000, the wait to get in was an hour. Highway traffic backed up for miles. More than 40,000 people crammed into the place, picking clean sections of the warehouse. The store still pulls in more than 100,000 customers per week. IKEA has big plans for Russia. Company officials are placing IKEA’s simple shelves, kitchens, bathrooms, and bedrooms in millions of Russian apartments that haven’t been remodeled since the Soviet days.

One of IKEA’s strength is its strategic learning and adjustment in its international expansion. Its approach has been called “flexible replication,” wherein a strategic template is fitted to each international context. And now IKEA has opened 16 new stores in China’s biggest cities.

Sources: Colin McMahon, “Russians Flock to IKEA as Store Battles Moscow,” Chicago Tribune, May 17, 2000; “IKEA to March into China’s Second-tier Cities [Next],” SinoCast China Business Daily News , August 6, 2007, p. 1; “IKEA Struggles to Source Sustainable Timber,” Environmental Data Services , July 2009, p. 22; Anne VanderMey, “IKEA Takes on China,” Fortune, December 12, 2011; Anna Jonsson and Nicolai J. Foss, “International Expansion through Flexible Replication: Learning from the Internationalization Experience of IKEA,” Journal of International Business Studies 42, no. 9 (2011), pp. 1079–102.page2image11048

Answer all of the questions that follow:

1. The fact that Ikea strives to lower costs, minimizes materials and packing, and has catalogs that are completely recyclable shows what type of company commitment?

2.The fact that IKEA has stores in more than 40 countries around the world and sells to many markets likely means that the company experiences benefits of global marketing?