Case Study #6—IKEA

Read the case study located in the section titled Case Studies in your textbook and prepare a 7- to 10-page report in a Microsoft Word document concerning the following situation:

The IKEA case provides an excellent opportunity to apply strategic management concepts to a large privately-held company that is expanding into India. IKEA is a Netherlands-based Swedish company with a presence in 44 countries around the world, including the US, the UK, Russia, the EU region, Japan, China, and Australia. It is the largest furniture retailer in the world but did not enter India until 2013, despite the fact that it has been sourcing from India since the 1980s.

The purpose of this case study is to examine the factors that are crucial to IKEA’s continued success and to propose strategic actions to sustain its competitive advantage. The case opens with a review of the company’s humble beginning. IKEA was founded by 17-year-old Ingvar Kamprad in Sweden in 1943. By the 2000s, IKEA has become the world’s largest furniture retailer. The corporate structure was constructed to prevent any takeover and to protect the family from taxes. Thus, the structure is a complicated arrangement of not-for-profit and for-profit organizations. The IKEA stores provide customers with a unique shopping experience with low prices, solid quality, modern designs, and most importantly, the concept of do-it-yourself (DIY) products.

The extensive discussion is followed by a description of the furniture industry in India and what IKEA had to overcome in order to enter the Indian market. IKEA first met with regulatory and political roadblocks, and then had to work with suppliers in order to meet the Indian government’s requirement for sourcing. Finally, there are several challenges that IKEA faces.

This case is ideal for demonstrating the importance of the general environment, international corporate-level strategy, and type of entry. The following points are to guide a review and discussion of these important concepts.           

• Review IKEA’s general environment segments and elements in India and describe in detail all the elements associated with this segment.  Include three to four perspectives of the general environment.

• What are the segments in the general environment that relate to IKEA’s situation?  Be specific?  Provide examples and details.

• Analyze IKEA’s intended international corporate-level strategy in India.  How was it strategized and what led to this country of interest?

• Describe how, if in any way, India is different from other countries?  In your opinion, what would be a close second country?

• What is IKEA’s choice of international entry mode?  Provide research and examples.

• What are the advantages and disadvantages compared to other international entry modes?

• Identify IKEA’s current challenges in India. Based on your analysis, what additional recommendations would you make to help IKEA achieve its goals?

• Discuss the uncertainties and risks of doing business in different regions throughout the world.

• Discuss whether IKEA would be wise to pursue a cooperative strategy. Also identify the type of cooperative strategy that would be best, explained why would it be best, and suggested with whom IKEA should pursue this strategy? If a cooperative strategy was not a good idea for IKEA, explained why not.

• IKEA’s product demand is difficult to manage. Recently overseas competition has refocused their product lines from the low end of the market to the more median price range. As they did this, they also broadened their product lines. How should IKEA manage their products? Should IKEA have a product line to meet the needs of the entire market or should they focus on one area of the market? If they follow a market focus strategy, what should their new target market be?