Assignment 4

Submit online on Blackboard by April 15, 2021 by midnight

Case Study 7: International Business Strategies

Q1. What strategies and other approaches does IKEA follow that have
allowed the firm to become the worlds leading furniture retailer?
"To have well-designed, practical home furnishings at prices so low that as many customers as
possible can afford them," IKEA's business philosophy states. The strategy for operating IKEA
furniture is to understand the consumers in every country and work to meet their employees'
needs. Design a premium product. Lower prices while reducing costs appropriately and
potentially making profits. Unique marketing concept and a massive budget for the catalog.
strong cadres and reliance on family management companies
" Furniture has traditionally been regarded as a significant investment and a more permanent
commodity within the home. IKEA has changed the way people think about furniture by
launching well-designed items that are meant to be used right away and discarded in a short
period (i.e., when worn out or when the user has moved on to a different taste level).
This is accomplished by creating home furnishings that combine feature, quality, style, and
value.

 The IKEA philosophy is to offer high-quality, well-designed furniture at affordable

prices.
 IKEA is geared toward middle-class families that have restricted living space. The target
market is progressive, well-educated, has limited space, and is unconcerned about their
social status. IKEA can deliver standardized products at stable prices by relying on a
global customer base. This method lowers the total cost of foreign operations. IKEA's
corporate strategy seeks to achieve scale economies through global production, buying,
and manufacturing consolidation.
 Managers of retail businesses IKEA sends regular market analysis reports to the
company's headquarters. Also, almost 90% of IKEA's labels are the same all over the
world.
 The catalog and catalog app serve as the primary promotional tools in each IKEA store,
which follows a centralized promotional strategy.
 IKEA's headquarters prepare and develop the company's global branding and product
range, working closely with external suppliers in most cases.
Q2. Describe IKEAS organizational culture. how does it contribute to the
firm's success?
IKEA's corporate culture is critical to ensuring cost-effective company practices and sustaining
the furniture giant's cost leadership business strategy. In other words, IKEA does not have the
most attractive financial incentives to its employees due to its cost-cutting business strategy.
Instead, the home improvement and furniture retailer recruits staff by offering intangible
incentives deeply ingrained in the IKEA corporate culture.
The following values guide IKEA's organizational culture:

 Simplicity and a high degree of informality are the hallmarks of this design. "Humbleness
in approaching tasks and consistency in the way of doing things are cornerstones of the
IKEA culture," according to one source. For example, only a few executives at IKEA US
 have business cards, and "everyone is on a first-name basis and sits side by side at IKEA
desks," so if you need your ego stroked, IKEA is not the place for you.
 The importance of teamwork. Executives who tend to run their businesses as a one-man
show do not fit into the IKEA community. The Swedish furniture company wants to
make sure that only people who share its beliefs and respect its culture work for it. As a
result, anyone interested in working at IKEA is encouraged to take an online test that
consists of a set of 10 work-related scenarios with a variety of options. The test's results
indicate whether or not applicants are likely to "fit" into the IKEA corporate culture.
 Employee diversity and various ways of doing things are valued. As of 2018, women
made up 70 percent of all workers and 40 percent of management at the Inter IKEA
Group. The furniture retailer believes that its LGBT+ workers have the freedom to be
themselves. The organization also wants to increase the number of employees from
different ethnic groups. Frugality is a virtue. Ingvar Kamprad, the late IKEA founder, and
long-time leader was known for his frugal spending habits, including driving a 1993
Volvo 240 GL for two decades, shopping at flea markets, and having haircuts while
traveling in developing countries to save money. The founder's frugality has influenced
IKEA's corporate culture in a way that managers at the company have noticed.
IKEA employees all over the world are seen as crucial to the company's potential success. The
company's structure is informal, and its organizational structure is flat. There are no corporate
dining rooms or executive parking spaces, and there are not many names. Managers fly business
classes and stay in budget hotels. Every store's management is fluent in English or Swedish to
ensure good communication with the headquarters. Every year, IKEA hosts an anti-bureaucratic
week in which managers dress up as sales clerks and conduct tasks ranging from the cash register
to forklift operations. The company's ethos emphasizes consensus decision-making.
This encourages managers to share their skills and experiences with their peers while also
making employees and vendors feel appreciated.
Q3. What strategic challenges does IKEA face going forward?
There is much red tape in developing countries like India. Due to excessive government
intervention, IKEA had to suspend operations in many countries, including Russia. IKEA also
faces difficulties in adapting to national markets in terms of employment, activities, and
customer loyalty, among other things. Besides, IKEA must figure out how to:

 Achieve the actual benefits of multinational operations—economic productivity and

learning—by maintaining a global design consistency while paying attention to local
markets.
 Take into account customer feedback and design requirements from different markets.
 While maintaining complete oversight, delegate power to local store managers.
 Reward and motivate employees and vendors.

Firms that want to be internationally competitive must pursue three strategic goals
simultaneously: efficiency—the company must create effective foreign supply chains. The term
"performance" refers to reducing a company's operating costs.
On a global scale, operations and events are carried out.
Flexibility- To accommodate customers from all over the world, the company must develop
global flexibility.
risks and opportunities unique to each nation Learning- The company must develop the ability to
learn from working in foreign markets and to apply what it has learned globally.
the ability to, for instance, the company could purchase:

 New managerial and technological expertise.

 New product concepts.
 Skills in collaborating with others.
 The desire to live in strange situations.

 References
 Commerce, Q., 2018. How does IKEA manage its inventory? s.l.:
https://www.tradegecko.com/blog/supply-chain-management/ikeas-inventory-
management-strategy-ikea.
 Dudovskiy, J., November 11, 2019. s.l.: https://research-methodology.net/ikea-
organizational-culture-simplicity-teamwork-diversity/.
 Kevin, 2015. s.l.: https://digital.hbs.edu/platform-rctom.
 Shoulberg, W., 2015. s.l.: http://www.therobinreport.com/is-ikea-the-most-influential-
retailer-of-the-past-25-year.