Summary
IKEA may be the world’s most successful global retailer. Established in 1943 in Sweden by Ingvar Kamprad when he was only 17 years old. Today the home-furnishing superstore has grown into a global cult brand with 230 stores in 33 countries that host 410 million shoppers a year and generate sales of € 14.8 billion.
IKEA targets market is the global middle class who are looking for low-priced but attractively designed furniture and household items. The company applies the same basic formula worldwide: Open large warehouse stores festooned in the blue and yellow colors of the Swedish flag that offer 8000 to 10000 items, from kitchen cabinets to candlesticks. Use wacky promotions to drive traffic into the stores. Configure the interior of the stores so that customers have to pass through each department to get to the checkout. Price the items as low as possible. Make sure that the product design reflects the simple, clean Swedish lines that have become IKEA’s trademark. IKEA aims to reduce the price of its offerings by 2 to 3 percent per year, which requires relentless attention to cost cutting. With a network of 1300 suppliers in 53 countries, IKEA devotes considerable attention to finding the right manufacturer for each item.
Despite its standard formula, to achieve global success, IKEA had to adapt its offerings to the tastes and preferences of consumers in different nations. IKEA first discovered this in the early 1990s when it entered the United States. The company soon found that its European-style offerings didn’t always resonate with American consumers. Since then, IKEA has redesigned its U.S. offerings to appeal to American consumers, which has resulted in stronger sales. The same process is now unfolding in China, where the company plans to establish 10 stores 2010.
Case Questions
1. How has the globalization of the markets benefited IKEA?
IKEA begun manufacturing its product in Sweden but to lower its costs, IKEA decided to transfer...