Task 2: Using the Uppsala model, evaluate IKEA’s internationalization strategy from 1974 onwards and assess to what extent the model adequately explains how the company has internationalized.
Expanding internationally could be a smart and beneficial business proposition because of tending to develop much quicker than running locally, accessing to cheap resources, increasing quality and diversification. However, selecting an approach to access a new international market is not easy. It depends on many factors as sales objects, markets, organizational structure, finance and personnel. Uppsala model was proposed by a number of Swedish researchers at the University of Uppsala (Johanson and Wiedersheim-Paul, 1975 ; Johanson and Vahlne, 1977) and has been extend by Wetch and Loustarinen. IKEA is well known as a successful expanding international business. Is IKEA expansion in an international market similar to modes of entering an international market of Uppsala model?
Uppsala model shows that many companies often develop their international operations in small steps, rather than by making large foreign production investments at single point in time using two variables:
1. level of commitment in a particular host country
2. level of market knowledge to steer the direction of the geographic expansion
The assumption that the internationalization of a firm develops step by step was originally support by evidence for case of study of four Swedish firms
Stage 1: No regular export activities
Stage 2: Export via independent representatives
Stage 3: Establishment of a foreign sales subsidiary
Stage 4: Foreign production/ manufacturing units.
Comparing IKEA’s internationalization strategy from 1974 onwards and what the researchers had noted “first of all, that companies appeared to begin their operations abroad in fairly nearby markets and only gradually penetrated more far-flung markets. Second, it appeared that companies entered new markets through...