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IKEA is a furniture company operating on a global scale. With stores all around the world, it had to adapt its strategy to the countries where the European approach proved unsuccessful. Nevertheless, IKEA is an example of a highly profitable global company. This paper will cover the benefits of globalization that IKEA experienced, the importance of cross-cultural understanding, and the limits of the global market.
IKEA is a tremendously successful company. In part, it owes its success to perceiving the whole world as its market. With 230 stores in 33 countries, it has shown that global strategies can lead to success. Its strategy focused on providing a finely designed product at the lowest possible cost. IKEA stores share their style all over the world, making the brand recognizable and reliable. By expanding its market without lowering the quality of the product, it was able to establish one of the most recognizable and profitable furniture brands in history (Steenkamp 51). IKEA prides itself on its cost-cutting policy, and with a global strategy, it requires globalization of production. By creating production sites in the countries it operates in, IKEA cuts the costs of delivery and manufacturing that would otherwise become unfeasible when working on a global scale (Olhager et al. 146; Burt et al. 16).
However, IKEA was not able to keep its stores and catalog identical in all countries. Without understanding the specific needs of the country, a global company is at risk of losing a lot of customers. Before expanding into the United States, IKEA did not consider the differences between the US and European markets (Mellahi and Frynas 4). As the case study points out “Sofas weren’t big enough, wardrobe drawers were not deep enough, glasses were too small, curtains too short, and U.S. size appliances didn’t fit in the kitchens.” This expansion could have been disastrous had the company not addressed this problem by redesigning its products to be more appropriate for the market. Now it is a popular brand in the United States, and the early mistakes are long forgotten.
To not repeat the same error twice, IKEA made an effort to customize its stores in China to the needs of Chinese customers. For example, a balcony section of the store was introduced. Chinese apartments often have balconies, so it was a smart decision to capitalize on this regional difference (Prange 81). This change in strategy shows some of the limits of the global approach. One strategy cannot apply to all countries due to their regional differences. A global company has to consider the needs of its customers on a more local level. This move will make the business more profitable in return. However, it does not prevent the global approach from being viable. These limits only suggest that the strategy should include more thorough research of the market before expanding. After the research is done, the company can choose how to appropriately segment the market (Schlegelmilch 70).
Globalization can be used to create a successful business. IKEA utilized this to cut costs on production, expand into 33 countries, and become a brand known worldwide. The story of its rise was not without obstacles. Its difficulties in expanding beyond Europe have shown that there are limits to utilizing the same strategy everywhere. However, with a few adjustments based on regional preferences, the company became a success outside of Europe.
Burt, Steve et al. “International Retailing as Embedded Business Models.” Journal of Economic Geography, vol. 16, no. 3, 2015, pp. 715-747, Web.
Mellahi, Kamel, and Jedrzej George Frynas. Global Strategic Management. Oxford University Press, 2015.
Olhager, Jan et al. “Design of Global Production and Distribution Networks.” International Journal of Physical Distribution & Logistics Management, vol. 45, no. 1/2, 2015, pp. 138-158, Web.
Prange, Christiane. Market Entry in China. Springer International Publishing, 2016.
Schlegelmilch, Bodo B. Global Marketing Strategy. Springer, 2016.
Steenkamp, Jan-Benedict. Global Brand Strategy. Palgrave Macmillan UK, 2017.