Case Discussion and Internet Exploration Questions

Closing Case Sweden's IKEA

Website — http://www.ikea.com

Case Discussion Questions

What strategy was IKEA pursuing as it expanded throughout Europe during the 1970s and early 1980s-a multidomestic strategy, a global strategy, or an international strategy?
Why do you think this strategy did not work as well in North America as it did in Europe?
As of 1998, what strategy is IKEA pursuing? Does this strategy make sense? Can you see any drawbacks with this strategy?

Internet Exploration Question

The case focuses on Sweden's IKEA and its efforts to expand to other markets. Established in the 1940s, IKEA is a furniture company that sells a wide range of furniture and related products. In its initial push to expand globally, IKEA largely ignored the retailing rule that international success involves tailoring product lines closely to national tastes and preferences. Instead, the company stuck with its initial vision that it could sell the same "essentially Swedish" products around the world. Initially, the idea worked. The company was able to sell its standardized products across Europe, and as a result was able to build considerable economies of scale into its operations and maintain a price advantage over its competitors. The company stumbled, however, when it tried to enter the North American market. Between 1985 and 1996 IKEA open 26 stores in North America, but unlike the company's experiences across Europe, the stores did not quickly become profitable. Its "essentially Swedish" products just didn't catch on in America. By 1991, IKEA's top management realized that if it were going to succeed in North America, it would have to customize its product offerings to North American tastes. Today, IKEA's products have been "tailored" to be compatible with North American tastes, and the company claims that it is making a profit in its North American markets.

This case illustrates an important point. Regardless of how profitable and savvy a company is selling its products in one market, it may encounter problems in another markets unless it fully understands the subtleties of the new market. One way that a company can quickly "come up to speed" on a new market is by retaining the advice of a consulting firm that has expertise in that market. The following are the website addresses for three global consulting firms that specialize in international business:

http://www.globalltd.com/

http://www.terra-international.com/

http://www.edgemarkets.com/

Spend some time navigating these websites and then answer the following questions. First, what types of services to these companies offer? Second, even though IKEA was in experienced international firm, could it have avoided some of the mistakes that it made in its initial push into the North American market by obtaining advice from one of these firms? Do you believe that IKEA would have been open to advice? Why or why not?

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