This case study provides information about Ikea’s growth strategy which is based on a cost leadership with high degrees of standardization and only a few local adaptations. Applying growth drivers, marketing mix and internationalization strategy, the case gives profound insights into the company’s success and how it was achieved. Key value of the case involves critical assessment of Ikea’s internationalization and recommendations to maintain growth. Outcome of the study was that Ikea is dependent on certain growth drivers that include company values, prices, product range, places of distribution and advertisement on the internal side of the company and governmental actions, growth of the population, mergers and sustainability on the external side of the company. Ikea’s growth strategy seems to be very successful. Nevertheless, the company has to face several challenges regarding its internationalization process. Through governmental regulations, too superficial market research and different tastes of customers that lead to a necessary adaptation to local circumstances, Ikea needs to avoid being outperformed by its competitors.
Table of Contents
1 Introduction
2 Models
3 Growth Drivers
3.1 Internal Growth Drivers
3.2 External Growth Drivers
4 Difficulties of Internationalization
5 Recommendations
6 Conclusion
Objectives and Topics
This case study aims to analyze the growth strategy of the Ikea Group, examining the factors contributing to its international success and the challenges faced during global expansion. The research focuses on the intersection of cost leadership, standardized marketing, and local adaptation strategies.
- Analysis of internal and external growth drivers
- Evaluation of the 4 P's marketing mix in a global context
- Investigation of internationalization strategies (waterfall vs. sprinkler)
- Assessment of operational challenges in foreign markets
- Strategic recommendations for future market maintenance
Excerpt from the Book
3.1 Internal Growth Drivers
According to its vision “to create a better everyday life for the many people” by creating a wide range of products at low prices, so that every person can afford them, Ikea has a range of about 9,500 products that are sometimes even 50% cheaper than products of competitors (Grant, Jordan, 2012, p. 32; Dahlvig, 2012, p. 74). The company’s 12 in-house designer and 60-70 external designer launch about 2,000 new products worldwide every year (Hiiemaa, 2015). But Ikea’s product range is not only wide in numbers, also in functions. Although the products are connected by the unique Scandinavian design, there are products that are suitable for every occasion and room in a house or apartment like kitchens, toys or even plants (Dahlvig, 2012, pp. 63-64). By creating this wide range, the company makes sure that every customer finds something to buy, even if it is just a candle. By clever solutions adapting to the problems of the customers with small rooms, Ikea manages to attract many people in cities where living space is limited. As the number of people who live in big cities will increase, e.g. by 5% in Tokyo (Statista, 2014), this represents a strong growth factor.
A second growth driver of Ikea’s product range regards the self-assembling of the furniture. Ikea has the assumption that a customer who wants to spend less on products is also willing to take part in the sales process. This includes the self-transportation, the self-assembly and even the introduction of self-checkout (Dahlvig, 2012, p. 93). By this method, Ikea keeps its own costs low at the same time as providing a purchase experience for the customer. For the customers who do not want to be integrated in that way, the company also offers transportation or installation and construction of the ordered furniture. Nevertheless more people complain about the difficult or often incomplete manuals of furniture, the so-called “husband-killers”, that take far too long to be put together. Although this is tested by new employees, the criticism still remains (Kowitt, 2015; Harrison, 2012).
Summary of Chapters
1 Introduction: This chapter provides an overview of the Ikea Group and outlines the purpose of the study, which is to analyze the company's growth strategy and internationalization process.
2 Models: This section introduces the theoretical framework used to evaluate Ikea, including internal and external growth drivers, the 4 P's marketing mix, and market entry strategies.
3 Growth Drivers: This chapter details the internal and external factors that have facilitated Ikea's significant and stable growth over time.
3.1 Internal Growth Drivers: This sub-chapter examines how factors like product range, pricing strategy, self-assembly, and standardization contribute to Ikea's internal growth.
3.2 External Growth Drivers: This sub-chapter explores how environmental factors, such as government policies, market liberalization in countries like China, and sourcing strategies, drive company growth.
4 Difficulties of Internationalization: This chapter discusses the challenges and barriers Ikea encounters during its global expansion, including issues with market research and the limits of standardization.
5 Recommendations: This chapter suggests strategic improvements for Ikea, focusing on digital integration, online presence, and location-specific adaptations to maintain market power.
6 Conclusion: This chapter summarizes the findings, reiterating that Ikea's success is rooted in its ability to effectively identify and utilize growth drivers while navigating global challenges.
Keywords
Ikea, Growth Strategy, Cost Leadership, Internationalization, Standardization, Market Entry, 4 P's, Global Sourcing, Furniture Retail, Customer Integration, Competitive Advantage, Emerging Markets, Supply Chain, Retail Management, Business Model
Frequently Asked Questions
What is the fundamental focus of this case study?
The study examines the growth strategy of the Ikea Group, analyzing how the company achieved its global market position through a combination of cost leadership and standardization.
What are the central themes covered in this work?
The core themes include internal and external growth drivers, internationalization strategies, marketing mix applications, and the challenges of adapting a global retail concept to local markets.
What is the primary research goal?
The goal is to develop a comprehensive analysis of Ikea's growth strategy to better understand the sources of its success and identify potential threats to its future expansion.
Which scientific methods are employed?
The study utilizes growth driver analysis, the 4 P's of the marketing mix, and a comparison of waterfall versus sprinkler internationalization strategies.
What topics are addressed in the main body?
The main body covers the identification of internal and external drivers, specific difficulties encountered in international markets, and strategic recommendations for digital and operational improvements.
Which keywords define this work?
Key terms include Ikea, Growth Strategy, Internationalization, Standardization, Market Entry, and Competitive Advantage.
How does the waterfall strategy apply to Ikea's international expansion?
Ikea has historically followed a waterfall approach, expanding sequentially from physically near markets to those further away, such as moving from Norway and Denmark to China.
Why did Ikea face difficulties in the American market?
The company faced issues due to a lack of prior market research, leading to a mismatch between their standard furniture sizes and the larger dimensions preferred by American consumers.
What role does China play in Ikea’s external growth drivers?
China acts as a significant external growth driver through market liberalization, a growing middle class, and low-cost sourcing opportunities for raw materials and production.
What does the author recommend regarding Ikea's online presence?
The author recommends that Ikea should increase its online focus, improve its mobile application services, and implement more targeted advertising for Ikea Family Card members to offset the declining impact of traditional catalogues.
- Citar trabajo
- Viktoria Klima (Autor), 2017, It's IKEA's World. A Growth Strategy Based on Cost Leadership, Múnich, GRIN Verlag, https://www.grin.com/document/446483
