The store exteriors are painted bright blue and yellow, Sweden’s national colors. Shoppers view furniture on the main floor in scores of realistic-looking settings arranged throughout the cavernous warehouses. At IKEA, shopping is a self-service activity. Store layouts ensure that visitors have ample opportunity to drop grab-and-go impulse purchases into their $.99 blue Frakta shopping bags as they browse each showroom and write down the names of desired items.
The lower level of a typical IKEA store contains a restaurant, a housewares department, a grocery store called the Swede Shop, a supervised play area for children, and a baby care room. Finally, after shoppers have paid for their purchases on the lower level, they pick up their furniture and drive away.
Most furniture is in “flat pack” kit form; one of the cornerstones of IKEA’s low-cost strategy is having customers take their purchases home in their own vehicles and assemble the furniture themselves. Kamprad arrived at this crucial insight early in his career after watching an employee at the original Almhult store take the legs off a table and tuck them under the tabletop so the unit would be easier to transport.

Over the years, IKEA has become integrated into global consumer culture. Kamprad’s insight about the advantages of selling knockeddown furniture has given rise to something called the “Ikea effect.”  Writing in the Journal of Consumer Psychology, a team of researchers showed that successfully completing a task such as assembling IKEA furniture leads to perceptions of high value by the consumer. French fashion house Balenciaga even paid IKEA the ultimate compliment by recreating the Frakta bag as a luxury item. Balenciaga’s blue “Arena Extra-Large Shopper” carries a price tag of $2,145!
IKEA’s unconventional approach to the furniture business has enabled it to rack up impressive growth in an industry in which overall sales have been flat. Sourcing furniture from a network of more than 1,600 suppliers in 55 countries helps the company maintain its low-cost, high-quality position. During the 1990s, IKEA expanded into Central and Eastern Europe. Because consumers in those regions had relatively little purchasing power, the stores offered a smaller selection of goods; some furniture was designed specifically for the cramped living styles typical in former Soviet bloc countries.

Questions
1. Review the characteristics of global and transnational companies described in Chapter 1. Based on your reading of the case, would IKEA be described as a global firm or a transnational firm?
2. In Chapter 11, it was noted that managers of IKEA stores have a great deal of discretion when it comes to setting prices. In terms of the ethnocentric/polycentric/regiocentric/ geocentric (EPRG) framework, which management orientation is in evidence at IKEA?

3. What does it mean to say that, in terms of Porter’s generic strategies, IKEA pursues a strategy of “cost focus”?