1.)After doing well in home country Sweden and then Europe, why did the Ikea falter in North America? List reasons below:
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2.)List some adjustments Ikea made in North America to turn things around.
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3.) What was IKEAs strategy prior to its problems in North America (strategy name from text chapter 12 in choosing a strategy section starting page 357 )
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4.) What is IKEAs strategy today in North America (strategy name from text Chapter 123)
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5.)How does IKEA deals with its product suppliers? (two sentence maximum)
IKEA and Its Strategy of International Business closing case Walk into an IKEA store anywhere in the world, and you would recognize it manufacturing costs. Developing a new product line can be a painstaking instantly. The warehouse-type stores all sell the same broad range of af- process that takes years. IKEA's designers will develop a prototype fordable home furnishings, kitchens, and accessories. Most of the products design-a small couch, for example-look at the price that rivals charge for are instanty recognizable as IKEA merchandise, with their clean yet tastea similar piece, and then work with suppliers to figure out a way to cut ful lines and functional design. prices by 40 percent without compromising on quality. IKEA also manufac The outside of the store will be wrapped in the blue and yel ow colors tures about 10 percent of what it sells in-house and uses the knowledge of the Swedish flag. The store itself will be laid out as a maze that requires gained to help its suppliers improve thelr productivity, thereby lowering customers to walk through every department before they reach the check costs across the entie supply chain. out stations. Immediately before the checkout, there is an in-store wareIt's a formula that has worked remarkably well. From its roots in Scan- house where customers can pick up the items they purchased. The dinavia, in 2015 IKEA had grown to become the largest furniture retailer in furniture is al flat, packed for ease of transportation, and requires assem- the world with 328 stores in 28 countries and revenues of $36 bision bly by the customer.If you look at the customers in the store, ill e 32 billion euro) IKEA had 771 million store visits and 1.9 billion online that many of them are in their 20s and 30s. IKEA sells to the same basic visits AKEA.com). With its Swedish heritage, IKEA is particularly strong in customers all across the world: young, upwardly mobile people who are Europe, where it has more than 200 stores, but it also has around 50 stores looking for tasteful yet inexpensive "disposable" furniture in North Amerca. Its strongest growth recently has been in China, where it A global network of about 978 suppliers based in 50 countries manu had 17 stores, and Russia, where it had 14 stores factures most of the 12,000 products that IKEA sells. IKEA itself focuses onLook a little closer, however, and you w l see subtle differences be- the design of products and works closely with suppliers to bring down ween the IKEA offerings in North America, Europe, and China. In North Chapter Twelve The Strategy of International Business 353 America, sizes are different to reflect the American demand for bigger are located near public transportation, and IKEA offers a delivery serice so beds, furnishings, and kitchenware. This adaptation to local tastes and that Chinese customers can get their purchases home. preferences was the result of a painful learning experience for IKEA. When the company first entered the United States in the late 1980s, it thought Times Magazine, October 5, 2005, p. 45"The Secret of IKEA's Success," The that consumers would flock to their stores the same way that they had in Economist, February 24, 2011:B. Torekul, Leading by Design: The KEA Story (New Europe. At first they did, but they didn't buy as much, and salles fell short of expectations. IKEA discovered that its European-style sofas were not big enough, wardrobe drawers were not deep enough, glasses were too cASE DISCUSSION QUESTIONS small, and kitchens didn't fit U.S. appliances. So the company set about redesigning its offerings to better match American tastes and was re- warded with accelerating sales growth. Sources:J. Leland, "How the Disposable Sofa Conquered America The New York York: HarperCollins, 1998P. M. Miler, IKEA with Chinese Characteristics Chinese Business Review, Juty-August 2004, pp. 36-69 1. Why do you think IKEA uses a floorplan that forces the customers to move along a certain path in the store? Lesson learned when IKEA entered China in the 2000s, it made adap- 2. Is it appropriate for IKEA to customize their furniture to each geographic tations to the local market. The store layout reflects the layout of many ction, for example, differences between US. and European furniture? Chinese apartments, where most people Ive, and because many Chinese Some companies do not make these changes, but IKEA does; why? apartments have balconies, IKEA's Chinese stores include a balcony sec 3. IKEA entered the United States in 1985 and China in 1998. But the tion. IKEA has also had to shift its locations in China, where car ownership company started in 1958; why did it take so long to move into the lags behind that in Europe and North America. In the West, IKEA stores are United States and China? Why do you think IKEA is not in more than located in suburban areas and have lots of parking space. In China, stores 28 countries today (there are almost 200 countries in the world)
