IKEA's Global Renovations

In September 2018, Swedish furniture retailer IKEA announced

record revenue of US$44.7 billion for 2018 and [a] 7 percent increase

in profit over 2017. Despite many highly publicized setbacks over the

years, including high-profile product recalls in 2017, a scandal

regarding use of horse meat in its iconic meatballs in 2013, and

accusations of forced labor in the 1980s, IKEA continues to prosper in

markets around the world. Since expanding outside of Europe over 30

years ago, IKEA has attempted to balance its unique approach to both

the retail shopping experience and its own expansion as it has sought

to achieve a reputation for social responsibility and sustainability.

IKEA's Humble Beginnings

The idea of IKEA began in 1935 in the small province of southern Sweden, Smaland, where the people are known for their hard work and for making the most from very little means. Ingvar Kamprad, a nine-year-old boy with a strong entrepreneurial spirit, began by selling fish and Christmas decorations to those in the local community. By age 17, using a gift of money from his father, Kamprad established the company IKEA. Kamprad created the name IKEA by combining his initials, the initials of his hometown farm, and the initials of a nearby village. During that period he sold everything from pens to gadgets to stockings, and within a short time he was able to

put together a mail-order catalog. By 1947, Kamprad decided to introduce home furnishings to the product mix and by 1951, eliminated all other products lines, focusing solely on the home furniture market.

Kamprad built his empire on the foundation of offering a "wide range of home furnishings of good design and functionality at a price low enough to be affordable to most people. With this idea in hand, he set out to build a business that met the needs of the Swedish people, showing no differentiation between rich and poor.

Around this time, he was seeing a great deal of pressure from other furniture providers in his direct market. In 1956, with his suppliers facing pressure to boycott due to increased competition, Kamprad decided to design his own furniture and have a manufacturer produce it. This seemingly small decision led IKEA to offer low prices and efficient packaging, which are still the capstones of the business today.

It is universally believed that IKEA's growth and success are a direct result of Kamprad's vision, values, and culture, which he cultivated in all aspects of IKEA's business model. His openness to change, his drive for innovation, and his focus on his stakeholders have made IKEA what it is today: the largest and most successful furniture retailer in the world.

Growth and Expansion

The first IKEA store opened in Almhult, Sweden, in 1958. In 1963, IKEA opened its first international store in Oslo, Norway, and two years after that opened a flagship store near Stockholm. In 1973, IKEA spread to mainland Europe, opening stores in Switzerland and

Germany. Germany, to this day, remains IKEA's largest market.

Following these markets, a store was opened in Australia in 1977 and in the Netherlands in 1979. The first store in the United States did not arrive until 1985, which is surprising given IKEA's record-breaking US$6.1 billion in revenue in the U.S. in 2018. The U.S. opening was quickly followed by the first one in the United Kingdom.

See Figure 1 for a more detailed timeline of IKEA's expansion.

IKEA now operates over 422 stores in 50 countries, with 208,000 employees as of 2018.2 The fast growth was primarily organic, with IKEA maintaining full control over the company, as it still does today. Several "business format franchises" currently exist, where local entrepreneurs took on the capital investment and the management, and left the merchandising and

marketing to IKEA. Since 1982, IKEA has been owned by a foundation, and remaining private is a keystone of success to ensure that the culture and values remain intact.

Specifically, the Netherlands-based company Inter IKEA Systems BV owns the franchise, and Ingka holding company, of which Kamprad was the senior advisor, operates over 300 stores worldwide. In addition, a separate company, Ikano, manages the Kamprad fortune and owns several other IKEA stores in its own right.

IKEA's success cannot be ignored in today's turbulent market, with IKEA being commended for entering and remaining in traditionally difficult markets. What keeps the IKEA group going strong is its corporate initiatives embedded in Swedish heritage. These corporate initiatives are visually apparent throughout the stores and have been considered a "significant force of competitive advantage. The Swedish lifestyle incorporates a "fresh, healthy way of life" with bright colors and textiles even though Sweden does not see a great amount of sunlight. The high quality, stress-free furniture and the caring employees represent a Swedish tradition where "rich and poor alike were well looked after. Food stands with Swedish snacks are prominent in every store. Also, the do-it-yourself requirement of customers to perform some of the work by putting together and/or transporting the furniture facilitates low prices.

Every IKEA store is built fundamentally similar, but each has a distinct local flare. Within any IKEA there are "free pushchairs, supervised childcare and sometimes children's playgrounds as well as wheelchairs for the disabled. In addition, a receptionist's desk holds catalogs, tape measures, and pens and pencils, and a wide range of staff members are always throughout the store to aid any customer in need of help.

One of the biggest reasons for IKEA's success on a global level has been its ability to enter new international markets yet keep its core values and brand image consistent. This is something that other companies have not been able to tackle as successfully, and a brief look into IKEA's international strategy will provide a strong understanding of why the company has been so successful with global expansion while at the same time maintaining a positive corporate image.

Vision, Core Values, Brand IKEA is a unique case, not only because its founder wrote a vision and a set of core values over 60 years ago that are still in use today, but also because the founder is still a part of everyday management.

Ingvar Kamprad, Sweden's richest man when he passed away in 2018 at 91 years old, created these core values that have driven business growth, shaped culture, and ultimately built a brand image that has propelled IKEA to huge success. In fact, some believe that the culture, embedded deep in every store, transcends the actual products. Kamprad began with his vision to offer "a wide range of welldesigned, functional home furnishing products at prices so low that as many people as possible will be able to afford them. From this vision came a set of corporate values that are still followed today. The three defining values that drive operations to this day are "common sense and simplicity," "dare to be different," and "working together.

Common sense and simplicity, created as a value in 1943, follows the belief that "complicated rules paralyze!" The principle that simplicity prevails both internally and externally has been a major driving force in operations since IKEA's inception. Simplicity can be seen in large warehouse stores; in interactions between management, suppliers, and customers; and in cost cutting.

Cost cutting is seen throughout the business, especially at the management level. One will not find management flying first class or staying in luxury hotels. Cost-saving techniques are seen at every level, allowing IKEA to not just verbalize its commitment to low prices, but to physically have significantly lower prices than the competition. Dare to be different, also created in 1943, is about always finding a new path by asking the question, "why?" By constantly questioning the status quo, IKEA has found success in innovation and in its ability to continually change and evolve. For instance, Ingvar Kamprad, when conceiving IKEA, asked himself, "Why must well-designed

furniture always be so expensive? Why do the most famous designers always fail to reach the majority of people with their ideas?

That simple question has led IKEA to create what it is known for

today, and will continue to guide the company moving forward.

Kamprad believed that it is more difficult now than ever before to find new ways to solve problems and, in the face of strong competition, will allow IKEA to differentiate even further from the competition.

Working together was added to IKEA's values in 1956 when the furniture was recreated for self-assembly by customers. IKEA even released this statement in 1999: "You (the customer) do your part. We (IKEA) do our part. Together we save money. It is very representative of its belief to work together in every aspect of the business and help each other along the way.

According to Tarnovskaya et al., the vision, values, and culture, taken together with systems and networks, form the "value proposition for customers. In other words, how these values permeate into the business will be apparent to customers, allowing them to form their own opinion on the brand. The customers and stakeholders of IKEA, therefore, ultimately define the brand essence.

Corporate brand is a construct of "intangible nature," built through relationships, perceptions, and behaviors. It involves all stakeholders, including "customers, competitors, employees, and other business actors. By taking the values created by Ingvar Kamprad years ago and embedding them in all company stakeholders, IKEA has developed strong corporate brand values that have led them to success both domestically and internationally.

Global Expansion Internationalization Strategies

As the number of stakeholders increases, especially across country borders, the more difficult it is to maintain a uniform brand image and goals. IKEA has found success when expanding internationally by staying consistent with the global values described while still allowing some room for a unique local flare.

"Employees become the ambassadors of the brand values," as they are the salesmen of the firm. If employees do not believe in the values and live them, the customers surely won't either. IKEA succeeds by bringing in a staff of experienced IKEA employees, traditionally Swedish, to train and reshape the culture in each new market. For instance, IKEA trains all new staff members on the core competencies

seen as most important to support brand vision and values, and the success of this lies not only in training, but also in recruitment.

An IKEA HR corporate manager was quoted as saying, "Our goal is to

employ co-workers who understand and embrace our core values and

will reflect and reinforce those."12 By focusing heavily on the recruitment process, IKEA is able to ensure it hires the right type of employee who can potentially change his or her own personal traditional values and become a believer and salesperson of the IKEA brand. Edvardsson et al. even argued that values are coproduced with

customers, and given that employees are communicating the brand to the customer, communication becomes a value in itself.

Another important stakeholder that plays a strong role in internationalization is the supplier. The global supplier plays a large role because it needs to act as a firm base for the company when entering new markets, to continually support IKEA in order to avoid the necessity of constantly forming new relationships. Just as important, though, is the need for local suppliers, who are very beneficial and most often necessary within each market, but who typically hold views contradictory to Swedish values.

In 2000, IKEA created a code called "The IKEA Way," or "IWAY," that puts forth standards of acceptable working conditions for suppliers.

The code touches on many aspects such as child labor, forestry, and corruption, with the main goal to make "sustainable development the core business value. With nearly 1,000 suppliers in 50 countries, IKEA focuses on longterm relationships with suppliers who not only produce low-cost, high-quality goods, but who positively impact working conditions, the commodities, and the environment as well. "On a global scale, IKEA has more than 1,000 employees involved in purchasing. Purchasing is divided into 16 regional 'trading areas,' encompassing 43 trading service offices in 33 countries.

Every supplier is chosen based on his or her ability to meet

predetermined standards set forth in the IWAY, focusing specifically

around management style, financial situation, sourcing of materials,

equipment, impact on the environment, and location. The IWAY is

made up of 19 areas containing over 90 issues that must be met. It is

revised every two years and IKEA has a staff of internal auditors

selected to research the suppliers' ability to meet the IWAY

requirements. Once a supplier makes it to the final stage of approval,

goals and plans are set in place to further improve working

conditions.

When entering a new market, IKEA chooses and trains local suppliers

similarly to its processes for recruiting and hiring employees. For instance, when entering Russia, IKEA's strategy was to build a local supplier base through "active cooperation in the Russian wood industry. IKEA's proactive strategy was difficult, given that IKEA bases its strategy for long-term commitments on feelings of trust,

which was very uncommon for Russians, who "operate under great uncertainty and are reluctant to enter into long-term commitments. However, IKEA took the time to understand the Russian positions and invested heavily to change their opinions and

behaviors.

Global expansion has proven historically difficult, yet IKEA has found

a way to not only balance the entire customer experience, but also

achieve a reputation for social responsibility and sustainability in the

process. One of its greatest impacts thus far has been on the

environment. In 1997, before the IWAY was even finalized, IKEA

sought to increase the efficiency of transportation by writing "IKEA,

transport and the environment."18 Its purpose was to limit pollution

from travel and strategically place all stakeholders geographically.

Based on responses gathered by a University of Bari study, 60 percent

of stakeholders lived less than 20 km from the store. According to one

author, "IKEA's intuition was not so much to involve some vendors in

this program, but more to formalize this synergy through the sharing

of an ethical code. A code whose purpose is not only practical in terms

of production, but also symbolic of the ability of the Swedish

corporation to use its brand as a means to ensure the work of all those

with whom it collaborates.

The goal is to limit manpower and trips by using flatpacks, and

ultimately limit CO2 emissions through decreased travel. In 2001,

with 170 carriers, IKEA asked its suppliers to meet certain

requirements". . . IKEA recommended they update transport

vehicles to more modern models. The company also required a switch

to less polluting fuels as well as the establishment of environmental

protection policies and action plans to control pollution."20 Within 10

years, results in Italy, for example, showed a decrease from 75 percent

to 65 percent of road transport as well as CO2 emissions reductions.

According to chief sustainability officer Steve Howard, IKEA aims to

be energy independent by 2020. As of 2018, the company has

installed a total of 750,000 solar panels at its retail locations,

purchased 441 wind turbines, and invested US$2.5 billion globally

into renewable energy for its stores. Approximately 90 percent of its

stores are currently equipped with an on-site energy source.21

IKEA's dedication to the environment and strong network of stakeholders has been yet another point of success when entering international markets. A look into a few internationalization examples will provide further information on IKEA's global practices.

See Figure 2 for a full list of IKEA's first stores built in each country.

Figure 2 Location of New Stores by IKEA Year City/Country

1958 Almhult, Sweden

1963 Oslo, Norway

1969 Copenhagen, Denmark

1973 Zurich, Switzerland

1975 Sydney, Australia

Year City/Country

1976 Vancouver, Canada

1977 Vienna, Austria

1979 Rotterdam, Netherlands

1981 Paris, France

1984 Brussels, Belgium

1985 Philadelphia, USA

1987 Manchester, UK

1989 Milan, Italy

1990 Budapest, Hungary

1991 Prague, Czech Republic

1991 Poznan, Poland

1996 Madrid, Spain

1998 Shanghai, China

2000 Moscow, Russia

2004 Lisbon, Portugal

2005 Istanbul, Turkey

2007 Bucharest, Romania

2009 Dublin, Ireland

2013 Cairo, Egypt

2013 Doha, Qatar

2014 Tangerang, Indonesia

2014 Gwangmyeong, South Korea

2015 Casablanca, Morocco

2017 Belgrade, Serbia

2018 Salmabad, Bahrain

2018 Riga, Latvia

2018 Hyderabad, India

China Entry and Expansion

IKEA entered China in 1998 and initially moved slower than it had in

other locations. By 2006, it had opened three stores, and there were a

total of 27 stores by 2019. The Beijing location, which opened in 2006,

has been tagged as IKEA's largest-volume store globally with over 6

million visitors annually.

IKEA originally entered China as a joint venture with the Chinese

government. In 2004, China entered the World Trade Organization

and, as a result, the third location in Quangzhou was able to be wholly

owned by IKEA, as well as all subsequent openings.

Asia has been a difficult market for IKEA, notably because of the

extreme cultural differences between Asia and Sweden. It has not

been an easy road for IKEA, yet even in difficult times, Asia cannot be

ignored given its sheer size.

Asia makes up 30 percent of IKEA's sourcing, and the large

population results in daily visitors, for instance, on a Saturday in

Beijing equaling the number of weekly visitors to a store in the West.

The size and population, though, also come at a price for the company

that created a successful business based on principles of

standardization with local adaptation.

China is vastly different from all Western markets in size, culture, and

tastes, and has forced IKEA to alter its marketing strategies to meet

demand. The core strategy of the company is to offer low-cost, highquality furniture, meaning the cost must be low in comparison to other furniture providers in the country. Other businesses in China, though, are traditionally providing the lowest cost options. Therefore, IKEA, faced with extreme competition and copycats, had to alter its emphasis to the higher-income population, who see its furniture as

more of a luxury purchase. IKEA has also seen challenges in the open-showroom-selling environment, which is designed to allow customers to envision the

design of a room and touch the furniture. The Chinese are not accustomed to this and view it as a hangout. Customers can often be found reading, lounging, and napping on the furniture, or gathering around looking for freebies. In fact, during a 2015 heat wave, IKEA had to issue a formal policy prohibiting customers from sleeping in the air-conditioned bed section of the store. Furthermore, several

China locations have now become hotspots for senior citizen romance.

The seniors show up in groups, sit for hours in the cafeteria, and bring their own food and tea. To deal with these groups taking up all the space without actually making a purchase, IKEA has added guards and created special seating areas for those patrons who only want to sit and not shop. Because of these situations, IKEA had to adapt each store to its unique surroundings and cultural differences in order to successfully meet the needs of the Chinese economy. Although it has been a difficult undertaking, China has become the most important growth market for IKEA. In 2017, despite a slowing Chinese economy, sales grew over 14 percent. Russia Entry and Setbacks IKEA entered Russia in 2000 as a "last big hobby" for founder Ingvar Kamprad, then age 81. Amid large changes in culture and a great deal of training, IKEA was a huge success with its "mega-mall" business model. The first store in Russia drew 40,000 shoppers on the first day, and as of 2016 IKEA operates 14 stores with approximately 200 million visitors each year. Although IKEA has seen success in Russia, the road to get there was not always easy. Like China, Russia's culture is extremely different from Sweden's, and changing a culture without changing the IKEA brand values proved to be extremely difficult. For instance, when hiring, IKEA wants its employees to have a personality that lends to the IKEA business model rather than a comprehensive resume, whereas Russians place a great deal of emphasis on education and experience.

Training was also an issue for the Russian employees, who value academic training and had a negative perception of the "shop floor training" provided by IKEA trainers. However, the IKEA trainers stuck to the IKEA model and began reaching their new Russian counterparts by altering the Russians' previously held views. In 1998, after the currency devaluation and economic collapse seen throughout Russia, IKEA stood by its side, refusing to abandon the country IKEA worked so hard to enter. This dedication created a strong outlook among the Russian population. However, IKEA's

challenges in Russia did not diminish following this symbol of perseverance.

After entering Russia in 2000, IKEA invested $4 billion in ten years. This amount would seem to be a plan that would pay in dividends, when looking at the original statistics, but, according to Kamprad, IKEA "had been 'cheated' out of $190 million" due to the rampant corruption running through Russia. According to the 2015 Corruption Perception Index, Russia ranked 138th out of 180 countries as the

most corrupt, whereas Sweden ranked 3rd. In addition, Transparency International's most recent Bribe Payer Index ranked Russia last out of the 28 countries evaluated, making it the most likely place for bribes to be paid out of the largest economies globally. What is a company dedicated to fair business practices

supposed to do in an opportunistic market flooded with corruption?

IKEA played fair, and dealt with blow after blow from the Russian

government. In 2004, the opening ceremonies of a new store in

Moscow were cancelled at the last minute due to the location being

too near a gas pipeline. Following that, in 2007, the company planned

on opening a Samara, Russia, location, which a year and a half later

still remained closed.

In June 2009, IKEA announced it would suspend all further investment in the country due to the troubles it previously faced with the government. And in 2010, the company announced that two expatriate executives were fired for taking part in bribes involving the Russian utility company, Lenenergo, in the prior year.

IKEA took a great deal of heat for taking bribes during an anticorruption campaign put forth by the company during the Russian turbulence. Although it is never acceptable to participate in corruption in any way, even turning a blind eye to it, anticorruption experts were quoted as saying: "How to reconcile tough anti-bribery

corporate policies back home with the corrupt rules of the game in

Russia is a nigh-impossible task.

It has been pointed out that, given IKEA's role as one of Russia's

largest foreign investors, the fact that the company has always

previously performed business ethically as proven by Sweden's place

on the Corruption Perception Index shows just how difficult it is to

perform business, and perform it well, in Russia.

Although IKEA is driven by a positive social mission and proactively

seeks out stakeholders who support its core values, it does not always

work out ideally. IKEA has recently been in the negative media

spotlight as a result of a few cases that go against its code of conduct.

It is important to mention, though, that IKEA was not acting in haste,

but rather these examples should highlight why the company must

stay on its toes in the midst of ubiquitous information, social

networks, and media and governments eager to take advantage of

companies in general.

Recent Challenges and Opportunities

Delayed Expansion into India

Despite plans to expand into India for over a decade, IKEA finally

opened its first store in August 2018 in Hyderabad. In the wake of an

economic slowdown in China and Russia, IKEA is now attempting to

expedite its entry into the Indian market, with plans for 25 new stores

by 2025. However, thus far, the company has faced significant red

tape and limiting bureaucracy.

In 2007, when IKEA first tried to expand into India, the company

sought to bypass the legal regulations that require foreign companies

to work with a local company in a joint venture. IKEA believed that it

would be far more successful operating on its own, and the company

believed that it could lobby the Indian government into agreeing.

Unfortunately for IKEA, the lobbying efforts took over five years until

the government finally waived the joint venture requirements,

significantly delaying IKEA's proposed timeline.

In 2016, IKEA ran into further problems after failing to find suitable

local suppliers that meet IKEA's standards. Per Indian law and IKEA's

agreement with the government, one-third of all products sold in

India must be produced in India. After an extensive search across the

country for local products that the company could add to its Indian

catalog, IKEA came up empty-handed. Local rugs were discovered to

have been woven by child labor, tables contained unsafe levels of toxic

materials, and plates were found to leak chemicals into food.

Finally, after investing over US$670 million in establishing the infrastructure to operate in the country, IKEA's Hyderabad location opened for business in 2018. With the success that IKEA has achieved in other emerging markets, India holds great potential for the company, if IKEA is able to successfully navigate the country's

infamous red tape to begin opening more stores. Images in Saudi Arabia

IKEA came under attack in October 2012 for removing pictures of women from catalogs destined for Saudi Arabia. That year alone, IKEA planned to produce over 200 million copies of its catalog in 62 different versions. However, it admitted to tailoring the images to suit fashion-related tastes of local markets.

IKEA publicly apologized for altering the Saudi images in a statement, noting that such self-censorship was inconsistent with its values.

"We're deeply sorry for what has happened, Ulrika Englesson

Sandman said, "It's not the local franchisee that has removed the

photos. The error has occurred in the process of producing the

proposal to Saudi Arabia, and that is ultimately our responsibility.

Catalogs still remain the primary source of marketing for IKEA, and it

comes at a time when Saudi Arabia is in a political firestorm over its

treatment of women. The same photographs had been published in 27

languages for 37 countries with the women present, leaving many to

wonder about IKEA's stance on gender equality.

Forced Labor Practices

IKEA publicly apologized in November 2012 for having profited by the

use of prisoners in East Germany 25 to 30 years prior. The issue was

publicized when, earlier in the year, the media began reporting on the

connection. In response to the accusation, IKEA hired Ernst & Young,

which researched 20,000 pages of internal records and 80,000 pages

of state and federal documents in addition to interviews of 90 former

employees and witnesses.

It was realized that political prisoners were in fact used in the

production of IKEA merchandise during that time, even though IKEA

initially questioned the use of prisoners by suppliers. Jeanette

Skjelmose, sustainability manager, showed her remorse in a public

statement: "We deeply regret that this could happen. . . . The use of

political prisoners in production has never been acceptable to the

IKEA Group. At the time, we didn't have today's well-developed

control systems and obviously didn't do enough to prevent such

production conditions among our former G.D.P. suppliers.

When speaking of their current control systems, Skjelmose was

probably referring to the previously mentioned IWAY code of conduct

standards. In addition to placing provisions on working conditions,

touched on in the code, IKEA also conducts audits on suppliers over

1,000 times every year just to ensure a situation like this will not arise

again.

This news comes as a large surprise to those who follow IKEA and its

traditionally positive social impact. IKEA has even been commended

many times over the years for its strong stance on social issues, such

as child labor. Susan Bissell of UNICEF (the United Nations

Children's Fund) in South Asia was quoted as saying,

The risk of falling into disrepute and becoming the victim of

consumer boycotts has driven many companies to move

production from South Asia to areas which are easier to

control. Those companies which stay on do everything they

can to conceal their presence. I wish more companies had

the courage to follow IKEA's example: stay on and actively

work on the problems and take genuine social responsibility.

IKEA is a sponsor of UNICEF [...] but we regard IKEA as a

cooperation partner rather than a contributor [...].

Many even commended IKEA for how it handled this situation. IKEA

took on the responsibility of hiring Ernst & Young to investigate the

situation at the first mention of forced labor. It is not the only

company to have profited from such actions, but one of the few that

took action against its prior role. In fact, Christian Sachse, a Berlin

historian, spoke of how common this act was, and said it would "take

years of research to properly understand the field.

For now, IKEA has accepted its wrongdoing and is moving forward

while trying to make things right. The company has vowed its

commitment to donate funds and provide an effort to research the

issue of forced labor in East Germany, and stands as one of the only

companies that is coming forward and taking action to turn the

negative into a positive.

Horsemeat Scandal

In light of the horsemeat scandal raging across Europe, inspectors

from the Czech Republic found traces of the meat in IKEA's European

signature meatballs in February 2013. Although the United States'

supply remained unaffected, customer morale is likely to have been

impacted. One customer was even quoted as saying, "I am more

trusting of Swedish companies and it makes me wonder about

corporate integrity in a way I never have questioned Swedes

before.

In a public statement, IKEA reassured communities and supporters

across the world that they are committed to high-quality, safe food

and will not stand for any ingredients other than those listed in the

recipe. The company guaranteed the public that it is taking all

concerns very seriously, and assured all that no product is actually

harmful if eaten. The real issue is the discrepancy in labeling.

Five percent of IKEA's total revenue comes from food, and meatballs

in 13 countries were temporarily removed during the investigation. It

is a situation affecting many of Europe's leading food companies,

including Nestl SA and ABP Food Group's Silvercrest Food. As IKEA

worked to resolve the issues internally, the company attempted to

ease the nerves of the disheartened public.

Cake Contamination

Just one month after the horsemeat scandal took place, IKEA again

found itself in the news for chocolate cake that was discovered to

contain traces of coliform bacteria, a contaminant found in the

environment and in the feces of humans and warm-blooded animals,

according to The Wall Street Journal. Although the cakes posed no

true health hazards, as the issue was caught before the cakes hit

stores, it came at a bad time publicly.

The Shanghai quarantine bureau destroyed two tons of the cake, and

IKEA performed a formal investigation and removed the cakes from

restaurants in 23 countries. The company has released a formal

apology for all concerns raised regarding the issue.

Budget Hotel Chain

IKEA, in a more positive light, announced a new partnership with

Marriott to open a budget-friendly hotel chain called "Moxy," targeted

toward next-generation travelers in Europe. The partnership aims to

sneak into the economy sector of the European travel market, which

represents half of the largest travel market worldwide.

The hope was to secure locations of 50 hotels in the next five years, as

well as 150 hotels in the next 10 years. The first opened in Milan, Italy,

in 2014. All rooms are designed to be the same size with the same

dcor, typically contemporary with large wall art, a flat-screen TV, and

USB ports. The hotel stay also includes a continental breakfast, bars,

and public spaces for the low price of 60 to 85 euros a night.

This comes as a new initiative for the largest furniture retailer, as well

as for Marriott, who currently owns over 5,700 properties in 110

countries but is now seeking a spot in the economy segment. The

brand will be operated by a franchise and will stay in line with IKEA's

low-cost, high-quality mentality.

In addition to entering new markets, as seen in its partnership with

Marriott, IKEA is also placing a strong focus on making its current

line of business even better. The company is investing heavily in core

products, particularly in the U.S. market, to battle the predisposition

that the product line is primarily for those in their "starting-up

phase." IKEA has also begun offering delivery service in some markets

and plans on putting other strategies into place to further highlight

itself as a quality brand that not only acts responsibly, but also listens

to its customers.

There has also been a shift in leadership structure globally at IKEA

over the last few years, as Jesper Brodin was promoted to CEO and

president in 2017, and founder Ingvar Kamprad passed away in early

2018. Although they are not involved in the day-to-day operations of

the company, Kamprad's three sons have promised to maintain their

father's vision for the company and foundation going forward.

Questions for Review 1. How would you describe IKEA's overall approach to international expansion? What were some of the important successes and challenges it experienced along the way? 2. What macro- and micro-political risks did IKEA face when it first considered entry into Russia? What kinds of preemptive and/or proactive political strategies might it have pursued to mitigate these risks? 3. How should IKEA respond to some of the recent scandals concerning product contamination, sourcing, working conditions, and product safety? 4. What motivation, leadership, and international HR approaches has IKEA pursued to achieve its international success? What additional steps might it consider given its expanding global reach and impending change in leadership?