Is IKEA destined to succeed everywhere it cares to establish itself?
Using a standardized products strategy with universal assortment around the world was the key to IKEA's success. That is, it markets the same basic products in all of its stores; instead of tailoring furniture to regional tastes, it focuses on making furniture that is universally attractive (Rondcha, 2008). Some 90% of the product line is identical across more than two dozen countries. However, in order to adapt to certain countries such as America, IKEA needed to modify their concept whilst still maintaining their original formula. Modification was implemented as the European products conflicted with American ...view middle of the document...
This can lead to price discrepancies as each modification is an added cost. Thus, lowering the margins per unit sold can greatly affect the overall profitability of the regional shop or chain of IKEA outlets in a particular country. However changes to IKEA's concept cannot be applied everywhere, as the differences can sometimes be greater than acceptable. This could compromise the brand’s image, which has a value itself.
Foreign political issues and/or unethical business dealings, like those evident in India and Russia, also prevent the success of IKEA. IKEA in Russia is currently unsuccessful due to issues including serious problems at some of the shopping centres' buildings, lack of permission for operations, poor corporate governance and weaknesses in internal controls and poor personnel management (Tse, 2010). Although Kamprad invested a huge amount of effort into Russia by showing personal interest into Russia's operation inevitability, they were still unsuccessful. In 2009, IKEA's expressed great interest in wanting to expand into India. Since, IKEA has planned to invest $1 billion into this market however the plan has now been put on hold due to Indian regulations capping foreign investment in single-brand retailers at 51 percent.
In conclusion, it is unreasonable to state IKEA will succeed everywhere it cares to establish itself. Although slight modification and adaption of IKEA's concept has succeeded in some countries, this has increased stress for adding cost to IKEA. Another factor preventing IKEA's success is external factors such as political issues and difference in cultural lifestyle and taste. Internal factors also contribute to the shortcomings for IKEA in certain markets, such as the recent unethical business behaviour present in Russia.
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Carpell, K 2006, Ikea’s New Plan for Japan. Retrieved April 28, 2008, from http://www.businessweek.com/globalbiz/content/apr2006/gb20060426_82182 5.htm?chan=search
Tse, Vivian, 'Ikea owner 'distressed' over Russian expansion.' The Local, 11 December, 2010
Which features of the ‘young people of all ages’ are universal and can be exploited by global/regional strategy?
The ‘young people of all ages’ market that Ikea has targeted share many features universally. The concept revolves around young people being influenced by regional tradition and local customs but to a lesser extent than older citizens. Because of this, a much broader market can be reached with a relatively standardised product. The general attitude of this...