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CHAPTER 11 . INTERNATIONAL STRATEGY AND ORGANIZATION Practicing International Management Case 295 fumi wide an is foulin 345 so low IKEA's Global Strategy EA (www.ikea.com) is a nearly $30 billion global furniture powerhouse based in Sweden. With more than 345 stores in 42 entries, the company's success reflects founder Ingvar Kamprad's social ambition of selling a wide range of stylish, functional home furishings at prices so low that the majority of people can afford buy them. The story of Kamprad's success is detailed in a book titled IKEA: The Entrepreneur, the Business Concept, the Culture The store exteriors are painted with Sweden's national colors, bright blae and yellow. Shoppers view furniture in scores of realistic sel- tings arranged throughout the cavernous showrooms. In a departure from standard industry practice, IKEA's furniture hears names such as "Ivar" and "Sten" as well as model numbers. At IKEA, shopping is very much a self-service activity after brows ing and writing down the names of desired items in the showroom. Jeppers pick their furniture off shelves, where they find boxes con taining the furniture in kit form. One of the comerstones of IKEA's strategy is having customers take their purchases home and assem. ble the furniture themselves. The typical IKEA store also contains a Swedish-cuisine restaurant, a grocery store called the Swede Shop a supervised play area for children, and a baby-care room IKEA's approach to the furniture business enables it to rack up impressive growth in an industry in which overall sales are flat. Sourcing furniture from more than 1,500 suppliers in 50 coun- thes helps the company maintain its low-cost position. IKEA has also opened stores in emerging markets, such as in Central and Eastern Europe. Because many consumers in those regions have relatively low purchasing power, the stores offer a smaller selec tion of goods, and some of the furniture is designed specifically for the cramped living styles typical in former Soviet bloc coun- tries. Throughout Europe, IKEA benefits from the perception that Sweden is the source of high-quality products. In fact, one of the company's key selling points is its "Swedishness." IKEA also op- erates in emerging markets like Russia, where its core strategy and anticorruption policies have been effective. Taited States will eventut Industry observers predict that the United States will eventu- y be IKEA's largest market. The company opened its first U.S. Store in Philadelphia in 1985 and today has dozens of outlets that generate billions of dollars in sales annually. IKEA's competitors the company very seriously and say any industry player that Stores the future Walmart of home furnishings (as IKEA is some- limes called), does so at its own peril. Some U.S. customers, however, are ired to find popular items sometimes out of stock. Another problem is the long lines result- ing from the company's no-frills approach. Although all customers appreciate receiving quality products at a fair price, some of them question whether drawbacks of the IKEA concept are worth the savings. Goran Carstedt, president of IKEA North America, responds to such criticism by referring to the company's mission. He notes that IKEA's ability to keep prices low rests on the strategy of pro- viding limited services. Customers return to IKEA despite having to make some small sacrifices because they value the company's low prices, he says. To keep them coming back, IKEA is spending millions on advertising to get its message across Whereas com mon industry practice is to rely heavily on newspaper and radio advertising, two-thirds of IKEA's North American advertising budget is allocated for TV. Incredibly, IKEA has also expanded into apartment building The retail giant has more than 3.500 of its prefab homes through- out Sweden, Norway, Finland, and the United Kingdom. IKEA'S BoKlok (meaning "smart living in Swedish) apartments resemble IKEA's modern furniture. The apartments are designed with open- plan living spaces with high ceilings, windows on three sides, and of course, pre-fitted IKEA kitchens Thinking Globally 11-9. When company founder Kamprad decided to expand into China, he based his decision on his own intuition, not on market research. Looking at IKEA's current performance in China, did Kamprad's decision pay off? 11-10. Relying on topics covered in this chapter, would you clas. sify IKEA's approach as one of standardization or adapta- tion in markets around the world? Explain. Sources: Jennifer Karmon, "IKEA's First Cultural Collaboration Is A Sham Turn To The East: Sweden Meets China." Yahoo website (https:/homes yahoo.com/blogs/spaces), January 21, 2014: "The Corruption Eruption. The Economist, May 1, 2010, p. 73: Dianna Dilworth, "Ikea Enters UK's Housing Market," Bloomberg Businessweek (www.businessweek.com). April 20, 2007, Kerry Capell. "Ikea's New Plan for Japan," Bloomberg Businessweek (www. businessweek.com), April 26, 2006; Ikea website (www.ikea.com), selected reports CHAPTER 11 . INTERNATIONAL STRATEGY AND ORGANIZATION Practicing International Management Case 295 fumi wide an is foulin 345 so low IKEA's Global Strategy EA (www.ikea.com) is a nearly $30 billion global furniture powerhouse based in Sweden. With more than 345 stores in 42 entries, the company's success reflects founder Ingvar Kamprad's social ambition of selling a wide range of stylish, functional home furishings at prices so low that the majority of people can afford buy them. The story of Kamprad's success is detailed in a book titled IKEA: The Entrepreneur, the Business Concept, the Culture The store exteriors are painted with Sweden's national colors, bright blae and yellow. Shoppers view furniture in scores of realistic sel- tings arranged throughout the cavernous showrooms. In a departure from standard industry practice, IKEA's furniture hears names such as "Ivar" and "Sten" as well as model numbers. At IKEA, shopping is very much a self-service activity after brows ing and writing down the names of desired items in the showroom. Jeppers pick their furniture off shelves, where they find boxes con taining the furniture in kit form. One of the comerstones of IKEA's strategy is having customers take their purchases home and assem. ble the furniture themselves. The typical IKEA store also contains a Swedish-cuisine restaurant, a grocery store called the Swede Shop a supervised play area for children, and a baby-care room IKEA's approach to the furniture business enables it to rack up impressive growth in an industry in which overall sales are flat. Sourcing furniture from more than 1,500 suppliers in 50 coun- thes helps the company maintain its low-cost position. IKEA has also opened stores in emerging markets, such as in Central and Eastern Europe. Because many consumers in those regions have relatively low purchasing power, the stores offer a smaller selec tion of goods, and some of the furniture is designed specifically for the cramped living styles typical in former Soviet bloc coun- tries. Throughout Europe, IKEA benefits from the perception that Sweden is the source of high-quality products. In fact, one of the company's key selling points is its "Swedishness." IKEA also op- erates in emerging markets like Russia, where its core strategy and anticorruption policies have been effective. Taited States will eventut Industry observers predict that the United States will eventu- y be IKEA's largest market. The company opened its first U.S. Store in Philadelphia in 1985 and today has dozens of outlets that generate billions of dollars in sales annually. IKEA's competitors the company very seriously and say any industry player that Stores the future Walmart of home furnishings (as IKEA is some- limes called), does so at its own peril. Some U.S. customers, however, are ired to find popular items sometimes out of stock. Another problem is the long lines result- ing from the company's no-frills approach. Although all customers appreciate receiving quality products at a fair price, some of them question whether drawbacks of the IKEA concept are worth the savings. Goran Carstedt, president of IKEA North America, responds to such criticism by referring to the company's mission. He notes that IKEA's ability to keep prices low rests on the strategy of pro- viding limited services. Customers return to IKEA despite having to make some small sacrifices because they value the company's low prices, he says. To keep them coming back, IKEA is spending millions on advertising to get its message across Whereas com mon industry practice is to rely heavily on newspaper and radio advertising, two-thirds of IKEA's North American advertising budget is allocated for TV. Incredibly, IKEA has also expanded into apartment building The retail giant has more than 3.500 of its prefab homes through- out Sweden, Norway, Finland, and the United Kingdom. IKEA'S BoKlok (meaning "smart living in Swedish) apartments resemble IKEA's modern furniture. The apartments are designed with open- plan living spaces with high ceilings, windows on three sides, and of course, pre-fitted IKEA kitchens Thinking Globally 11-9. When company founder Kamprad decided to expand into China, he based his decision on his own intuition, not on market research. Looking at IKEA's current performance in China, did Kamprad's decision pay off? 11-10. Relying on topics covered in this chapter, would you clas. sify IKEA's approach as one of standardization or adapta- tion in markets around the world? Explain. Sources: Jennifer Karmon, "IKEA's First Cultural Collaboration Is A Sham Turn To The East: Sweden Meets China." Yahoo website (https:/homes yahoo.com/blogs/spaces), January 21, 2014: "The Corruption Eruption. The Economist, May 1, 2010, p. 73: Dianna Dilworth, "Ikea Enters UK's Housing Market," Bloomberg Businessweek (www.businessweek.com). April 20, 2007, Kerry Capell. "Ikea's New Plan for Japan," Bloomberg Businessweek (www. businessweek.com), April 26, 2006; Ikea website (www.ikea.com), selected reports