IKEA’s global strategy Essay
There are few companies which manage to enter a foreign market, establish themselves and take over the market from the competitors. The major challenges which face such companies are learning the market trends and developing goodwill which will make consumers use its products as opposed to competitors’ products. There are also unique challenges which face individual markets, such as the macroeconomic environment, which only local firms have the ability to adapt to in a relatively short time. In spite of these challenges, IKEA a company with origins in Sweden has managed to establish a global presence.
It uses a global sourcing approach where it takes advantage of the different strengths of different markets when undertaking its operations. According to Rosenhauer (2008: 2-3), IKEA was established in 1943 and is the largest furniture retailer in the world. It operates in more than twenty five countries and has over one million customers who visit it each year. It is one of the most successful multinationals in the world. This paper aims at analyzing the factors which have led to the success of this firm using the global sourcing strategy, and the characteristics that other multinationals can borrow from it in order to succeed.
Global sourcing. This is a strategy which exploits the global efficiencies when producing and selling products. There are several characteristics that multinationals can learn from IKEA in relation to the global strategy. These are briefly explained below; Subcontracting strategy. Subcontracting is a strategy that involves delegation of core activities to independent contractors who perform duties on behalf of a firm. It involves giving professionals an opportunity to perform duties efficiently and at lower costs, since they are professionals at what they do.
IKEA subcontracts manufacturing services to manufacturers across the world, and this enables the manufacturers take advantage of their expertise and technology, which eventually reduces costs. Standardized product strategy. This is a strategy which is incorporated in IKEA’s global strategy. It involves the manufacture of high quality standardized products which meet the global demand patterns. This is done as a strategy to boost scales, through targeting the global market, and producing products which are standard and readily recognized by consumers in any part of the world. Read also Challenges Facing By Ikea