Ikea and Its Mode of Entry Essay

1807 Words Sep 23rd, 2013 8 Pages
Ikea

5/20/2012

Global marketing | Ikea Case |

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Question 1: should Ikea change its mode of entry?
In IKEA’s history two different modes of entry were used. Both were met with big success and allowed IKEA to enter new markets very easily, and in a secure way.

In the 70’s and the 80’s the IKEA’s method as mode of entry was simple: try to establish a link with a supplier in the host country before opening a retail outlet through company-owned subsidiaries. This direct mode of entry was used to enter European and North American markets and it worked well to develop IKEA concept (without any adaptation) in these countries.

Then IKEA looked for an expansion by franchising
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Strategic alliances could reduce the complexity of logistics if IKEA is able to find a reliable partner in this field.

* The problem of the psychic distance between Swedish (or Europeans) consumers and new markets consumers.

Local partners could help IKEA to understand better the customer’s behaviors in the host market. The psychic distance would be reduced and consequently IKEA could adapt its products, its stores layout following its local partner advices. Traditionally IKEA used to push Swedish design into the new markets without considering the local needs. If they could find a local joint venture understanding well the local needs they could provide more suitable products. * The centralized system suppresses creativity and freedom for franchisees.

Joint ventures and strategic alliances are more flexible and less “controllable” by central headquarters. So, creativity and freedom could make progress thanks to local partners with new ideas and new eyes on IKEA activities.

* Finding new local alliances could allow IKEA to diversify and to put in place on new market segments. By finding good partner IKEA could expand into other market segments in which an IKEA competitor has established well.

Finally, it appears that IKEA could consider changing its mode of entry because it could have positive aspects for the firm. But these positive effects don’t seem to be enough to justify changing the mode…