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Based on Johanson and Wiedersheim-Paul’s researches and studies of internationalization of four Swedish firms, Johanson and Vahlne (1977) developed the Uppsala internationalization model. This model is base on two assumptions. First, firms want to increase their profits but also want to keep the risk rate at a low level. Second, most firms are lack of knowledge about overseas markets, it is a big obstacle to the development of international firms; and firms can get necessary knowledge mainly through going abroad. Firms will face four aspects when going abroad: market knowledge, market commitment, commitment decisions and current activities. All of them are divided into stage and change aspects interacting with each other in a circle.…show more content…
The lack of market specific and experiential knowledge made IKEA fail in this market. Seeing Japan was a difficult market, IKEA spent time on preparations, making some surveys, learning about tastes and lifestyles of Japanese consumers. IKEA developed a new strategy to re-enter Japan based on learning the cultural differences. IKEA provided home delivery and service to assemble at home with an extra charge if customers want. IKEA also leant through international experience that managing suppliers also played an important role in business. IKEA provided supply centers and warehouse in Asia as a market commitment. IKEA established distribution centers in Kuala Lumpur and Shanghai to send furniture to Japan in a low cost and avoid stock delays. In 1998, IKEA opened its first store in China. IKEA expanded its market into China because China was a big potential market and it was also an opportunity for IKEA to deep its internationalization. China is also a very different market than previous markets that IKEA has entered before, such as European, Australian or North American market. However, China was a country that had many differences from Sweden such as social, economics, culture, politics and business practices. Therefore, IKEA had to adjust itself to be successful in Chinese market. China had a psychic distance from Europe countries like Sweden. IKEA had to accept high risk to invest in that high psychic distant market. IKEA reduced risk by doing
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