Firms are utilizing and adopting several strategies as per nature of their business to accomplish mission and vision. In this report, several global strategies have been explored and the applications and practical implications have also been compared with a global firm. The operations of IKEA have been studied to see the outcomes of global strategy in its operations.

1. IKEA
Foundations of International Business
Firm Strategy for Global or Multi-domestic Organizations
10/9/2012

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Executive Summary
Firms are utilizing and adopting several strategies as per nature of their business to
accomplish mission and vision. In this report, several global strategies have been
explored and the applications and practical implications have also been compared with
a global firm. The operations of IKEA have been studied to see the outcomes of global
strategy in its operations.
The basic purpose of this report is to study different global strategies and finally inspect
and analyze the application of those strategies in a practical firm such as IKEA. IKEA is
successfully utilizing global strategies without having any restriction related to ethics,
standards practices, legislation and dissatisfaction of customers because of adopting
strong global strategies and tactics. The central idea is to view that how IKEA is
handling different problem situations these days.

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Table of Contents
Executive Summary.........................................................................................................................2
Importance of strategies ..................................................................................................................4
Global strategy:................................................................................................................................4
Pros ..............................................................................................................................................5
Cons:............................................................................................................................................5
Efficiency......................................................................................................................................5
Strategic: ......................................................................................................................................6
Risk:..............................................................................................................................................6
Advance Learning: .......................................................................................................................6
Reputation: ...................................................................................................................................6
Multidimensional domestic Scheme................................................................................................6
Mission of IKEA:...............................................................................................................................7
IKEA and Global Strategy:...............................................................................................................8
Global Marketing Strategy of IKEA..................................................................................................8
Conclusion .....................................................................................................................................10
References List..............................................................................................................................11

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Importance of strategies
As per Govindarajan and Gupta (2008), global strategies provide direction to the
organization towards future challenges. The major benefit of global strategy is in a way
that it may be more suitable in those organizations where it is very difficult to reduce
cost but pressure for local responsiveness is less. Therefore a standardized product is
manufactured and sale out worldwide. Global strategy organizes and co-ordinates
product, price and placement strategies across international markets and locations,
firms that are utilizing global strategies are pretty centralized and integrated with the
group stakes and strategies.
The major reason of using global strategies is that they help to increase and foster
economic independence among national markets and multinational enterprise is a key
driver of globalization as well. For the purpose of assessing whether these
organizations are implementing global level operations, it is possible in a case if firms
are global in their real market penetration level across globe. By getting the date of 500
MNEs, it can be stated that some firms are successfully global but most of the firms are
not because their operations are based on breadth and depth of market coverage
(Rugman & Verbeke 2004).
Global strategy:
Global strategy means there is only strategy applied on all the branches of the world by
a group of companies regardless of any socio-cultural differences. For example, IKEA
will be applying same pricing strategies for every country for the same product. Some
major characteristics of global strategies are:
 Every product is similar in all countries
 Low level of centralized decision making authority at local country levels.
 This strategy is only effective in case of less differences in countries.
 It provides benefits such as low cost, standard activities, and quick product
development (Porter 1986).
IKEA Global strategy gives results in terms of:

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 Authentic distribution network.
 One mission statement that was followed closely in all countries for each line
of business.
 Strong financial control.
 High level of practical research and development.
 Quick marketability and quality maintenance, as the intended market is global
instead of individual.
There were certain pros and cons for global strategy and these cons and pros are as
follows:
Pros
 Furniture composite parts were same to maintain the economy.
 Customization cost of external structure of furniture was comparatively lower.
 The furniture business was there with low growth.
Cons:
 There were different consumer needs and preferences with respect to color, size.
Houses are small in Japan so they need smaller and lighter colored furniture
(Bartlett and Ghoshal 1989)
There was another dominant furniture trading industry in United States. An organization
named as IKEA is using global strategy and (having an edge over opponents) from
following sources
Efficiency
Some major decisions related to globalizations were beneficial in terms of increasing
efficiencies in areas such as:
 From Foundation to broaden market, balance economy is the essence
 It helps to exploit different other countries key resources like workforce and low
price raw materials.

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 Increase in the product life cycle of each line of business; in this way, older
products can be sold in lesser developed countries because of non-familiarity
with these products in under-developed countries such as Asian countries.
 Working flexibility, cost per shift, change over time, replacements rate (Hamel &
Prahalad 1993, pp.84-91).
Strategic:
 Commencement of mobile service facility and sole market supplier of the
product.
 Sale price within countries
 Transfer price.
Risk:
 Divide macroeconomic risks.
 Spread operational risks.
Advance Learning:
Diverse working environment renders chances of advance learning.
Reputation:
Making clientele while creating a balance between reputations entertain in the market
as well as branding. Global strategy works with objectives of Efficiencies in operations,
flexibilities and learning and innovations (Tilles 1963, pp.112-121). IKEA was most
suited to become a global organization due to it cost, customer, competitiveness, and
government support (Porter 1996, pp.61-78).
Multidimensional domestic Scheme
Multidimensional domestic scheme was introduced by companies focusing on the
demands, beliefs, and requirements of country people. It helps in better customization
for each and every line of business in every market of the country. It obviously and
easily contain decentralized approach such local based decision-making. It is effective
for countries where larges differences in the cities and states exists such US. The key

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success factors and outcome of this approach are quick product innovation, local
responsiveness, low political risks, and low exchange rate risks (Drucker 1954).
This study is based on IKEA’s story for using a global strategy.
Mission of IKEA:
IKEA’s objective is to provide a number of stylish and practical items of furniture of high
quality at fair price so that most of the public can manage to purchase them (IKEA
2012). The company focuses on clients who are passionate to furnish their homes by
investing physical energy in transporting and assembling the furniture at home at
reasonable price.
The target customer of IKEA is youthful and low level to middle class people
(Eisenhardt & Brown 1998, 59-69).
IKEA is a remarkably successful global furniture retailer company now but this group did
not globalize itself till 1960 because furniture has a big size compared to its value and
because it is easily vulnerable and risky and damaging nature in shipping so
transportation costs were conventionally very high. One of the trade barriers was
Government at that time. IKEA was pioneer with globalization of furniture firms. This
organization was making unassembled furniture; therefore it was easy to ship it and
effective cost wise. IKEA great contribution comes in the form of binding customers in
value chain. It was an attractive option for the customers to buy furniture in packed form
and assembled it at home. That was cost effective and fun activity for client to enjoy
decorating home with personal involvement. People were desperate to have economical
lifestyle so IKEA made progress all around Europe and has celebrated its silver jubilee.
Now a day, the fields in which IKEA operates are well defined and developed; the
company offers and deals in comparatively economical, modern, Scandinavian style
furniture and all of the above home furnishings (IKEA 2012).

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IKEA and Global Strategy:
IKEA experiences many country specific advantages. At the first place, IKEA is situated
at the ideal European premise that is widening the chances of progress for it. At parallel
level, IKEA is communicating with the international market by utilizing the man force
from there so there is no language barrier to communicate the value and mission of the
company. Also, IKEA has an edge over North American part of USA while criticizing the
Swedish furniture brand. (Hambrick, & Frederickson 2005, pp.51-60).
IKEA has established in 1943 and since then busy in maintaining its standard. IKEA has
consistently managed the identity as disassembled furniture supplier. It was a novel
idea that managed to have large inventory and create possibility for the buyers to carry
their furniture with them right after purchase. IKEA concept has removed the demand of
skilled staff hence reduce the labor cost and make workers more independent. This
management structure also helps to make faster decisions (Haleblian & Finkelstein
1999, pp.29-56).
Global Marketing Strategy of IKEA
IKEA focused on middle class. It has broadened the horizon and captures global market
and suite selected class for it. IKEA has not restricted itself to just become retailer rather
it has copyrights reserved for the basic idea to maintain the standard and strength of
furniture. It means that company believes that they need to completely control over local
implementation and execution of its great unique trading concepts.
The core reason of its popularity lies in its differentiators that give it an edge over
market as compare to other competitors and manage good clientele. Firstly, its products
are of very reliable quality and economical (these are generally 20-30% less in price
with same quality providers or competitors). Usually, customers feel unpleasant and
uncomfortable in furniture store due to its ambience and interiors but it is not the case
with IKEA. IKEA customers are provided pleasant and a less stressful place to buy
independently. Stores are full of non-threatening attitude and customers are allowed to
walk through a visually pleasing place with only the help they demand (Ikea’s Global
Strategy Case 2011). Thirdly, company does not compromise on the less inventory

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instead have extra supply to meet the customer satisfaction level by fulfilling their
demand of carrying the purchase with them or at least, receive the delivery within a day.
On the other hand, other competitors take a lot of time to deliver furniture to customers.
They show floor models and then ask several weeks for the delivery of customer
chosen item.
The way IKEA is working and with the speed of moves, management completely
confirms that its strategy is effective and permissive in multiple nations and lifestyles,
there was launched a quick action plan in steps. The major target of company is to
establish a single store or establish early footpath in each targeted and potential country
by utilizing all its healthy and beneficial resources such as low pricing, strong labor and
so on. This type of access is backed with competitive advertising and marketing
strategy to acknowledge the modern idea in that market. Later on, IKEA opens more
stores in every country depending upon demands.
It is a really difficult to standardize products for all the target markets as per geographic
segmentation but IKEA has managed to do it. It is world’s largest retail furniture chain
because of low cost of production. The cost of production is lower due to its large scale
of production that helps it to reach economies of scale; moreover the design of
production also helps to minimize cost. IKEA has broad scale to manage calculative
sales and marketing targets. In country after country they have known the art of site
selection, store opening, store design and store operations greatly and luck also helps
this firm a lot at the end. Furthermore, IKEA is putting its experience to great profitable
use (Ikea’s Global Strategy Case 2011).
No doubt, IKEA progress is appreciative in different regions, however; America created
barrier for following reasons.
 Individual customers demanded individual furniture item with peculiarities.
 The concept of frugal culture was not easily permissible to American diverse
culture.
 Americans started appreciated Swedish furniture that was built in Sweden and
directly sent to America.

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 Stock out situation was faced due to 1 or 2 months shipping time from Sweden to
United States.
 There was more competition in United States than in Europe with respect to
furniture cost and design (EDGE Consulting International 2012).
Conclusion
SWOT analysis strengths IKEA have strong internationally known brand attractive key
demographic customers. Key aspects to Globalization: IKEA has successfully marketed
its product in U.S. Europe, Canada and Asia. There are bright future prospects for IKEA
furniture among middle class that will appreciate frugal culture theory. The strategy of
IKEA dependent on cost leadership because it is offering low prices in all markets
where it currently has presence.
Value based pricing offers competitive price as compare to its competitors. Price
difference is seen due to different currency rates of different countries. This conversion
cost allows IKEA to have considerable business. Another benefit comes from sales and
CSR department. It is assumed that the buyers of IKEA furniture would be familiar with
its self assemble culture. IKEA support in assembling furniture is less; however, to some
extent IKEA goes against its culture and provide all selection, transport, and assembling
services to its prestigious customers. IKEA takes this step at its launch to a new region
and during its introductory phase. It could be an effective strategy while capturing new
bazaar. Here the question arise that should IKEA target a market where DIY is not
favored, it is possibly against IKEA globalization mission if it includes the cost of service
to the furniture’s price (Terra Consulting International 2012). IKEA stores are located in
suburban areas. This is the major factor in controlling the low cost theory concept. This
may have a negative impact on the product orientation, it matches with the IKEA culture
and target clients that are somehow attractive to the buyers to make a purchase and
take their product with them. The only requirement for the advertisement arises to
market the location of store. In short, the effective pricing and quality products are the
major solutions of globalization challenges for many countries.

11. 11
References List
Alan M Rugman and Alain Verbeke 2004, A perspective on regional and global
strategies of multinational enterprises, Journal of International Business Studies Vol. 35,
pp.3–18.
Christopher A. Bartlett and Sumantra Ghoshal 1989, ‘Managing across Borders: The
Transnational Solution' Harvard Business School Press.
Donald C. Hambrick, James W. Fredrickson and James W. Frederickson 2005, Are you
sure you have a strategy, The Academy of Management Executive, Vol. 19, No. 4, pp.
51-62.
Drucker, P 1954, The practice of management. New York: Harper & Row.
EDGE Consulting International 2012, viewed September 20, 2012, retrieved from
<http://www.edgemarkets.com/>.
Eisenhardt, K. M., & Brown, S. L 1998, ‘Time pacing: Competing in markets that won't
stand still’, Harvard Business Re-view, March-April, discusses "time pacing" as a
component of a process of contending with rapidly changing environments, pp. 59-69.
Global Business Access Ltd 2012. Viewed on 20 September, 2012, retrieved from <
http://www.globalltd.com/>.
Haleblian, J., & Finkelstein, S. 1999, ‘The influence of organizational acquisition
experience on acquisition performance: A behavioral learning perspective’,
Administrative Science Quarterly, Vol.44, pp.29-56.
Hamel, G., & Prahalad, C. K. 1993, Strategy as stretch and leverage. Harvard Business
Review, March-April, pp. 84-91.
Ikea 2012, Weclome to Ikea, viewed September 20, 2012, Retreived from <
http://www.ikea.com/>.

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Ikea’s Global Strategy Case 2011, November 14. StudyMode.com. viewed on
September 20, 2012, Retrieved from http://www.studymode.com/essays/Ikea-s-Global-
Strategy-Case-838668.html.
Michael Porter 1986, 'Competition in Global Industries' Harvard Business School Press.
Porter, M. E. 1996, What is strategy? Harvard Business Review, November-December,
pp.61-78.
Terra Consulting International 2012, viewed on September 20, 2012, retrieved
<http://www.terra-international.com/>.
Tilles, S. 1963. How to evaluate strategy. Harvard Business Review, July-August, pp.
112-121, for a classic, but more limited, set of evaluative tests.
Vijay Govindarajan and Anil K. Gupta 2008, 'The Quest for Global Dominance:
Transforming Global Presence into Global Competitive Advantage' Jossey Bass, p. 20-
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