Obs: don`t forget to answer the questions in the end of the case study.
1. History (Explain)
2. IKEA is considered one of the success stories. How have they achieved this success? What barriers have they overcome?
3. What is the basis of IKEA´s differentiation strategy?
4. What the best practices IKEA uses as it pursues differentiation?
5. How does work IKEA´s distribution system? How important this system is for IKEA international success?
6. Which ones are IKEA´s main global competitors?
7. Explain IKEA business model?
8. How does it work the manufacturing process? Where does production take place?
9. Is product adaptation related to IKEA strategy? Explain.

10. What is IKEA entry strategy for a new market? Is the store location weighted in the strategy? Explain.

IKEA has a very conservative entry strategy for a new market because it will never enter a new market with a retail store. Instead, they opt to form connections with different suppliers in the market for market knowledge and recognition before making the leap of opening a retail center. In the past, IKEA has entered new markets in Europe and North America by entering through company-owned subsidiaries. Now, however they tend to enter through franchising in unknown small and high-risk markets. The franchisees are carefully researched and evaluated with only the best being granted franchise status. IKEA headquarters continue to be very involved in the store, mandating a base 12,000 products and auditing, store quality insurance, and efficiency assistance.

11. Are after sales services important for IKEA international strategy? How does the process work?

After sales services are crucial to IKEA’s customer centered strategy. They approach after sales services with care because they know it enhances a customer’s experience, which will ensure they will be returning customers. Also, focusing on after sales services helps to lighten the potential weaknesses in their business model. They ensure beneficial after sales services by ensuring the consumers have the know how for construction of furniture, the right tool, and most importantly, access to customer service if problems arise.

12. How does IKEA brand its products?

IKEA works for a quality, yet affordable brand. It reaches consumers with this brand through high quality catalogs showcasing their new products, word of mouth from consumer to consumer, and careful store location (i.e. near universities and young parts of cities).

13. What is IKEA entry strategy for the Brazilian market? What are its main barriers and challenges faced by IKEA in Brazil?

IKEA has approached entering the Brazilian market in a very similar manner as they have with most of the other new markets they have entered. They have, and will continue to, established connections with the local suppliers of furniture and furniture parts. This not only helps decrease the competition from the local suppliers, but also gives IKEA the necessary market knowledge to succeed in a country like Brazil. The main barrier that IKEA faces when entering the Brazilian market is the harsh import climate that implements high taxes on materials sent to distribution centers. This limits the minimization of costs greatly. Also, to reach the largest target market, IKEA has to effectively place retail centers in more urban settings, which exponentially raises the rent and space necessary for the size of an IKEA store. Finally, IKEA faces tight competition from local and national suppliers and investments in furniture production, due to the wood industry in Brazil.

14. Is IKEA International Strategy successful? Explain.

IKEA’s International Strategy has been extremely successful. They have been able to use comparative advantage on all levels of production by utilizing local supplier’s market knowledge and establishing necessary connections around the world. While some worry about the seeming impossibility of keeping bureaucratic nuisances to the minimum, IKEA has shown that it can, and does, work. Even with the recent economic instability in their markets, IKEA has been able to rise above the recessions in a sustainable fashion. IKEA’s brand and prices will continue to prevail and will prove to be a successful business model going forward.

15. Until now IKEA international marketing strategy has been tightly and centrally controlled by corporate headquarters. However, high local' pressures emerging due to demographic and cultural differences might force the local IKEA shops to take strategic initiatives to respond to local market needs. In this connection discuss the regional headquarters and transnational organization (presented in Chapter 12) as hierarchical 'entry mode' alternatives to the very centralized strategy emanating from IKEA's headquarters.

Currently, IKEA relies on its central European headquarters for all worldwide standards. However, if IKEA were to regionalize it’s policy setting centers, it could more effectively cater to the specific markets that vary depending on many factors like cultural tastes, import/export laws, and marketing strategies. It would still need to keep its main European centralized headquarters, but just push certain responsibilities down the bureaucratic ladder.

16. IKEA has not yet explored joint venture and strategic alliances strategies. Evaluate the pros and cons regarding these two entry strategies versus the traditional IKEA entry mode of franchising.

One of the main cons to entering into joint ventures and strategic alliances is the weakening of the brand. IKEA relies on their regular standards of quality that stems rom every product being output by the same central governance. However, if IKEA were to enter into different business partnerships, they would have to rely partially on the quality and brand of the other company. IKEA has one of the best brands in the industry, so this would probably lead to the weakening of the brand due to the instability of other brands. However, these partnerships could lead to increased market knowledge, especially in new and booming markets, but this could also be achieved by their current strategy of connecting with local suppliers.

17. Should IKEA penetrate the South American market by establishing a shop in Brazil?

IKEA should not approach Brazil’s market as a way to enter into South America’s market because there are major differences between Brazil and the rest of South America, primarily because Brazil is Portuguese in culture, while the rest primarily associates with a Spanish culture. Also, Brazil’s economy and markets are extremely volatile in nature right now, so it would be less risky to set up shop in a place like Buenos Aires or Santiago, where the culture much more closely resembles Europe’s market and tastes, but also are much more stable. IKEA should continue to reach out to local suppliers to gain entry that way.

18. In the light of the political and economic situation in South America, outline the sourcing concept that should be implemented in the South American market.

IKEA will have to rely on specialized marketing and branding because it is extremely important to access the entirety of the diverse population of South America. Currently, South America faces an extremely wide gap between the rich and the poor, so to effectively market their products, they will have to carefully cater marketing to the different subsections of the population.