IKEA & GLOBAL PRESENCE FRAMEWORK
Our class sessions on IKEA provided a classic case study on a successful multinational company. As the world's largest furniture retailer, the Swedish IKEA has been able to translate and execute its concept across borders in a variety of different markets, opening its doors in more countries than Wal-Mart and being more profitable than Target. After reading about IKEA's success story in Fortune Magazine, we visited the College Park IKEA to gain more insight on IKEA's global strategy.
IKEA Visit
After dining on some classic Swedish fare in the IKEA cafe, we were greeted by Frank Briel, the store's manager. Mr. Briel led us down a long hallway into a part of that I, despite my many trips there, never knew had existed.
Mr. Briel told us about his 25-year career at IKEA and his role in launching the first IKEA store in Manhattan. After this, we watched a video that gave us a further understanding of IKEA's mission, culture and operations. Underscoring the video was IKEA's mission of "improving quality of life for the many people" and how this imperative translates into all that IKEA does. According to the video, the IKEA goal of offering cost-efficient furnishing to a wide range of individuals affects all of the companies operations, from its product design, to its sourcing stratgies, to its supply chain decisions to its company ownership structure. For example, IKEA designs its products to be ergonomic and efficient to ship, in order to create a quality user experience for customers and reduce costs. Further, the IKEA group is organized into a complex ownership structure, such that the company can focus on its mission and its longevity rather than being beholden to shareholder demands for quarterly performance.
The video was full of many illustrative cases of IKEA's commitment to its concept. For example, a popular selling mug went through several redesigns in order to be affordable, stackable (and thus easily shippable), and aesthetically pleasing to the consumer. Production of the Famnig pillow was strategically placed in India in order to create employment and foster economic growth in the region. IKEA pioneered the board-on-frame technology as a replacement for solid wood to make its products less resource-instensive, more cost effective to ship, and lighter for the consumer who ultimately assembles the product. In these ways, among many others, IKEA demonstrates its core values and applies them in a global framework.
Global Presence Framework
In the next class session, we dove into the global presence framework. This framework lays out the relevant considerations for a firm trying to internationalize. The framework, we learned, incorporates the choice of product, the choice of strategic markets, and the choice of entry mode. The firm must decide what product they wish to offer and where they wish to offer it, making sure that there is appropriate fit between the two. Then the company must decide how they will bring that product to the chosen market- through foreign direct investment, joint venture, franchise, etc. Furhermore, the firm must attempt to
1) transplant the corporate DNA, infusing the culture of the firm into the division abroad
2) win the local battle, managing relationships with actors abroad
3) manage the speed of global expansion, making sure that growth doesn't outpace demand or resources.
We watched a video which outlined Wal-Mart's expansion to other countries. What struck me in this video was the emphasis on transplanting the Wal-Mart culture abroad. The company sent key executives to the international subsidiaries to ensure not only that appropriate businesses practices were being followed but that the corporate culture was present. While I initially saw this approach as enthnocentric, I eventually came to understand it as essential to preserving the brand essence and operational norms across the organization
The Takeaways
These sessions were impactful because they gave us both a conceptual framework for an international business strategy as well as a real world example in which this framework could be applied. IKEA's products, low-cost home furnishings, are an appropriate product selection because they are applicable in many cultural contexts. IKEA chose very strategic markets, where its products could fit in. Further, IKEA entered these markets through appropriate strategic means.
What was most remarkable to me about IKEA's success was the way in which it has remained faithful to its concept and core identity. Staying true to its ideal of producing products for "the many people", "doing more with less" and aiming for efficiency, it has transplanted its corporate DNA around the world. Other firms would do well to learn from IKEA's global success.
