Chap1-Gobalization
2
CASE IKE A—T he Glo bal Reta il er IKE A may be the wor ld' s most succes sfu l glo bal retaile r. Established by Ingvar Kamrad in !weden in "#$% when he was &ust " years old( today the home)f ur nis hing su ers tor e has gr own int o a global cul t bra nd wit h *%+ stores in %% countries that host $"+ million shoers a year and generate sales of ,"$.- billion /". billion0. Kamrad himself( who still owns the rivate comany( is rumored to be the world's richest man. IKEA's target mar1et is the global middle class who are loo1ing for low)riced but attractively designed furniture and household items. The comany alies the same basic formula worldwide2 3en large warehouse stores festooned in the blue and yellow colors of the !wedish 4ag that o5er -(+++ to "+(+++ items( from 1itchen cabinets to candlestic1s. 6se wac1y romotions to drive tra7c into the stores. 8on9gure the interior of the stores so that customers have to ass through each deartment to get to the chec1out. Add restaurants and child care facilities so that shoers stay as long as ossible. :rice the items as low as ossible. ;a1e sure that roduct design re4ects the simle( clean !wedish lines that have become IKEA's trademar1. And then watch the results —customers who enter the store lanning to buy a /$+ co5ee table and end u sending /<++ on everything from storage units to 1itchenware. IKEA aims to reduce the rice of its o5erings by * to % ercent er year( which re=uires relentless attention to cost cutting. >ith a networ1 of "(%++ suliers in <% countries( IKEA devotes considerable attention to 9nding the right manufacture r for each item. 8onsider the comany's best)selling Klian love seat. ?esigned in "#-+( the Klian( with its clean lines( br ight color s( siml e legs( and comact si @e( has sol d some ".< mil lio n uni ts sin ce its intr oduct ion. IKEA origina lly manu factu red the ro duct in !wed en but soon tran sfer red roduction to lower)cost suliers in :oland. As demand for the Klian grew( IKEA then decided that it made more sense to wor1 with suliers in each of the comany's big mar1ets to avoid the costs associated with shiing the roduct all over the world. Today there are 9ve suliers of the frames in Euroe( lus three in the 6nited !tates and two in 8hina. To reduce the cost of the cotton slicovers( IKEA has concentrated roduction in four core suliers in 8hina and Euroe. The resulting e7ciencies from these global sourcing decisions enabled IKEA to reduce the rice of the Klian by some $+ ercent between "### and *++<. ?esite its standard for mula( to achieve glo bal success IKEA had to adat its o5er ing s to the taste s and references of consumers in di5erent nations. IKEA 9rst discovered this in the early "##+s when it entered the 6nited !tates. The comany soon found that its Euroeanstyle o5erings didn't always resonate with American consumers. eds were measured in centimeters( not the 1ing( =ueen( and twin si@es with which Americans are familiar. !ofas weren't big enough( wardrobe drawers were not dee enough( glasses were too small( curtains too short( and 6.!. si@e aliances didn't 9t in the 1itc hens . !inc e then( IKEA has re desi gned its 6.!. o5erings to aeal to American consumers( which has resulted in stronger sales. The same rocess is now unfolding in 8hina( where the comany lans to establish "+ stores by *+"+. The store layout in 8hina re4ects the layout of many 8hinese aartments( and since many 8hinese aartments have balconies( IKEA's 8hinese stores include a balcony section. IKEA also has had to adat its locations in 8hina( where car ownershi is still not widesread. In the >est( IKEA stores are generally located in suburban areas and have lots of ar1ing
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Transcript of Chap1-Gobalization
7/24/2019 Chap1-Gobalization
http://slidepdf.com/reader/full/chap1-gobalization 1/2
CASE
IKEA—The Global Retailer IKEA may be the world's most successful global retailer.
Established by Ingvar Kamrad in !weden in "#$% when he was &ust " years old( today the
home)furnishing suerstore has grown into a global cult brand with *%+ stores in %%
countries that host $"+ million shoers a year and generate sales of ,"$.- billion /".
billion0. Kamrad himself( who still owns the rivate comany( is rumored to be the world's
richest man. IKEA's target mar1et is the global middle class who are loo1ing for low)riced
but attractively designed furniture and household items.
The comany alies the same basic formula worldwide2 3en large warehouse stores
festooned in the blue and yellow colors of the !wedish 4ag that o5er -(+++ to "+(+++ items(
from 1itchen cabinets to candlestic1s. 6se wac1y romotions to drive tra7c into the stores.
8on9gure the interior of the stores so that customers have to ass through each deartment
to get to the chec1out. Add restaurants and child care facilities so that shoers stay as long
as ossible. :rice the items as low as ossible. ;a1e sure that roduct design re4ects the
simle( clean !wedish lines that have become IKEA's trademar1. And then watch the results
—customers who enter the store lanning to buy a /$+ co5ee table and end u sending/<++ on everything from storage units to 1itchenware.
IKEA aims to reduce the rice of its o5erings by * to % ercent er year( which re=uires
relentless attention to cost cutting. >ith a networ1 of "(%++ suliers in <% countries( IKEA
devotes considerable attention to 9nding the right manufacturer for each item. 8onsider the
comany's best)selling Klian love seat. ?esigned in "#-+( the Klian( with its clean lines(
bright colors( simle legs( and comact si@e( has sold some ".< million units since its
introduction. IKEA originally manufactured the roduct in !weden but soon transferred
roduction to lower)cost suliers in :oland. As demand for the Klian grew( IKEA then
decided that it made more sense to wor1 with suliers in each of the comany's big
mar1ets to avoid the costs associated with shiing the roduct all over the world. Today
there are 9ve suliers of the frames in Euroe( lus three in the 6nited !tates and two in
8hina. To reduce the cost of the cotton slicovers( IKEA has concentrated roduction in four
core suliers in 8hina and Euroe.
The resulting e7ciencies from these global sourcing decisions enabled IKEA to reduce the
rice of the Klian by some $+ ercent between "### and *++<. ?esite its standard
formula( to achieve global success IKEA had to adat its o5erings to the tastes and
references of consumers in di5erent nations. IKEA 9rst discovered this in the early "##+s
when it entered the 6nited !tates. The comany soon found that its Euroeanstyle o5erings
didn't always resonate with American consumers. eds were measured in centimeters( not
the 1ing( =ueen( and twin si@es with which Americans are familiar. !ofas weren't big enough(
wardrobe drawers were not dee enough( glasses were too small( curtains too short( and
6.!. si@e aliances didn't 9t in the 1itchens. !ince then( IKEA has redesigned its 6.!.o5erings to aeal to American consumers( which has resulted in stronger sales. The same
rocess is now unfolding in 8hina( where the comany lans to establish "+ stores by *+"+.
The store layout in 8hina re4ects the layout of many 8hinese aartments( and since many
8hinese aartments have balconies( IKEA's 8hinese stores include a balcony section. IKEA
also has had to adat its locations in 8hina( where car ownershi is still not widesread. In
the >est( IKEA stores are generally located in suburban areas and have lots of ar1ing
7/24/2019 Chap1-Gobalization
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sace. In 8hina( stores are located near ublic transortation( and IKEA o5ers delivery
services so that 8hinese customers can get their urchases home.
Case Discussion Questions
". Bow has the globali@ation of mar1ets bene9ted IKEAC *. Bow has the globali@ation of roduction bene9ted IKEAC%. >hat does the IKEA story teach you about the limits of treating the entire world as a
single integrated global mar1etlaceC
