IKEA
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IKEA
Introduction
IKEA is an international company that designs and sells furniture, kitchen appliances, and other home accessories. The company had 433 stores in 52 countries across the world, as of 2019. This essay analyzes the reasons behind the success of IKEA’s exp0ansion into Europe, its stumble in North America, and the lessons learned from the failure.
IKEA’s expansion into Europe
The European traditions had it that the children often inherited furniture from their parents. However, with the changing consumer patterns brought about by modernization and globalization, the Europeans began to embrace the new modern furniture. Thus, IKEA started providing low cost and contemporary furniture in Europe to attract its target market (Alenezi & Munzer, 2019). Other significant factors that enabled IKEA’s success in Europe were the company’s provision of high-quality goods and its ability to streamline its operations with the local suppliers.
IKEA’s Stumble in North America
IKEA’s expansion into North America resulted in a stumble. Despite the company being the most significant furniture business globally, it found the cost of production in the United States to be extremely high. With the North Americans having different tastes and preferences in furniture and the soaring costs of operations in the country, the company recorded a significantly massive drop in profits. The losses thus pushed IKEA to move its services to Europe, China, and other countries.
Lessons Learned
IKEA’s expansion into North America and subsequent failure taught it on the disadvantage of underestimating the local competition. Despite being the most significant furniture company globally, IKEA failed to understand the varied costs of production and diverse customer tastes. It, therefore, began its operations without conducting thorough research into the market. Other lessons learned included the need for appropriate strategic decisions regarding the number of employees to keep.
Application of the Lessons Learned
With the expansion into China and other European countries, IKEA has embarked on conducting thorough research on the local competition and appropriate strategies to enhance market penetration. The company has streamlined its size and the analysis of supply chain issues.
Conclusion
IKEA’s expansion into Europe was met by tremendous success due to its provision of high-quality furniture at low costs and modernity enhancement. However, the company subsequently failed in North America due to several reasons. They stumble in the United States was occasioned by the high production costs, the underestimation of the local competition, and the failure to conduct thorough research. However, IKEA has been applying the lessons learned from the failure to enhance its success in China and Europe.
References
Alenezi, S., Al Mutairi, N., Alenezi, S., & Münzer, S. M. (2019). Analysis of IKEA’s Internationalization Strategy. Journal on the community development in Asia, 2(3), 16-28.
http://ejournal.aibpm.org/index.php/JCDA/article/view/577