Business Case Study: The Business Structure Of IKEA
INTRODUCTION
IKEA is a Swedish furniture company that designs and sells furniture such as beds, chairs and desks, home accessories and appliances. It was founded in Sweden in 1943 by Ingvar Kampard as a mail order business it later started to sell furniture and went on to become the world's largest furniture retailer and turning its founder Ingvar Kampard into one of the richest person on the planet. IKEA has a complex corporate structure. It is controlled by several foundations based in the Netherlands, Luxembourg and Liechtenstein. Today Ikea owns and operates around 384 stores in 48 countries and is responsible for approximately 1% of world commercial product wood consumption making it one of the largest users of wood in the retail sector.
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To meet local laws, it formed a joint venture. It served as a good platform to test the market, understand local needs, and adapt its strategies accordingly. But it understood early on that Chinese apartments were small and customers required functional, modular solutions. The company made slight modifications to its furniture to meet local needs. The store layouts reflected the typical sizes of apartments and also included a balcony. Another big problem IKEA faced was that its prices which were considered low in Europe and North America, were considered high than in China. Prices of furniture made by local stores were lower as they had access to cheaper labour and raw materials, and because their design costs were close to zero. Ikea solved this by builting a number of factories in China and increased local sourcing of materials.Today globally 30 per cent of IKEA's range comes from China while about 65 per cent of the volume sales in the country come from local sourcing. These local factories also resolved the problem of high import taxes in …show more content…
A thorough and comprehensive analysis of the market is required to arrive at a decision. The company should design strategies that should specifically deal with both developed and emerging markets. As the project deals with the entry strategy of Ikea in an emerging market like India, numerous issues and factors have to be taken into consideration for the smooth entry and sustainable growth. India, as a country is diverse in nature in terms of culture, political environment etc. It also has several limitations in terms of technology and infrastructure. For a global company like Ikea, these factors play an important role in assessing its entry
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