Ikea International Business

1.0 Introduction of IKEA

1.1 Who is IKEA?

IKEA is the world's largest and top retailer of home furnishings, house wares furniture which are inexpensive and modish Scandinavian designed furniture. IKEA was founded by Ingvar Kamprad in 1943 in Sweden. The name IKEA is a short form and stands for the initial letters of founder's name and his home country: Ingvar Kamprad and Elmtaryd, Agunnaryd. In approximately 24 countries, IKEA has 253 fully-owned stores and has over 565 million people visit in every year. Furthermore, the worldwide sales of IKEA in 2008 was about 21.2 billion Euros (Gawor, Halasova, and Polzin , 2008) (Funding Universe, n.d.).

1.2 IKEA Corporate Structure

Figure 1. IKEA Corporate Structure (Tengblad, 2004)

In addition, Kamprad wanted to create a long-standing and independent organization through a unique ownership. Therefore, the IKEA Group has been owned by a foundation since 1982 because Kamprad had donated the company to a charitable foundation in the Netherlands called Ingka Holding B.V. in order to avoid problems of succession and outside shareholders as well as to help prevent the company from being split up or taken over when Kamprad died (Reference for Business, n.d.) (Gawor, Halasova, and Polzin , 2008).

Figure 1 shows the organizational of IKEA-companies. IKEA Group is owned by the INGKA Foundation which is based in the Netherlands. The parent company of all IKEA Group companies is INGKA Holding B.V. IKEA Group companies included Swedwood which is the industrial companies that manufacture IKEA products, IKEA of Sweden which is the IKEA R&D division, Purchasing, Distribution and other functions such as Human Services, IT and Communication. Moreover, the Inter IKEA Systems B.V. is separate from the IKEA Group companies and it is the owner of the IJEA concept and trademark. IKEA Holding S.A. which is part of Inter IKEA Holding is the owner of Inter IKEA Systems B.V. (IKEA, 2011) (Gawor, Halasova, and Polzin , 2008).

1.3 Vision and Mission of IKEA

The vision of IKEA is "to create a better everyday life for the many people" (Wisesaputri, 2009). Moreover, the mission of IKEA is to offer a diversification and low prices home furnishing items which are also with good design and function , as well as high quality and durability, and thereby most of the people can afford to buy them (Gawor, Halasova, and Polzin , 2008).

2.0 International Marketing Strategies of IKEA

2.1 Definition of International Marketing Strategy

Marketing is a set of processes for creating, communicating and delivering the value to the customers and managing the relationships of customers and stakeholders in a win-win way. International marketing is the process that finding out the needs of customers in foreign countries and fulfil their needs at right place and right price. Most of the multinational enterprise have to modify and specifically formulate their marketing strategy at international level in order to compete with other competitors (The Gemini Geek, n.d.).

Multinational enterprise are the business entities that operate in more than one country and its headquarters is based in one country, while other facilities arebased in locations in other countries (Wise Geek, n.d.). IKEA is an multinational enterprise and it has used various marketing strategies to grow in overseas and also do fully prepared when entering new overseas markets. Moreover, there have several reason for IKEA strive to grow and expand in overseas.

2.2 Reason for International Marketing

International marketing will bring benefits for IKEA, when IKEA implement international marketing and these benefits are also the driving force of IKEA to growth and expand continuously in overseas market. The reasons are shown as the following:

2.2.1 Increasing The Size of Market

When the minimum efficient size for a firms production is greater than the total sales potential of the domestic market, in order to fully exploit the scale economies and reduce the forms average costs to lowest level, the firms must finding extra sales in overseas markets. IKEA was founded in 1943 and till now IKEA has continued to grow so IKEA needs to increase the size of market in order to fully exploit the scale economies (Wall, Minocha and Rees, 2010).

2.2.2 Extending the product life cycle

Several years ago, IKEA have reached "saturation point" in the Europe market, so IKEA is finding new markets in overseas in order to extend the maturity stage of the product life cycle (Wall, Minocha and Rees, 2010).

2.2.3 Helping reduce investment pay-back periods

Moreover, reduce investment pay-back periods will allow company can obtain sufficient funds early for development of new products or new investment. Therefore, IKEA actively seeking new overseas markets to help achieve high volume sales early in the product life cycle and thereby reduce the pay-back period (Wall, Minocha and Rees, 2010).

2.3 Organizational Structure

One of the factors that IKEA can expand rapidly in overseas is IKEA has a unique organizational structure. The present organizational structure of IKEA is a highly functional global strategy. The control over strategic direction of IKEA is improved and minimized functional lay-offs. IKEA also focus on how to maintain centralized control over functional activities and gain the benefit from low coast, as well as further ameliorate quality from international suppliers. All of these can help IKEA continues to expand overseas smoothly. In addition, purchasing and distribution processes had integrated by the organization under one umbrella function, in order to ensure efficiency in the logistics process (Gawor, Halasova, and Polzin , 2008).

At the same time, IKEA also faces some changes that can influence the maintaining of IKEA's global organizational, for example increasing of responding to different national needs, impact of emerging demographic trends. Therefore, IKEA solve those problems by increasing franchisee autonomy and subsidiaries to centralize intervention (Gawor, Halasova, and Polzin , 2008).

Moreover, IKEA also maintains high control levels over its suppliers in order to ensure the products of IKEA are high quality, as well as to prevent suppliers produce competitive products for other IKEA's competitors. The centralized logistics system ensures that IKEA will not face severe store