Ikea's Swedish Ways
The case learning objective which relates to Chapter 8 and the case of IKEA's Swedish Ways is pressures for cost reductions and local responsiveness. The main strategic issue at IKEA was the fact that they largely ignored the rule that they needed to tailor the product line. They did this to stick to their founder's vision of "typically Swedish" products wherever in the world they were going to sell. This strategy proved to work in all other countries except when they entered North America, particularly the United States. I think IKEA trying to stay true to the vision was noteworthy, but they should have definitely followed norm when going global.
IKEA eventually customized their products to represent North American tastes, which entailed making the bedroom chest drawers deeper, selling king and queen-sized beds, and redesigning the kitchen furniture and kitchenware. Once they deepened the drawers on the bedroom chests, sales immediately increased by 30-40%. There were other issues besides the product offerings. Adverse movements in exchange rates affected the price of the products as well as the cost to make the products. IKEA also addressed this issue by sourcing approximately 45% of their products locally, which makes it less vulnerable to these adverse exchange rate movements.
By 2000, about 1/3 of IKEA's total products were designed exclusively for the U.S. market, which means the changes IKEA made are proving to be profitable. In 2000, IKEA's North American sales reached $1.38 billion, and they claim they have been making a profit in North American since 1993.
Currently, IKEA operates 25 stores in the United States and the U.S. accounts for 11% of their total 14.8 billion sales. IKEA's sales have jumped 10.8 billion since 1995 and continue to grow. IKEA's case proves that responding to local consumer tastes and preferences and dealing with pressures for cost reduction are effective when entering the global environment.
IKEA eventually customized their products to represent North American tastes, which entailed making the bedroom chest drawers deeper, selling king and queen-sized beds, and redesigning the kitchen furniture and kitchenware. Once they deepened the drawers on the bedroom chests, sales immediately increased by 30-40%. There were other issues besides the product offerings. Adverse movements in exchange rates affected the price of the products as well as the cost to make the products. IKEA also addressed this issue by sourcing approximately 45% of their products locally, which makes it less vulnerable to these adverse exchange rate movements.
By 2000, about 1/3 of IKEA's total products were designed exclusively for the U.S. market, which means the changes IKEA made are proving to be profitable. In 2000, IKEA's North American sales reached $1.38 billion, and they claim they have been making a profit in North American since 1993.
Currently, IKEA operates 25 stores in the United States and the U.S. accounts for 11% of their total 14.8 billion sales. IKEA's sales have jumped 10.8 billion since 1995 and continue to grow. IKEA's case proves that responding to local consumer tastes and preferences and dealing with pressures for cost reduction are effective when entering the global environment.