248 Part 2: Strategic Actions: Strategy Formulation
As illustrated in the following Strategic Focus, IKEA has implemented the global
strategy. IKEA has centralized a number of its activities, including design and packag-
ing. Accordingly, it integrates and centralizes some support functions from the firm’s
value chain (see Chapter 3). This integration and centralization brings about the types of
benefits sought by firms when using a global strategy. Significant cost savings increases
the productivity of the involved support functions, which foster economies of scale
benefiting IKEA.Sources: S. Chaudhury, 2015, IKEA’s favorite design idea: Shrink the box, Wall Street
Journal, June 18, B10; B. Kowitt, 2015, How IKEA took over the world, Fortune, http://www.
fortune.com, March 13; M. Locker, 2015, IKEA is getting into the wedding business,
Time, http://www.time.com, April 20; A. Molin, 2015, IKEA builds momentum in Europe,
Wall Street Journal, http://www.wsj.com, January 29; J. Sanburn, F. Trianni, & D. Tsai, 2015,
Find out why you overshop in IKEA, Time, http://www.time.com, March 17; C. Zillman, 2015,
Here’s how IKEA is fighting climate change, Fortune, http://www.fortune.com, June 11.Face to Face/UPPA/Photoshot
The founding CEO of IKEA, Ingvar Kamprad,
in front of one of IKEA’s store fronts.Strategic Focus
Furniture Giant IKEA’s Global Strategy
Founded in Sweden, IKEA has pursued a global strategy in
developing its well-designed, inexpensive retail furniture
strategy. As with most companies pursuing a global strategy,
it emphasizes global efficiencies.
One particular approach that IKEA has used is to reduce
shipping weight by efficient packaging. Efficient packaging and
the associated benefit of lower transportation costs “is at the
heart of IKEA’s ability to stay affordable.” For example, in 2011
the company cut the price of its Bjursta label dining table to
€199 from €279 by making the table legs hollow thus reducing
weight and raw material costs. “Instead of changing products
once they have hit shelves, IKEA is increasingly designing
things with packaging and manufacturing in mind from the
start.” A tradeoff they have experienced is that packaging can
become too efficient at the expense of consumer frustration at
the complexity of assembly once the product is in the home.
So, simple assembly is also an important criteria.
In 2015, IKEA plans to open 13 new stores adding to its
current total of 315. It is seeking to buy land in India to open
its first locations. Furthermore, the firm is ramping up its
focus on online shopping, currently available only in 13 of
27 country locations. It saw 1.5 billion online visits in 2014,
up from 200 million in the prior year, which also exceeds
its visits to physical stores. Ikea is expanding this strategy
by increasing its “click-and-collect merchandising approach
where people order online and pick-up the merchandise at a
physical location.”
IKEA is also focusing on developing city-center stores with
a smaller range of products compared to its majority of subur-
ban store locations. However, the suburban stores will likely be
maintained as its central focus. Even when in a suburban loca-
tion, IKEA seeks to be within walking distance of transportation
hubs such as subway stations.
Although, IKEA is focused on efficiency, it also takes a long
time to study each new country market entry. It focuses on
where a growing middle-class is developing. It has entered China,
is planning on a strong entry into India, and is considering Brazil
as well. All of these economies have a growing middle-class. Even
in these countries, IKEA is focusing on “flat packing, transporting,
and reassembling its quirky Swedish-styling all across the planet.”
One of IKEA’s latest strategies to improve its image is to
develop a sounder approach to sustainability. Accordingly, its
store roofs are outfitted with solar panels, and it will operate
314 wind turbines in 9 countries, putting the company on tract
to be energy independent by 2020. IKEA recycles left
over wood scraps from their furniture as well as the soft plastic
film used in packaging to make the Skrutt desk pads it sells. It’s
also starting to phase out non-LED light bulbs in its stores and
has begun selling solar panels. With this strategy, IKEA expects
to be seen as a company that takes its social and environ-
mental responsibility seriously as it expands internationally.
But in the process, it also expects to lower its costs.