The U.S. represents a market comparable in size to the entire European market for IKEA, and China and Russia constitute half of the famous BRIC block, which prior to 2008’s recession represented a hot target for every major retailer in the world.
The major challenge that this situation poses for IKEA is the need to adapt to each market’s particular set of characteristics. A thorough external analysis needs to be conducted for each market to identify the key elements that may affect IKEA’s strategy. For example, a simple PESTEL analysis would reveal that significant differences in the political environment could reveal the risks of investing in China due to a high level of government control and the uncertain trade and copyright laws. It could also become apparent that the individual’s disposable income varies greatly among the three countries. While Americans have the highest level of income of the three countries, the 2008 economic downturn affected more strongly the economic growth of the U.S. and Russia than that of China. Just by looking at a couple of factors, it becomes apparent how complex IKEA’s strategy will be in order to be successful in such diverse environments.
Short Term:
• Consolidate its positioning in its fastest-growing markets, especially in the United States, and continue its strategic expansion within each of these countries.
• Learn from its recently opened store in the Dominican Republic about the characteristics of the Latin American and Caribbean markets.
• Modify the management structure that not only limits their access to financial resources, but also makes it complicated to coordinate and make the decisions that will drive the firm’s future growth.
Mid Term:
• Expand to countries where its presence is limited (or nonexistent), whose characteristics are similar to other known countries, and that are close geographically to currently served markets (for example, Canada and the four Asian tigers).
• Slowly enter the Latin American market, starting with countries like Brazil, Chile, and Argentina.
Long Term:
• Consolidate in the new markets reached in the middle term.
• Explore additional offerings, such as serving small businesses.