Why do you think IKEA’s expansion into Europe went so well? Why did the company subsequently stumble in North America? What lessons did IKEA learn from this experience? How is the company now applying these lessons?

Answer:

In Europe, the company experienced rapid growth and success. This was because the company reduced its overall costs and was less responsive to needs of the locals. Most of the countries were dominated by retailers who sold expensive products and were not even available for delivery. However, IKEA came with a strategy to manufacture furniture with unique design, low prices and immediate availability in delivering which solved customers much-needed services. Customers were willing to buy stylish furniture with low prices which IKEA produced.

However, the company stumbled in North America market. Lack of paying attention to the needs of the customers in these market was the root of the problem. The customers in this required large furniture as well as the household items which IKEA did not offer. The company also faced stiff competition from market rivals such as Ethan Allen which offered high quality and well-designed products. Additionally, the company offered delivery services and other customer related services which mean it dominated the market IKEA was expanding to.

Most of the products were not good enough for the Americans. IKEA was selling the same products in the both Europe and America markets, but the customers had different taste and preference. For instance, American sheets did not fit IKEA beds, the sofas were not big enough, drawers were not deep enough, their drinking glasses were small, and curtains were too short, these contributed to company struggles to enter the America market.

Besides, IKEA was sourcing its products from overseas, and these products were pricedregarding Swedish currency Kroner which was strengthening against the American dollar. The difference in exchange rate increased the prices in IKEA’s American stores. These stores were even poorly located compared to that of the competitors.

From its struggles in the market, IKEA had to be decisive and come up with actions that would remedy the stumbling. The company redesigned most of its products in accordance with the preference of the America customers. The company chose new, large and better-located stores in America market. Additionally, the company outsourced goods from thelower-cost location as well as pricing them regardingdollars; this helped the company reduce the prices of its goods. To cut transportation costs and dependency of the value of thedollar, IKEA established factories in the US. Besides, the company paid attention to customer needs, most of theAmerican customers were more concerned with thedesign and disposable furniture. The company noticed the change in Americans culture and adjusted to these changes. Also, the company started advertising itself especially to young married period and overall younger demographic. As a resulted, the company sales increased rapidly as well as the revenues in the American markets.