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Case on IKEA: Expanding through franchising to the South American market

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Introduction

Individual Assignment: Case on IKEA: Expanding through franchising to the South American market. The objective of this paper 1. Until now, IKEA's international marketing strategy has been centrally controlled by corporate headquarter. However, the case study identifies a number of challenges facing the company including culture and demographic differences around the world. How should IKEA react to this challenge? 2. How attractive is Brazil for IKEA? And which market entry method do you recommend, and why? Introduction IKEA is a Swedish furniture company which has a unique design and applied a traditional internationalization strategy as centralisation. Certain marketers agree that the standardized marketing strategy which focuses on the similarities among cultures and develops global marketing plans eliminating the need of culture can be used for creating strong global brands and expanding business globally without any problems. The marketers employ this approach as a result of they see the world as a one large market in which difference between cultures have diminished and consumers have developed similar needs and want independent of location. However, there has been a long debate on the issue why many marketers try to change the approach of internationalization from standardization to adaptation which focuses on cultural uniqueness for each local market. In this essay will discuss "How should IKEA adjust its conservative strategy as regardless of cultural boundaries, How attractive is Brazil for IKEA, and which market entry modes do you recommend, and why?" ...read more.

Middle

By contrast, a society in which the social roles of men and women overlap is the femininity cultures. In contrast, Italy, Australia and Japan are the high-rank countries in masculinity thus, the advertising marketers should concentrate on masculinity, feature ads in the way of material success for men and nurturer for women and also use personalities or celebrities as presenters. On the other hand, the personalities of presenter will be downplayed in the feminine cultures such as Netherlands and Scandinavia. According to the Figure1 (Appendix ), the individualism is the highest aspect in Scandinavian country. For the Figure2, we can see that the level of uncertainty avoidance in Brazil is highest. So, the advertisers should understand the main cultural scheme of both Sweden and Brazil and design the effective advertising regard with its local culture preference, influenced successfully the expansion worldwide. IKEA in Brazil From the case study, it can be deducted that there are several attractive aspects for IKEA to invest in the area of furniture industry in Brazilian market. First of all, the furniture market in Brazil is attractively due to a big value of imported furniture and it is continues growing more and more. (IKEA Annual Report, 2002). Additionally, the labour cost is cheap compared to Europe and America. From the market analysts, it estimated that the import of furniture especially institutional furniture such as furniture used in hospitals and hotel will increase significantly. ...read more.

Conclusion

Moreover, both foreign firm and local partner can share the fixed cost of developing new products and reduce the level of risk including the conflict with nationalization or government interference. However, strategic alliances also have some disadvantages such as transfer technology know-how to the partner which results in the risk of unmanageable and uncontrollable of technology, and the battles between partners which bring to the bargaining power of venture collaborators (Hill, 2007). Last but not least, so as to gain the good alliance, IKEA needs to concern other three factors which is partner selection, alliance structure and the management style of the partner. Conclusion The conclusion to be drawn is that the centralized control by headquarter through franchising in Brazil brings to the failure of IKEA. Therefore, IKEA needs to adapt a policy and process to entry the Brazilian market by being aware of cultural and demographic difference. Also, choosing alternatively the entry mode as strategic alliances for expanding IKEA furniture industry worldwide will convey numerously good results. Moreover, Brazil market can be new sourcing area for IKEA to progress the furniture business. However, IKEA is required to survey market directions of furniture industry in Brazil in order to achieve business goals. In the same time, IKEA is able to adjust other marketing entry methods, such as licensing, franchising, and exporting to suit situations in Brazil. The company needs to realise that no one strategy is the best in reality. ...read more.

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