Internationalization and Ikea

I .1 Internationalization and IKEA

Internationalization is playing a big role in the world of business today . There are more reasons for companies to go abroad today than ever . Analysts mentioned various reasons why small and large companies should enter foreign markets , which include

the fact that the world GDP is many times larger than even the strongest domestic markets

some overseas markets are experiencing higher growth rates than domestic ones

Expanding overseas is considered as a great competitive

move because it avoids stronger frictions in domestic markets while maintaining corporate growth , etc (Abell , 1991

In light of these benefits , companies are striving to discover the best possible way that will allow them to gain all the advantages of internationalization . However , there are many forms of market entry to choose from . Within this , we will analyze the benefits and disadvantages of franchising compared to other forms of market entry

The study will focus on a worldwide-known furniture retailer , IKEA , who has been performing its franchising strategy to expand globally within the last two decades . There will be analysis of how best franchising could serve the company compare to other types of market entry

I .2 Corporate Background

The company , IKEA International , is a Sweden-based company that sells home furnishings and housewares in approximately 230 stores in 33 nations . It provides customers with a wide range of home furniture of various designs and functions . The company targets specific types of consumer , but these customers have grown in numbers as the company grew Its competitive advantage lies on its ability to deliver good product quality with cheap prices . The cheap prices come from the strategy of making customers half producers and half consumers . In simpler words customers assemble the products themselves (`Facts and Figures , 2006 Franchising and Other Forms of Market Entry

II .1 Franchising in IKEA

IKEA 's retailing has a franchise system managed by Inter IKEA Systems BV . The products are sold only in IKEA stores franchised by Inter IKEA Systems BV . The company has been pursuing the franchising strategy for international expansion since the 1980 's . The IKEA Systems BV evaluate and regulate franchisees . After the application is agreed , franchisees must agree to some extent of control and evaluation over their IKEA business . Headquarter will audit and evaluate franchisees for their performance periodically . However , headquarters provided them with required training and operational support

After