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IKEA The Global Retailer Case Solution

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Globalization of markets refers to the promotion and selling of products and services across different regions, without considering any border restrictions. Nowadays, globalization of markets is widespread, as all brands are expanding their offerings to markets outside of their own. In the case of IKEA, the brand was able to communicate its culture through its offerings outside the European market. The globalization of markets for IKEA means that it appeals to the global middle class and fulfills the synonymous need of the target market, which is to buy attractive furniture at low prices.

Following questions are answered in this case study solution:

  1. How has the globalization of markets benefited IKEA?

  2. How has the globalization of production benefited IKEA?

  3. What does the IKEA story teach you about the limits of treating the entire world as a single integrated global marketplace?

Case Study Questions Answers

The brand uses similar product designs and store layouts to attract the global audience, and applies standardization within its global markets as much as possible. For example, each store represents a warehouse type format offering 8,000 to 10,000 items, and the layout of all stores is such that the customer has to walk through the entire store to get to the checkout counter. Prices are kept low at a global level, hence the products are attractive for middle class customers who are interested in minimalistic furniture and interior designs. Furthermore, restaurants and childcare facilities are also present within every store globally, to ensure that customers can spend long hours in the store without any distractions. IKEA has kept its product designs consistent, to reflect simple, minimalistic, Swedish style, which has become part of the brand’s identity. However, it is important to highlight that while the brand has adopted a standardized approach in most of its global markets, it has also been forced to adapt and alter its designs, to meet the needs and tastes of international customers. For example, after entering the US market, it was learned that American customers did not prefer the European-style products offered by the brand. Furniture and other products sizes weren’t adequate for the American audience, and hence, the brand had to adapt and alter its offerings to appeal to the US customers. 

2. How has the globalization of production benefited IKEA?

Globalization of production refers to the outsourcing of some or all production activities to different countries, to take advantage of cheap skilled labor or overall low costs of manufacturing. Various brands have incorporated this approach to save production costs; Nike, Zara, H&M, to name a few. 

IKEA has also adopted globalization of production in order to lower the prices of its products globally. In order to meet cost efficiencies, IKEA has 1,300 suppliers in 53 countries. Hence, products having high demand in certain markets are supplied by suppliers in nearby countries, in order to save up on shipping costs. The shipping costs associated with furniture can be high due to its weight and size, hence, global sourcing decisions have to be taken in order to lower down the costs of products in certain markets. For example, China is a large market for IKEA owing to its population size and huge consumption potential. Hence, IKEA has 300 suppliers in China alone, making it one of the largest purchase source for the brand.

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