OPENING CASE: IKEA’s Global Strategy
Summary
The opening case describes IKEA’s global strategy and the way the company tailors its offerings
to meet customer demands. When IKEA first expanded to the United States in the 1980s, it saw
disappointing sales as U.S. consumers expected its products to be larger than was typical in
Western Europe (where IKEA was founded). Once IKEA developed larger sizes to accommodate
American tastes, sales improved. IKEA built on this experience when expanding into China in
the early 2000s and found success by reshaping its stores and offerings to accommodate Chinese
culture. Discussion of the case can revolve around the following questions:
QUESTION 1: What are the characteristics of IKEA’s global strategy? Who are its target
customers? How does the design of its stores and offerings fit into this strategy and the market
that IKEA is trying to reach?
ANSWER 1: IKEA’s target customers are upwardly mobile consumers in their 20s and 30s who
QUESTION 2: How well does IKEA’s strategy translate in other cultures outside of Western
Europe? What are some advantages to maintaining a consistent global strategy? What are some
disadvantages?
ANSWER 2: The basic formula of IKEA’s business-level strategy—to offer designer-inspired
furniture made affordable by an efficient global supply chain—works well in other countries. So
QUESTION 3: IKEA found success in the international market by localizing its products for
different consumers’ needs. Discuss how the company may need to change its strategies in
response to evolving tastes around the world. For example, how might consumer preferences in
the United States have changed after the financial crisis of 2008? In what way will tastes in
China evolve over the next 50 years?
ANSWER 3: Student answers will vary. In general, young consumers in the United States have
moved toward a more urban lifestyle since 2008, preferring to live in smaller apartments or lofts
CRITICAL THINKING AND DISCUSSION QUESTIONS
QUESTION 1: In a world of zero transportation costs, no trade barriers, and significant
differences between nations with regard to factor conditions, firms must expand internationally if
they are to survive. Discuss.
ANSWER 1: The theory of comparative advantage suggests that activities should take place in
the countries that can perform them most efficiently, given that different countries are endowed
QUESTION 2: Plot the position of the following firms on Figure 13.6: Procter & Gamble, IBM,
Apple, Coca Cola, Dow Chemical, Intel, and McDonald’s. In each case justify your answer.
ANSWER 2: Most students will probably agree that Procter & Gamble, Apple, Coca Cola, and
McDonalds are facing pressures for localization as well as cost pressures. This will push the
QUESTION 3: In what kind of industries does a localization strategy make sense? When does a
global standardization strategy make most sense?
ANSWER 3: A localization strategy makes sense when pressures for local responsiveness are
high. This situation is common when there are significant differences in consumer tastes and
preferences between markets, when differences in infrastructure and traditional practices require
QUESTION 4: Reread the Management Focus on Procter & Gamble, and then answer the
following questions:
a. What strategy was Procter & Gamble pursuing when it first entered foreign markets in the
period up until the early 1980s?
b. Why do you think this strategy became less viable in the 1990s?
c. What strategy does Procter & Gamble appear to be moving toward? What are the benefits of
this strategy? What are the potential risks associated with it?
ANSWER 4:
b. Numerous factors prompted Procter & Gamble to change its strategy. Because of its
country-by-country approach to the market, the company had extensive duplication of
c. Today, Procter & Gamble is trying to take a transnational approach to markets. The company
has reorganized into business units, each responsible for its own profits. Each unit has been
QUESTION 5: What do you see as the main organizational problems that are likely to be
associated with implementation of a transnational strategy?
ANSWER 5: This is a student judgment question. Implementation difficulties include
CLOSING CASE: Global Strategy Levers
Summary
The closing case describes the five global strategy “levers,” or dimensions, that determine how
local or global a company is in the marketplace. The five levers are market participation,
products/services, supply chain management, marketing, and competitive moves. A
well-balanced approach to global competition requires paying relatively equal attention to each
of these five dimensions, though businesses tend to emphasize one or two dimensions based on
their organizational strengths and weaknesses. Discussion of the case can revolve around the
following questions.
QUESTION 1: Which global strategy lever do you think is the most universally important across
companies, and why? Which is the least important, and why?
ANSWER 1: Student answers will vary. Some may consider marketing to be the most important
QUESTION 2: Do you think your answers in Question 1 will change over time; if so, how?
ANSWER 2: Responses to Question 1 may change as economic conditions change around the
QUESTION 3: FedEx emphasizes supply chain management the least in driving its corporate
global strategy. But, it is viewed as a supply chain company—perhaps even a transportation
company. Why do you think the other global strategy levers are more important for FedEx?
QUESTION 4: Microsoft is known for making competitive moves globally but competitive
moves is its least-emphasized strategy lever; why do you think that is the case
QUESTION 5: If you could work for one of the 10 companies shown in the bar chart based on
their global strategy makeup, which company would it be, and why?
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INCORPORATING globalEDGE™ EXERCISES
Use the globalEDGE™ site {globaledge.msu.edu/} to complete the following exercises:
Exercise 1
Your company, a white goods manufacturer (primarily major kitchen appliances) based in the
United States, has decided to pursue international expansion opportunities in sub-Saharan Africa.
In order to achieve some economies of scale, your strategy is to minimize local adaptation.
Focusing on a comparison of two sub-Saharan African countries of your choice, prepare an
executive summary that features aspects of the product where stabilization will simply not be
possible and adaptation to local conditions will be essential.
Exercise 1 Answer
Additional Info:
This question requires the student to analyze factors that may lead to adaptation of a major
kitchen appliance. There are many factors, including but not limited to: primary language
spoken, personal income, electricity consumption, voltage rates, climate, urbanization, literacy
rates, distribution channels, and marketing practices. Some of this data is available directly on
globalEDGE, under Statistics and Economy pages. Others will be available through many
resources linked through from globalEDGE including the U.S. Commercial Service Country
Commercial Guides (linked from the home page of each Country Insights page on globalEDGE).
Exercise 2
Additional Info:
The Global Retail Development Index is an annual study that A.T. Kearney conducts, ranking the
top 30 developing countries for retail expansion worldwide. The index analyzes 25
macroeconomic and retail-specific variables to help retailers identify emerging market
investment opportunities.