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Entry Strategy of IKEA into Brazil - Essay Example

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Entry Strategy of IKEA into Brazil

IKEA through its various marketing strategies has created a steady demand for its products. The company also prides itself in being innovative and has managed to get customers to accept products that they would not normally accept through design changes. In the initial stages IKEA expanded its business into new markets outside of Sweden including Norway by direct entry and by acquiring other businesses. However, over the years IKEA has been focusing on expansion of its business through franchising. IKEA now operates over 325 stores which are located in 35 countries. An analysis of the Brazilian market indicates that it is a very promising environment for IKEAs products. The standard of living of working class individuals have improved and this has increased their demand for various products including home furnishings. Upper and middle class Brazilians have high disposable income and are willing to spend on high quality brand name products and so it would be good if IKEA offer goods for different segments of the market instead of focusing on just low priced products. Additionally, research indicates that 59% of Brazilians have a preference for foreign brands over home brands. However, there are certain obstacles in the political and legal environment that may negatively impact the success of IKEAs business. Furthermore, the currency of Brazil is overvalued. It is therefore important that IKEA use its resources to correct weaknesses in its operations and make use of opportunities and lessen the impact of threats in the environment. Introduction IKEA operates 325 stores in 35 countries throughout the world. The company’s first stores between 1955 and 1978 were opened in Sweden, Norway, Denmark, Switzerland, Germany, Australia, Hong Kong, Canada, Austria, Netherlands and Singapore. Since then the company has expended its operations to 24 additional countries. However, the company does not have a presence in Brazil. Most of IKEA stores are franchises and therefore the company does not have to provide any capital outlay. However, franchise fees are dependent on the success of its franchise operations. In determining a strategy for IKEAs entry into Brazil, a thorough research of the Brazilian market is required. This research will involve an analysis of the macro-environment in which furniture manufacturers and distributors operate in Brazil and a strengths, weaknesses, opportunities and threats (SWOT) analysis. Evaluation of IKEA International Marketing Approach The marketing strategy used by IKEA is to set the price of its home furnishing products low enough that as many persons as possible will be able to afford it. The IKEA concept is aimed at providing low priced products so that more people can live a better life. This concept guides the design, manufacture, transportation, sale and assembly of IKEAs products (Inter IKEA Systems B.V. n.d.). IKEA is constantly evaluating new countries and the decision to enter is made after a thorough research. This will involve an analysis of the political, economic, social, technological, ecological and legal (PESTEL) environment and a SWOT analysis. Appendix 1 provides a PESTEL analysis of IKEA. A SWOT analysis of IKEA is also provided in Appendix 2. IKEA sells a wide range of products and each one of these products experience varying demands. IKEAs products may be analysed using the BCG matrix. In this matrix products are classified into cash cows, stars, dogs and question marks. IKEA should be able to determine ...Show more

Summary

To: The Director of International Marketing - BCG From: Consultant Subject: IKEAs Entry into Brazil Date: Report Executive Summary According to Inter IKEA Systems B.V. (n.d.), IKEA was established in 1943 by Ingvar Kamprad as a mail order business in Sweden…
Author : mgorczany
Entry Strategy of IKEA into Brazil essay example
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