Ikea Global Supply Chain

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Another model to consider before moving into a new location is the Uppsala Internationalization Model. This concept of internationalization process involves the role of development of knowledge in overseas markets and operations on one hand and balance with a rising commitment of resource to foreign markets on the other hand.

The Uppsala Model

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(Fig. 2)

In figure 2, Internationalization model is divided in two perspectives namely; state aspects and change aspects. State aspect consists of market commitment and market knowledge while change aspect consists of current business activities and commitment decision (Johanson and Vahlne, 1990). The internationalization of this model can be distinguished in two patterns. Firstly, firms will start to invest in a few nearby countries instead of investing in many countries promptly. Secondly, firms will invest in specific country by learning with psychic distance in new markets (Jahanson and Vahlne, 1990).

The second pattern is what IKEA would use in internationalizing into a new location and while assumptions of Uppsala model relates to the lack of knowledge about foreign market (Johanson & Vahlne, 1977) which is the main problem. However, this knowledge can be gained in order to enter the new location. Second assumption is decision on investing abroad will be made through market uncertainty. Then learning process will carry learning by doing (Johanson, 1988; Lindblo, 1959 and Quinn, 1980). In the last assumption, knowledge is dependent on individuals and cannot be transferred, that is, experience is a crucial factor that can lead to opportunities in market (Johanson & Vahlne, 1977).

CONCLUSION

IKEA are considered as retailer internationalization since IKEA’s plan into entering a new location is organizing strategic objective, understanding the local nature of markets and using outlet as a retailer’s product.

A strategic planning is required for IKEA when internationalizing into a new location they are moving into so as to be successful. Psychic distance and Uppsala model should be applied into their strategy and wherever they move into would be a success as IKEA already possess a strong brand image, also has strong relationship of network structure, large number of suppliers and customers would easily associate with them.

REFERENCES

Alexander, N & Myers, H 2000, “The retail internationalization process”, International Marketing Review, vol.17, iss.4/5, pp.334-353

Buckley, P J, Pass, C L & Prescott, K 1992, “The internationalization of service firms: A comparison with the manufacturing sector”, Scandinavian International Business Review, vol.1, pp.39-56

IKEA Group (2012) Social and Environmental Report, Retrieved December 20, 2013 from http://www.ikea.com/ms/de_AT/about_ikea/pdf/ikea_se_report_2012.pdf

IKEA Group (2012) How IKEA Creates Its Low Prices. Retrieved December 20 2013, from http://www.ikea.com/ms/en_GB/about_ikea/press_room/lowprices.pdf

Porter, M.E. (1996) What is strategy? As cited in Segal-Horn, S. (ed) (1998) The Strategy Reader, Oxford, Blackwell