BM026-3-3INTSM

Individual Assignment

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Learning Outcomes
1. Demonstrate knowledge and understanding of variety of external and internal environmental
influences of international strategic management thinking and planning.
2. Apply concepts developed in the module to some aspect of international business and critically
evaluate outcomes.
3. Critically analyse and evaluate appropriate approaches to solving international strategic management
problems.

QUESTIONS
The case study offers scope for discussing the trends and present strategies for IKEA and how IKEA
plans to grow according to the recent trends. This assignment paper contains THREE questions. Please
read the case study. Your answer needs to show your ability to analyse and evaluate the tools and theories
used as well as to make a critical comparison of works presented by different authors.
IKEA The Case Study
During the last half of the twentieth century, many barriers to international trade fell and a wave of firms
began pursuing global strategies to gain a competitive advantage. However, some industries benefit more
from globalization than do others, and some nations have a comparative advantage over other nations in
certain industries. To create a successful global strategy, managers first must understand the nature of
global industries and the dynamics of global competition.
Companies go international for a variety of reasons but the typical goal is company growth or expansion.
When a company hires international employees or searches for new markets abroad, an international
strategy can help diversify and expand a business. Globalization is the process during which businesses
rapidly expand their markets to include global clients. Such expansion is possible in part because
technological breakthroughs throughout the 20th century rendered global communication easier. Air
travel and email networks mean it is possible to manage a business from a remote location. Now
businesses often have the option of going global, they assess a range of considerations before beginning
such expansion.
The furniture industry is an example of an industry that did not lend itself to globalization before the
1960s. The reasons for that are its features. Furniture has a huge volume compared to its value, relatively
high transport costs and is easily damaged in shipping. Government trade barriers also were unfavorable.
But IKEA company established in the 1940s in a small village in Sweden, has become one of the
worlds leading retailers of home furnishings. In 2002 it was ranked 44th out of the top 100 brands by
Interbrand, topping other known brands such as Pepsi. In 2002, it had more than 160 stores in 30
countries. How did IKEA achieve it? The IKEA business idea is: We shall offer a wide range of welldesigned, functional home furnishing products at prices so low that as many people as possible will be
able to afford them. By the early 1960s the Swedish market was saturated and IKEA decided to expand
its business formula outside Sweden. They noted: Sweden is a very small country. Its pretty logical: in a
country like this, if you have a very strong and successful business, youre bound to go international at
some point. The reason is simpleyou cannot grow any more (Retrieved from http://www.ikea.com).
IKEAs internationalization strategy in Scandinavian countries and the rest of Europe has not paid
significant attention to local tastes and preferences in the different European countries.
Only necessary changes were allowed, to keep costs under control and IKEAs low responsiveness to
local needs strategy seems to work well in Europe (Kling K., Gofeman I. 2003).
Level 3

Asia Pacific University of Technology and Innovation

2015

BM026-3-3INTSM

Individual Assignment

Page 2 of 4

The first challenge came in 1985 when IKEA entered the US market and faced several problems there.
The root of most of these problems was the companys lack of attention to local needs and wants. US
customers preferred large furniture kits and household items. As a result of initial poor performance in the
US market, IKEAs management realized that a standardized product strategy should be flexible enough
to respond to local markets. In the early 1990s IKEA redesigned its strategy and adapted its products to
the US market. Thanks to it IKEAs sales in the US increased significant and by 2002 the US market
accounted for 19% of IKEAs revenue. As the case study illustrates, in several industries firms with
effective strategy do not have to change their core strategy significantly when they move beyond their
home market. IKEA does not significantly change its corporate strategy and operations to adapt to local
markets unless there is a compelling reason for doing so. IKEAs strategy in the US during the 1980s
demonstrates that even the most successful formula in the home market can fail if multinational
companies do not respond effectively to local business realities (Carnegy H. 1995).
In the international competitive environment, the ability to develop a transnational organizational
capability is the key factor that can help the firm adapt to the changes in the dynamic environment. As the
fast rate of globalization renders the traditional ways of doing business irrelevant, it is vital for managers
to have a global mindset to be effective. Globalization of business has led to the emergence of global
strategic management. A combination of strategic management and international business will result in
strategies for global cooperation. However, there are obstacles to progress along the way. The problems
caused by these obstacles can be solved by cooperative ventures based on mutual advantages of the
parties involved. Proper effective communication will be a key element for global strategies because what
is proper and effective in one culture may be ineffective and improper in another. Marketing products
globally is complex and difficult because of several factors including: International Strategic Alliances,
coordination and control of international marketing, communication, regional trade blocks, and choice of
global strategy. The firm with the choice of an effective global strategy that takes into consideration its
strengths and weaknesses in the face of the opportunities and threats in the environment, will survive.
ANSWER ALL 3 QUESTIONS BELOW.
1. Critically analyse your assessment of IKEAs situation at the beginning upon entering U.S?
(30 marks)
2. Evaluate and explain IKEAs current strategy of expansion into international markets.
(30 marks)
3. Discuss the challenges and your recommendations for IKEA if it decides to acquire other furniture
companies through expansion strategy?
(40 marks)
FORMAT AND STRUCTURE
Following is the recommended structure for your assignment
Cover page
Content page
Answer to the question with headings and subheadings
References
Bibliography (if available)
Appendix (if available)
You are to use the following format of writing.
Font type: Arial or Times News Roman
Font size: Heading 16pts, subheading 14pts, normal writing 12pts
Level 3

Asia Pacific University of Technology and Innovation

2015

BM026-3-3INTSM

Individual Assignment

Page 3 of 4

1 and half line spacing between paragraphs

Caption and source is to be given to each diagram, chart, and table used in your answer.

REFERENCES AND CITATIONS

References and citations are to be written according to Harvard Referencing System.
Ensure the format you use for writing your citations and references is consistent throughout the
document.
Ensure each citation has its corresponding reference and each reference has its citation in the answer.
In Harvard Referencing, no bullets and numbering is required in the references. However, you will
need to present the references in ascending alphabetical order (i.e. from A to Z)

USING ONLINE RESOURCES

The following websites will give you basic information of some theories, concepts and principles.
However, at Level 3, these websites do not have the adequate authority and/or quality for citation
purpose and students should look at other better alternatives.
1. The Economist, www.economist.com,
2. Business Week, www.businessweek.com

WORD PENALTY
A sliding scale of penalties for excess length will be imposed according to the amount by which the limit
has been exceeded. Your word count must be indicated on your cover page.
Word Count
Penalty
2,001 2,200
No penalty
2,201 2,400
10% penalty of the total mark
2,401 2,600
20% penalty of the total mark
2,601 and above
Marks will be capped at a pass (i.e. 50%)
Words in diagrams, charts, tables, captions, citations and references are not considered into the word
count.
MARKING CRITERIA
The mark criteria will consider the following in each question:

Mark will be allocated for familiarity with subject/material and evidence of original thinking.
Mark will be allocated for Quality of argument/reasoning; the depth of analysis; expansion of
ideas/argument and recognition of wider context/complexity of topic
Mark will be allocated for the relevance of answer to task set; the accuracy of details; consistency of
focus and the organisation of ideas.
Mark will be allocated for the critiquing information sources in terms of credibility and relevance

Level 3

Asia Pacific University of Technology and Innovation

2015

BM026-3-3INTSM

Individual Assignment

Page 4 of 4

PERFORMANCE CRITERIA
Grade
Distinction
75% 100%

Credit
65% 74%

Pass
50% 64%

Fail
Below 50%

Description of performance level

Ability to show good application of theories and concepts covered in the module with
reference being made effectively to the context of the case or questions
The answer must be able to exhibit high depth of analysis and evaluation supported by
extensive sources of relevant authority (using more than the minimal requirement of 10
references) with clear linkage to the issues concerned in the questions.
Good use of language with minimum or no grammatical errors ad spelling mistakes.
Expressions of ideas are clear, concise and comprehensive.
Overall answer show high originality of own writing (this can be evident through effort
of paraphrasing).
Proper layout with proper heading and subheading and consistency in referencing and
citations.
Each reference is be reflected by a citation in the body of the assignment.
Ability to show proper understanding of the theories and concepts.
Answer shows basic level of analysis and evaluation with some evidence of references
being made to the issues and context concerned in the question.
Minimal number of references from relevant sources is made.
Citations and references are present but not consistent.
Some grammatical and spelling errors are made.

Level 3

Some understanding of the theories and concepts are shown albeit with certain
mistakes on the application and definition.
Very limited level amount of analysis and evaluation is made.
Inconsistency in writing the references and citations.
Some parts in the answer where citations are required are without citations.
Lack of originality in writing.
Answer fails to flow cohesively.
Answer given by students fails to address the question.
Poor understanding of the theories and concepts. Many incidences of
irrelevancy and inaccuracy.
Ideas are presented in a fragmented manner.
High evidence of students copying and pasting works from other sources.
Citation and references are written in a highly inconsistent fashion.
All or many of the references do not adhere to Harvard System.
Less than the minimal sources of references have been made.

Asia Pacific University of Technology and Innovation

2015