Every year, more and more companies decide to expand into international markets, but only a few of them become successful. It is important to choose a localized strategy. Moreover, each market has its characteristics and nuances. There exist many factors that will influence a business and entrepreneurs to think carefully about going global. Therefore, global expansion is a good opportunity but, at the same time, a great danger for a growing business.
A great example of a successful global expansion is IKEA. It is the world's largest furnishing retailer. The company was established in 1943 in Sweden. The founder is Ingvar Kamprad. The name of a company consists of the initials of Ingvar Kamprad, as well as Elmtaryd and Agunnaryd, the farm, where he grew up, and his hometown respectively. Kamprad started his business with selling pens and pencils. The first big store was opened in 1958 in Sweden, the largest one in Scandinavia. The store was located outside the city. Moreover, the company decided to open an in-store restaurant in order to fully satisfy their customers. People could go shopping and have some coffee in the same place. IKEA offers goods with low prices and good quality.
Then the company decided to expand its activities beyond Sweden and opened stores in Norway and Denmark. In the 1970s, they succeed in other parts of Europe. Furthermore, after a few years, they expanded to other countries such as Japan, Australia, Canada, and Singapore.
IKEA offers almost 10,000 home furnishing products from kitchen cabinets to candlesticks with a simple design. Their customers are identified as young, middle class, and mobile who prefer modern low-priced products. When IKEA opened a store in Shanghai, almost 80,000 people visited it, which shows the level of company’s success. In the 2000s, IKEA entered absolutely new markets such as Russia, the United States, Latin America, and the Dominican Republic. Today, there are 373 stores in 47 countries. Nevertheless, they do not want to stop and plan to expand to the whole world. The best indicator of a company's success is the presence of IKEA's products in almost every European house, according to information on the company’s official website (“IKEA History”).
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The example of an unsuccessful global expansion is Starbucks. Despite the fact that this company is the most successful coffeehouse in the world, they have experienced failures in the international expansions. The first Starbucks store was opened in 1971 in Seattle by three teachers. What is more, they started with selling coffee beans and coffee making equipment, but not drinks. After almost ten years, they hired Howard Schultz as the director of retail operations and marketing. He proposed to serve customers with fresh coffee, but, unfortunately, the owners refused and Schultz opened his cafe by the name IIGiornale. In 1987, he bought Starbucks and created a new strategy under the name Starbucks Corporation.
In 1992, the company had 165 stores from Seattle to Vancouver. They met their success in the United States and Canada. In three years, Starbucks grew into 676 stores with the well-known brand name. Furthermore, in 1996, the company decided to expand into the international market and opened stores in Japan, Hawaii, and Singapore. Nowadays, there are almost 17,000 stores in 55 countries all over the world. In 2000, Starbucks opened the first store in Sydney, and then there were around 86 outlets across Australia. Unfortunately, eight years later, they had to close almost 60 stores there and lost $143 million. Another failure of Starbucks was in Israel. They opened several stores there, but the shops were empty. Starbucks Corporation had to close all stores in Israel and lost millions of dollars (“Company Information”).
Why is the IKEA the most successful global retailer? Shoulberg thinks that “there is perhaps no other retailer on the planet that has moved its basic model into so many places with so much success.” First, IKEA's strategy is the winning one because of low prices. Moreover, one of the challenges of going global is different income in different countries. To satisfy all social groups, especially richer people, the company decided to sell office furniture and more traditional furniture design. IKEA concentrates on individual marketing rather than mass marketing. What is more, IKEA designs its products with good quality.
Secondly, IKEA has a strong brand image and unique brand identity. Their blue and yellow stores are easily noticeable. As for Australia and China, IKEA brings to their market a new strategy and even the new lifestyle and service to their customers. It is important to note that IKEA using the principle ‘think global, act local’. What is more, this company tries to act according to the local culture.
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Thirdly, they have a successful promotional strategy that uses numerous advertising campaign, catalogs, online shopping, home delivery, and online advertising. It should be noted that they spend millions of dollars on publishing catalogs. IKEA has used this method from the beginning of their business. It helps to discover tastes of various people and to make an exclusive products on demand.
Therefore, there are many reasons why IKEA is such a popular international company. For example, cooperation with suppliers from different countries helps to reduce operational costs. Moreover, they use highly efficient logistics. What is more, they understand that the most important element of successful business is their customers. That is why they use different methods to find out peoples' demands (Kowitt).
For many years, Starbucks has been a great example of the successful company. Nevertheless, they have faced some failures. That is why the coffee industry grew and developed, but Starbucks did not. Their biggest failure was in Australia because they simply did not understand their customers. The company did not pay attention to the Australian market, as they tried to present the American business model.