The command terms are classified according to four Assessment Objectives (AO):

 AO1 - Demonstration of knowledge and understanding

IKEA is a multinational company (MNC) that designs and sells ready to assemble furniture, home
appliances, kitchen services, and home services. IKEA’s vision is “To create a better everyday life
for the many people”. The company offers a wide range of well-designed, functional home
furnishing products at competitively low prices so that as many people as possible will be able to
afford them. One of IKEA’s aims is to achieve high quality products at affordable prices through a
range of strategies including optimization of its supply chain, long term relationships with its
suppliers, investments in capital expenditure and automation, and manufacturing in bulk.
(a) Define the term multinational company. [2 marks]
.............................................................................................................................................................
...............................
.............................................................................................................................................................
...............................
.............................................................................................................................................................
...............................
.............................................................................................................................................................
............................
IKEA was founded in Sweden in 1943. By the end of 2020, IKEA operated 422 stores in more than
50 countries worldwide. Approximately 70% of IKEA stores are located in Europe. Around 15% of
the company’s annual sales come from Germany and approximately 14% from the USA. Apart
from opening new stores in different countries, IKEA’s growth strategy includes a wide product
range of more than 9,500 products. IKEA’s product lines include (are categorised as) furniture,
beds and mattresses, storage and organisation, baby and children, kitchen and appliances,
decoration, lighting, kitchenware and tableware, winter collection, textiles, and home smart. IKEA
has also broadened its markets by operating IKEA restaurants and coffee shops within many of its
furniture retail stores.
(b) Apply the Ansoff matrix to two growth strategies used by IKEA. [4 marks]
.............................................................................................................................................................
...............................
.............................................................................................................................................................
...............................
.............................................................................................................................................................
...............................
.............................................................................................................................................................
............................

The company uses a franchising strategy as part of its extensive expansion plans. Potential IKEA
franchisees are evaluated through a stringent process, given further guidance, and trained
accordingly. Successful franchise operators are authorized to market, sell (the entire product
range) and operate (the sales channels) of IKEA goods. In return, IKEA franchisees pay the Inter
IKEA Group an annual fee of 3% of their net sales revenues. Franchisees also provide valuable
input based on their own consumer and local market insights. This provides further opportunities to
expand and collaborate.
(c) Explain one advantage and one disadvantage to IKEA from its franchising strategy. [4
marks]
.............................................................................................................................................................
...............................
.............................................................................................................................................................
...............................
.............................................................................................................................................................
...............................
.............................................................................................................................................................
............................

IKEA plans to explore and exploit the growing Indian market. With just one large store in
Hyderabad, India in 2018 the company has expanded online in Pune and Mumbai. The furniture
retailer aims to integrate its brick-and-mortar format (of physical) stores with online stores. IKEA
announced the opening of its store in Navi Mumbai on 18th December 2020. This became one of
the company’s signature and largest stores along with its small-format stores in the country.
IKEA aims to target 100 million customers in India by 2022. The demand for furniture is increasing
in India and consumers are open-minded to foreign retailers and suppliers. The government has
eased the process of expansion in India by supporting MNCs. Legislative practices have been
improved, and new contracts have been formed to source other unconventional materials from
India. The mandate by the Indian government is to ensure that 30% of all goods sold in IKEA’s
Indian stores are sourced locally. The Indian domestic furniture market is expected to expand at a
rate of around 13% between 2020 and 2024. The global furniture market is estimated at US$1.1
trillion, from which the Indian market size is currently less than 5%.
However, consumers are price-sensitive and have loyalty towards Indian stores. The market is
dominated by local vendors and well-established brands such as Godrej, Zuari, and Yantra. These
companies have a well-proven market presence. Moreover, firms such as Pepperfry and Urban
Ladder are generating high amounts of sales revenues through online platforms, indicating the
success of e-commerce in India’s furniture industry. The country’s infrastructural developments
and investments in technology are also the key objectives of the Indian government.
(d) Discuss the impact of the external environment on the growth and expansion of IKEA in
India. [10 marks]
.............................................................................................................................................................
...............................
.............................................................................................................................................................
...............................
.............................................................................................................................................................
...............................
.............................................................................................................................................................
.............................
.............................................................................................................................................................
............................
.............................................................................................................................................................
............................