Custom IKEA Export Report essay paper sample
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1.0 Company and Product Situation Analysis
IKEA (Ingvar Kamprad Elmtaryd Agunnaryd) is a private company that was founded in 1943 based in Sweden (Sinclair Keith 2009, p.12). It has employed up to 127,800 employees by the year 2008 with half of the company's employees working and living there. Their major market is Europe which takes 80% and North America and Asia which takes 15% and 5% respectively. They are currently planning to export some of its products to other countries but special attention was given to New Zealand, Brazil and Qatar. At the moment it is considering to export furniture items to the mentioned three countries.
1.1 Product Profile
As Sinclair Keith (2009, p.24) reports, IKEA furniture covers the entire spectrum of furniture including bathroom furniture, bookcases, outdoor furniture, beds, sofas, office furniture and hotel furniture. Furniture being widely used in the world by different persons of different status, IKEA Company decided to specialise in production of Economy grade and Designer grades of the products which cater for both the poor and the rich respectively. The company's product differentiated in quality and price depending on the capacity of the consumer to fulfil his needs.
In exporting the products the company is able to achieve improved profits from sales, diversification and increase in market representation, acquiring of new technology, experience and knowledge. Apart from this it will also be in a position to sell surplus considering balancing of demand (seasonal demand). In exporting the company will also face challenges which can be described as disadvantages and this includes expenses to be incurred in promotional strategies, travel costs to the target market, processing and repackaging of the new products, delay in payment making and finally difficulty in identifying good distributors for the product in the target market.
1.2 Current Market Profile
The income of Qatar is high compared to that of New Zealand and Brazil. This gives it a higher priority as a target market for export. But on the other hand, people living in New Zealand are lavish spenders compared to the other two countries (Levine, 2008, p.76). This is due to the wealthy and skilled Briton migrants in New Zealand who are always ready to spend and enjoy the good environment there. In terms of investment we find that Brazil has a stable economy that allows growth and attraction of other investors (Levine, 2008, p.79)
The users of furniture in the international market are more of the same as in local market in that they use furniture in their daily lives and activities. The IKEA Company has different grades of furniture which is favourable for all groups of persons despite their income level.
1.3 Product Industry Analysis
As Levine, (2008, p.76) reports, the company faces competition from other furniture manufacturing industries including Capris furniture industry which is privately owned and having its headquarter based in united states, Thomasville furniture industry based in North Carolina, Canadian furniture in Canada, Dare global industry and Kasen international holding limited in china.
The above competitors have been in the market for a long time and have favourable retail outlets countrywide. They have established strong interpersonal relationships with their customers thereby increasing sales. On the other hand most of these companies incur high labour costs and high transport costs which make their product so expensive in the market. Some of them are medium or small sized and are therefore not in a position to enjoy economies of scale. This limitations makes most of them produce products of a lower quality than expected in the market.
Levine (2008, p.86), further reports that, IKEA Company produces in large scale, therefore enjoys the economies of scale from that. This factor enables them to be in a position to produce furniture of a higher quality considering the different level of incomes of individuals. It caters for both the poor and the rich price wise. Production in large scale also ensures a reduction in costs of production.
1.4 SWOT (company analysis)
Sinclair Keith (2009) reports that the company has competitive capabilities and resources that enables it to compete successfully in the market. It has multiple retail outlets, able to adapt comfortably to a change of environment, provides quality products and in time, has trained and reliable staff and finally it produces unique products compared to that of its competitors. One of the weaknesses of the company is that being a large company, it is not in a position to compete with the small businesses. The company also incurs high costs in the production compared to the low costs experienced by its competitors who have similar productivity.
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The company is provided with opportunities that make it competitive (Sinclair Keith 2009, pp. 143). It is in a position to offer its products at different locations and times. It also has a well defined market niche and uses internet distribution to increase its sales. It is able to identify the target markets and still be in a position to define its products. The company faces threat from the new products in the market which reduces the advantages experienced by it. The existence of government regulations limits the amount of sales made. The unstable market trends and introduction of new technology also posses threat to the company.
Global Market Search
The system of social stratification in Brazil is developed by the fact that there is unequal distribution of income. The poor and the rich have different social class in that they do not intermingle easily. The poor are found in the rural sectors while the rich are in major towns where they go to school, work and even develop from there. Those of a lower level of income seek help from the outside colonies which act as an advantage to them in that anyone is free to access their market .In contrast, Cluny Macpherson (2007, p. 99) holds the view that New Zealand has equal distribution of income and it avoids creating strong social stratification. They value immigrants from other countries creating a good environment for investors. On the other hand, Qatar has a higher percentage of immigrants compared to Brazil and New Zealand. It is made up of Muslim religions that are still evolving from tradition life into a modern life. They have a stable political situation which does not discriminate the women from the men in terms of development (Sinclair Keith 2009, pp. 144)
2.1 Demographics and Population
The table below gives a summary of the demographic situation of Brazil, Qatar and New Zealand (Cluny Macpherson 2007, p. 109)
DEATH RATE/1000 POPULATION
NET IMMAGIRATION RATE/1000 POPULATION
TOTAL FERTILTY RATE
INFANT MORTALITY RATE/1000
2.2 Economic Criteria
According to Ann Hartness (2001 p. 99,) the consumer expenditure in Brazil is low compared to that of New Zealand. Brazil has a higher population whereby most of its citizens earn a low income. It has a current account balance of $11.28B.New Zealand has a current account of $35.2B while Qatar has a current account balance of $3.786B. The GDP values of brazil, Qatar and New Zealand are $1.577trillion,$63.8million and 24.7% million respectively. The currency used in Brazil is Brazilian Real (1BRL) while that of New Zealand and Qatar are New Zealand dollar and Qatari Rial respectively (Cluny Macpherson 2007, p. 111).
Qatar being an oil wealth country it enjoys good infrastructure and networking services (Cluny Macpherson 2007, p. 114). The roads are paved but have no railway services. It also has modern telecommunication services provided by Q-Tel and 430000 landlines to aid in communication. On comparison, Brazil has a poor infrastructure with few roads being paved. It also has a limited railway system which is due to the poor maintenance of the transport sector. It has 19million main lines in use and a modern system of internet communications. New Zealand on the other hand has an extensive and modern infrastructure which is used widely. Its internet services are widely spread making it easy to communicate. Mobile phones are also widely used compared to the others above. From the above features we find that New Zealand has the best infrastructural facilities compared to the other two countries thus having a steady economic growth. Most of its citizens use private mode of transport (Sinclair Keith 2009, pp. 143).
2.4 Local Consumption
Qatar being a smaller country with a population of 1.4 million people has an expensive level of consumption. The country provides market to its own furniture products that are produced in the country. On the other hand New Zealand has a high consumption level compared to Qatar because of its developed country. The citizens have a lavish lifestyle in which consumption of designer furniture is accommodated. Brazil has a low consumption level of designer furniture because of the low income earned by individuals in the country. It has an unequal distribution of income and this does not favour high consumption level (Levine 2008)
2.5 Political/Legal Environment
According to Sinclair Keith (2009, pp. 145), Brazil has an unequal distribution of national income and this promotes the introduction of races in the society. The stratification is based on the amount of wealth one has in that, the rich do not mingle with the poor. This limits the ease of movement in the country. Trade can be carried out but not freely as in New Zealand who are welcoming. The economy of Brazil is unstable due to, the above fact. On contrast, New Zealand has a favourable environment to carry out trade.
According to Sinclair Keith (2009, pp. 145), the citizens are welcoming and easy to get along with despite the different races. It also has a stable economy as it does not have a strong social stratification. Its citizens practise equal distribution of income. Qatar being a Muslim country it cities any other religion apart from Muslim, it therefore provides difficulty in trade among different citizens. It also has an unstable political status due to the form of leadership applied there. Tariffs and duties have to be observed before importing or exporting (Sinclair Keith 2009 pp 148)
Basing on the facts collected above it is evident that New Zealand has a favourable environment to carry out export with. In agreement with Sinclair Keith (2009, pp. 146), it has a well developed network and internet activities combined with an extensive infrastructure. It is, then followed by Qatar and lastly Brazil whose economic status is not stable. New Zealand has no any form of barrier that might hinder free movement of goods in or out of the country.