The paper "Choosing the International Business Enterprise - IKEA" is a perfect example of a business case study. The report will analyze and focuses on IKEA using various concepts like Comparative and competitive advantage Market Entries, theories of Foreign Direct Investment and the Eclectic Paradigm and Organization form among others will be analyzed to demonstrate why IKEA was chosen. 2.1 Comparative advantages From the corporation’ s perspective, comparative advantage is defined as “ the capability of a company to develop and produce goods and services at a low cost compared to other companies” (Deardorf, 2005).
This statement reflects the true state of IKEA over the years. In 2007 Timber news argued that the Company settled for Sweden, Netherlands and developing countries because of cheap raw materials for making its products. In 2007, Timber news went ahead to say for over 25 years, Northern Swedish Company, Hedlunda Industry, has been continuously supplying IKEA with cheap pine wood. 2.2 Competitive Advantages IKEA posses various competitive advantages that it employs to gain its market advantage, and the include cost leadership, differentiation and focus. In its cost leadership, strategies of IKEA practices a low pricing strategy.
IKEA’ s website in 2014 contended that the company launched products on a low pricing strategy so as to enable the middle-income consumers to buy. Its costs are set low so that buyers can compare them with those of competitors and make informed decisions (The Times 100 n. d). IKEA differentiates its more than 12,000 different products it offers on its website (Henley, 2008). The company’ s products are identified majorly by one name which mostly holds Scandinavian origin (Henley, 2008). The names are unique are adopted from a naming system developed by IKEA. The company focuses its business on specific market segments more than others.
The company focuses more on office furniture more than home furniture. It dedicates most of its strategy and resource here because it forms its large customer base. 2.3 New Trade Theory A new theory of trade is aligned with getting the economy of scale.