366SAM - Critical Issues in Globalisation
Assignment Title: IKEA in 2013: Furniture Retailer to the World
Based on the case study of IKEA in 2013, it states that IKEA is the largest home furniture retailer and the most successful international retailer in the world (Charles, 2014). Recently, the furnishing industry in Brazil becomes the leader in South America and those furniture companies in Brazil are small, lack of skilled labor and low technology (Tammela, 2013, p.592). As a business consultant of IKEA, this essay is to advise the management team of IKEA regarding their expansion activities to Brazil. First of all, this essay will analyse the external environment of IKEA in Brazil by using PESTLE analysis and Porter 5 forces and analyse the internal environment by using SWOT analysis and Value Chain Analysis (VCA). Besides, this essay also discusses the potential costs and challenges that may face if IKEA expand to Brazil and are different entry modes and strategies can be used to expand to Brazil.
First of all, this essay will analyse the external environment in Brazil by using PESTLE analysis and Porter’s five forces. PESTLE analysis consists of six important factors and the details of it will show in Appendix 1.1. Besides, the Porter’s five forces is a tool to analyse the Furniture industry structure in Brazil by using five industrial forces and this analysis of forces will presented below (Raab, 2012) (Appendix 1.2).
For the PESTLE analysis, the political factors of Brazil are high corruption rate, slow legal reforms progress, weak rule of law, stable political system, democratic elections, and Brazil is part of MERCOSUR (Sarkar, 2013). Besides, the economic factors of Brazil are high interest rates (approximately 18.4 % per annum), high inflation rate, big emerging markets, instable economy since 1999 and there is appreciation of Brazilian real (Makos, 2014). The social factors of Brazil are the...