Entry strategy of IKEA in to Brazil Essay Example | Topics and Well Written Essays - 1500 words

Entry strategy of IKEA in to Brazil - Essay Example In the initial stages IKEA expanded its business into new markets outside of Sweden including Norway by direct entry and by acquiring other businesses. However, over the years IKEA has been focusing on expansion of its business through franchising. IKEA now operates over 325 stores which are located in 35 countries. An analysis of the Brazilian market indicates that it is a very promising environment for IKEAs products. The standard of living of working class individuals have improved and this has increased their demand for various products including home furnishings. Upper and middle class Brazilians have high disposable income and are willing to spend on high quality brand name products and so it would be good if IKEA offer goods for different segments of the market instead of focusing on just low priced products. Additionally, research indicates that 59% of Brazilians have a preference for foreign brands over home brands. However, there are certain obstacles in the political and legal environment that may negatively impact the success of IKEAs business. Furthermore, the currency of Brazil is overvalued. It is therefore important that IKEA use its resources to correct weaknesses in its operations and make use of opportunities and lessen the impact of threats in the environment. IKEA operates 325 stores in 35 countries throughout the world. The company’s first stores between 1955 and 1978 were opened in Sweden, Norway, Denmark, Switzerland, Germany, Australia, Hong Kong, Canada, Austria, Netherlands and Singapore. Since then the company has expended its operations to 24 additional countries. However, the company does not have a presence in Brazil. Most of IKEA stores are franchises and therefore the company does not have to provide any capital outlay. However, franchise fees are dependent on the success of its franchise operations. In