Introduction
This essay compares the international business strategies of Next, a UK-based fashion and homeware retailer, and IKEA, a Swedish multinational furniture and home goods company. Both firms operate on a global scale, yet their approaches to market entry, branding, and supply chain management differ significantly due to their distinct industries and business models. The purpose of this essay is to analyse how these companies navigate the complexities of international expansion, focusing on their strategies, challenges, and adaptability to diverse markets. By examining these aspects, this piece will highlight the broader implications for businesses operating internationally. The discussion will proceed through an analysis of their market entry methods, cultural adaptation, and supply chain operations, before concluding with a synthesis of key insights.
Market Entry Strategies
Next and IKEA employ contrasting strategies when entering international markets, reflecting their unique business priorities. Next, primarily a clothing retailer, often opts for a cautious approach, favouring a combination of owned stores and franchise partnerships. For instance, in markets like the Middle East, Next relies heavily on franchise agreements to mitigate financial risk and leverage local expertise (Fernie and Sparks, 2018). This strategy allows Next to expand with relatively low capital investment while adapting to regional preferences through local partners. However, this can sometimes limit control over brand consistency, a challenge Next has faced in maintaining uniform customer experiences globally.
Conversely, IKEA typically pursues a wholly owned subsidiary model, establishing large-scale stores in new markets to maintain strict control over its brand and operations. This approach, while resource-intensive, enables IKEA to replicate its signature store layout and low-cost model across countries (Jonsson and Foss, 2011). For example, IKEA’s entry into India in 2018 involved significant investment in standalone stores, tailored to local tastes through product localisation. Although effective in preserving brand identity, this strategy can expose IKEA to higher financial risks, especially in volatile markets. Thus, while Next prioritises flexibility, IKEA focuses on uniformity, with each approach carrying distinct advantages and limitations.
Cultural Adaptation and Branding
Cultural adaptation is another area where Next and IKEA diverge in their international operations. Next, operating in the fashion industry, must continuously adapt its product offerings to align with local trends and cultural norms. In conservative markets, for instance, Next modifies its clothing ranges to respect cultural sensitivities, ensuring relevance to diverse consumer bases (Fernie and Sparks, 2018). However, this responsiveness can sometimes lead to inconsistencies in brand identity, arguably diluting its global image.
IKEA, by contrast, maintains a more standardised branding approach, promoting its “democratic design” ethos worldwide. Yet, it also demonstrates cultural sensitivity by adjusting product ranges and store layouts to suit local preferences. In China, for example, IKEA offers smaller furniture suited to compact urban living spaces, illustrating its ability to balance standardisation with localisation (Jonsson and Foss, 2011). This adaptability, while generally successful, occasionally faces challenges when cultural nuances are misunderstood, potentially impacting customer reception. Both companies, therefore, exhibit awareness of cultural differences, though their execution varies in depth and focus.
Supply Chain Management
Supply chain management is critical to the international success of both Next and IKEA, though their strategies reflect their differing operational needs. Next relies on a flexible, fast-fashion supply chain, sourcing products from multiple countries to ensure quick responses to market trends. This approach, while efficient, can expose Next to risks such as supply chain disruptions or ethical concerns over labour practices in supplier countries (Fernie and Sparks, 2018). Addressing these issues remains a persistent challenge for the company.
IKEA, on the other hand, operates a vertically integrated supply chain, controlling much of its production and distribution to maintain low costs. This allows IKEA to offer affordable products globally but requires significant investment in logistics infrastructure (Jonsson and Foss, 2011). Furthermore, IKEA’s emphasis on sustainability, such as sourcing sustainable materials, adds complexity to its operations, particularly in markets with limited supplier capabilities. Both firms, therefore, must navigate complex supply chain challenges, with IKEA’s model offering greater control and Next’s providing agility.
Conclusion
In conclusion, the comparison of Next and IKEA in international business reveals distinct approaches shaped by their respective industries and strategic priorities. Next’s reliance on franchising and flexible supply chains prioritises adaptability and risk mitigation, though it risks brand inconsistency. IKEA’s focus on owned stores and vertical integration ensures brand uniformity and cost control, yet demands significant investment and exposes it to financial risks. Both companies demonstrate cultural awareness, albeit with varying degrees of localisation. These differences highlight the importance of tailoring international strategies to specific business models and market conditions. Indeed, their experiences underscore broader implications for multinational corporations: balancing standardisation with adaptation and managing supply chain complexities are critical to global success. Future research could explore how emerging technologies might further influence these strategies, offering new solutions to longstanding challenges.
References
- Fernie, J. and Sparks, L. (2018) Logistics and Retail Management: Emerging Issues and New Challenges in the Retail Supply Chain. 5th ed. Kogan Page.
- Jonsson, A. and Foss, N.J. (2011) International expansion through flexible replication: Learning from the internationalization of IKEA. Journal of International Business Studies, 42(9), pp. 1079-1102.
