IKEA: expanding through franchising to the South American market

Essay by BellphawineeUniversity, Master'sB, November 2014

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IKEA: expanding through franchising to the South American market?

It is the beginning of 2011, and Ingvar kamprad, founder of the Swedish furniture retailing giant IkEA, is concerned 'his' firm may be growing too quickly. he used to be in favour of rapid expansion, but he has now started to worry that the firm may be forced to close stores in the event of a sustained economic downturn. on the other hand, IkEA is active in nearly all the world's con- tinents, though to a lesser degree in South America. kamprad wonders if this continent, and in particular Brazil, could be a future growth market for IkEA.

Although IkEA is one of Sweden's best-

known exports, it has not, in a strict legal

sense, been Swedish since the early 1980s.

the store made its name by supplying Scandinavian designs at Asian prices. It managed its international expansion without stumbling.

Indeed, its brand - which stands for clean, green and attractive design and value for money - is as potent today as it has been at any time in more than 60 years in business.

the parent of all IkEA companies - the operator of 253 of the 287 worldwide IkEA stores - is Ingka holding, a private Dutch-registered company. Ingka (taken from the first few letters of kamprad's name) belongs entirely to the Stichting Ingka foundation. this is a Dutch-registered, tax-exempt, non-profit-making legal entity, which was given kamprad's shares in 1982. Stichtingen, or foundations, are the most common form of not-for-profit organization in the netherlands; tens of thousands of them are registered.

Most Dutch stichtingen are tiny, but if Stichting Ingka foundation were listed it would be one of the netherlands' ten largest companies by market value. Its main asset is the Ingka holding group, which...