Entry of IKEA and small and medium firms' response

Using novel and primary data on local SMEs belonging to the Portuguese furniture production cluster this study addresses the changing nature of competition and local firm’s strategic response to IKEA’s entry and its impact on their performance.

The study focuses on clusters, firm strategy and multinational corporations (MNCs) by assessing (i) how local firms, predominantly SMEs, respond to the MNC entry, (ii) which factors explain their strategic response, and (iii) the impact of strategic responses on their performance.

The findings suggest that firms facing an important environmental change – IKEA’s entry into their cluster – respond in diverse ways and find alternative pathways to engender performance gains and structural changes into the cluster. Local firms’ – small producers offering customized products with more added value, using different raw materials and providing delivery and assembly services – response to IKEA’s entry mainly by searching for a distinct positioning based on a differentiation-focus strategy, whereby specializing in distinct products, value added services and positioning themselves in more restricted markets.

IKEA’s entry seems to stimulate upgrading capabilities and boost the sophistication of local firms’ production, moving them into more complex products.

Click here to go to the paper by Vasco Eiriz and Natália Barbosa.