IKEA can either set up new operation in the country or can acquire an established firm in the host nation and use that firm to promote its promote its product as long as IKEA own 100 percent ownership of the stock. Habitat Retail Ltd. is a household furnishings retailer in the United Kingdom, Germany, France and Spain and in the year of 1992, IKEA acquired Habitat's UK and French chain with about pound 55m to expand their business (Moore. J, 1992). IKEA own all of their buildings and land, and stores are custom built and designed for efficiency and sales potential. In order to do that, IKEA do not cut back investment in retail stores. (Deniz, Marco & Art, 2012) The main purpose of the IKEA use this expansion strategies is to ensure operational control, standardization, and provide a smooth entry into to a new market. The attractive way to use wholly owned subsidiaries is where IKEA can reduces the risk of losing control over their core competence and its concept. This expansion strategies give IKEA have the full control over operation practices such as marketing, logistics and decision in different countries to meet their standard. In addition, all the profits will go to IKEA due to having full control on every operation. It is necessary for them engaging in global strategic coordination. Wholly owned subsidiaries also required IKEA to realize location and experience curve economies (Hill et. al., 2011). This which means, IKEA able to achieve economic of scale by manufacture more products and reduce the average cost of products (Hill et. al., 2011). Indirectly, this also fulfill the IKEA porter generic strategies which is cost leadership.
However, wholly owned subsidiary strategy is highly expensive choice for company that would lead to severe financial risk if not successful. IKEA have to bear the full costs and high risk by themselves of setting up the factories, stores and retail shops operations in other nations (Hill, et. al., 2011). Japan was the first country in Asia that IKEA considered to enter in 1970's during their expansion to the international market. Their first entry to Japan market was in 1974 (n.a, 2008). Due to the differences between culture, lifestyle and behavior lead to IKEA face the failure and they had to withdraw their store out of Japan. However, IKEA decided to re-enter the market in 2002. This time IKEA conducted a thorough study of the markets and understand their requirement (Alexandra, 2009). At present, there are five IKEA stores in Japan, last of which was opened in year 2011(Inter IKEA Group, n.d.). Besides that, there are political risks of entering in to the market wholly in the form of nationalisation threats or corruption and bribery (Back et. al., 2010). Recently in year 2009, there have been issues about corruption in the opening of retail store in Russia (n.a., 2011). It has been held by safely officials' requests for payments and IK
