In this study, we analyse urban planning processes in two medium-sized/small Swedish municipalities that both have set out clear ambitions to grow and develop in a sustainable way. The issue in focus, more specifically, is to see what happens when a strong developer shows interest in locating major retail development in the city, thus promising s a wave of commercial development and a strengthened regional role of the city concerned, but at the same time requiring acceptance of a retail model that is highly car-dependent and also by other means environmentally unsustainable. The company IKEA’s current growth strategy, involving a number of new IKEA stores and IKANO retail complexes in small and medium Swedish cities presents a critical case of this sustainable development dilemma. In this paper, we examine how the location of IKANO retail centres becomes decisive issues for urban development in two cities: Västerås and Borlänge. We explore how, through their strategies and actions, the municipalities accept, or seek to mediate, mitigate or transform, the development opportunity offered by IKEA. We identify and discuss key power-mechanisms and the way knowledge was being managed in the planning processes. Through our approach, we are able to reflect both on the current state of strategic planning in medium-sized/small Swedish municipalities, and on the role of IKEA, in their interests and capacities to bring about sustainability transitions.