Based on your analysis, what are the opportunities and challenges for IKEA in their market operations in (a) China; and (b) Japan?
2. In reference to Topic 6, discuss the market entry strategies that IKEA adopt in China and Japan respectively.
3. In reference to Topic 4 & 5, what are IKEA product, pricing, marketing communication and distribution decisions in the two Asian markets? To
what extent these marketing mixes have been adapted to the preferences and needs of these markets?
4. For each of these markets, plan, discuss and justify what, in your opinion, IKEA’s marketing strategy should be in the near future to gain
market shares and achieve higher profitability.
The case study introduces the IKEA Company. This particular case study emphasises on how the company has made a success on their business (Alex Schmidt, 2012). It also shows the ways and steps business expansion of IKEA Company in all over the world including Europe and Asia. Despite of increasing market growth this company somehow still cannot make a proper market expansion in China and Japan (Brennan and Brennan, 2012). The prime focus of this case study is to analyse the various opportunity and challenges that this company is facing towards making growth in the market of China and Japan. Implementation of some pricing strategies to cop up with the market of China and Japan are also shown in this study.
IKEA is a famous private type of multination retail industry. Name of the founder of this company is Ingvar Kamprad. It was founded in Almhult, Sweden in 1943. Later this company expanded its business in all over the world including Europe, Asia, North America, Oceania, and Africa. The headquarter of IKEA Company is situated in Leiden, Netherlands. Name of the CEO and chairman of this is Peter Agnefjall. The products of this company are various homes furnishing furniture. It has revenue of over €29.293 billion according to the survey of 2014 (China teaches IKEA limits of homogeneity, 2012).
The IKEA Company first opened its stores in china in Beijing in the year 1998 (Combe et al., 2012). The expansion plan of this company has underscored the value of its confidence in China considering very loss making stores. Therefore the company is now applying various distinct culture and strategy to cop up with the China market.
The various opportunities that can be found to expand the market of IKEA in China are described below-
Changing infrastructure of the stores- The IKEA stores in China look similar to the stores in Europe with blue and yellow printed logo hang up outside of the building. The customers of China are very much attracted towards such infrastructure.
Easy system in buying procedure- people of China is very simple. They do not want complexity in anything (Editorial Board, 2012). For this the IKEA has initiated a very simple process in its product buying procedure, where people can go to the store to see the products. After that they can make a choice of the product. If they choice any product they can take a note of the product and can search that product in the warehouse for buying it.
Differentiation in the quality of the product- IKEA has made its product as an international brand which provides elegant and modern design in its furniture. This company provides a complete solution in home furnishing products. For this the consumers in China need not go for any other company for other products of furniture. This company also sells various kinds of cooking appliance, lighting, and bedding. IKEA is the only store in China that provides such a complete solution for home furnishing (Goretsky, 2012).
Pricing strategy- The financial condition of China is weak. So the customers of China are not tending to buy expensive products. For this IKEA has initiated a low price strategy so that all type of customers including rich and poor would be able to afford the products of it.
Promotional program- IKEA has produced a number of products for celebrating the New Year, which is a great festival for Chinese. This company has made a lot of effort to adapt it product according to customer preferences and demand.
The challenges faced by IKEA are described below-
Culture of China- The culture of China seems more challenging for IKEA. The consumers of China are not tending to buy high priced product of this company. Unlike Sweden who believes in not sharing the bed with anybody because of disturbance in peaceful sleep; Chinese believes that it is a bad symbol of relationship. So the Chinese do not tend to buy the single bed if IKEA (Heaven, 2012).
The local Competitors- There is many companies in china who provides same products. These competitors are using same technology as IKEA to produce product. By using the same technology, same procedure the competitors of IKEA are now able to meet the customer needs.
Lowering prices- Lowering the product price is not helpful for IKEA. Local stores of China make their products by using the materials which are not original. So normally the price of the product of local brand is very low. Customers of china tend to go for these local companies who provide the same product in a lower price.
The foreign competitors- Those who are rich in China go for the foreign company who provide expensive product with high quality.
Distribution system of China- China has a large population of 1.3 billion and an inadequate basic road infrastructure. For this the company can access a very small part of consumer in a most affluent city (Henningsen, 2012). Distribution system of China is underdeveloped. Most of the IKEA’s stores are situated in city. Transporting thousands of products to these city stores increases the cost of distribution apart from retailing cost due to congestion in road and logistic compliance.
High priced products- The consumers of China do not like the high quality product of IKEA without any personal services.
IKEA first entered into Japanese market in 1974 with a Japanese trading company. Later they had to stop their business in Japan. After 5 years they re-entered in market after analysing the mind of Japanese.
Opportunities of IKEA in Japan
Young customer as target- The IKEA has targeted the young customers. The young customers are more tend to adopt new design in their home furnishing product.
Product design- The Japanese like the IKEA’s well designed products which are light coloured.
Understanding the customers- The IKEA has understood the Japanese customer’s preference and their living requirement. Based on this it has categorized the customers. It helps the company to provide customized solutions. Gradually the customers of Japan start to appreciate its differentiated products.
Culture of Japan- Culture of Japan seems to be most challenging for IKEA in expanding its business in Japan. They show a great apathy towards their home. So normally they do not want to decorate their home.
Further expansion- The expansion of IKEA in the market of Japan needs a large investment of money.
Staff attitude- The staff attitude of IKEA towards the consumers restricts the expansion of market in Japan.
Weather condition of Japan- The home furnished products of Japan should be made in such a way that it can protect them from earth quake. It is not always possible to make such product.
It is a big step of IKEA to enter into the Chinese market. IKEA has got a huge potential consumer group in China who are quite different from consumers of other countries.
Product strategy- The product of IKEA for China provides complete solution for home decoration (Hill and Jones, 2012). The consumers of China need not to go for other stores for any home product. This company also provides various home appliance and lighting and bedding products. The light coloured products of IKEA are very much attractive for Chinese. The product of this company provides customized solution to the customers. Differentiations in product are made to meet the customers’ needs. The focus of this company is to produce affordable product for the Chinese customers.
Chinese culture has taken into consideration by this company to know the behaviour as it was posing a problem due to the indulgence of large group of people. Female were mainly targeted by this company because this company believes that females are always ready for any change in activities as compared to men. A survey showed 65% of women who belong to the age group of 30 to 45 years have more knowledge regarding the home furnishing items and generally make decisions on behalf of the entire family members. Another strategy adopted by this company was to reduce the prices by maintaining the best quality so that the customers are interested in buying the products with satisfactory price structure.
IKEA has put more emphasis on the interior design which will help the Chinese people to decorate the house according to their expectations (Ivarsson and Alvstam, 2010). The people residing in china have small apartments which they need to decorate in the more traditional manner and this company actually helps them to provide solutions by decorating the balcony which is very common in every house of Chinese people. These people use small beds which are approximately 190cm as compared to other country who uses 200 cm and this company helps with the smartest solutions to design this sort of requirements by this people residing at this particular group. Products are produced by IKEA keeping in view of the essence related to the traditional as well as cultural edge which helps in smooth functioning of the business enterprise.
IKEA has started its business operations first in Japan in the year 1974 which were actually a joint venture with a Japanese company with the aim to expand in the global market but unfortunately it failed in the year 1986 because it lost its presence at that point of time. After the failure which was recognized by them, the company made efforts to re enter the Japanese market b understanding the requirements of the Japanese households which will help the company to have a better edge over other competitors (Johansson and Thelander, 2012).
After the detailed investigation, it was found that the people residing in Japan sally lives in small spaces, this is the reason why they thought of bringing the products that can be adjustable in small spaces like small sofa sets, storage boxes etc. Various promotional measures were adopted by this company so that it is helpful to meet the needs as well as expectations of the customer as far as possible. The company made effort to provide convenient locations which will help them to access any time wherever they need the assistance.
Japan is a country who believes in traditional essence so this company believes in providing the products which has a traditional edge and can be adjustable in small spaces which are found as the requirement of the people residing in Japan (Lasserre, 2012). Females are mainly targeted because they are the decision maker and have a better knowledge regarding the interior design as compared to men so the company make effort to satisfy the needs as per their expectations which will definitely help it e smooth functioning of the business enterprise. As the company has re-entered the market so special effort has to be made by the company to meet the needs and expectations of the customers as far as possible. Japanese are mostly more traditional by nature so the interior design are mostly made by this company which has some edge over this criteria which is essential for the customers. The failure of the company basically in this Japanese market was due to lack of understanding the real side of Japanese people so their needs and expectations were not met completely which poses a threat for this company to exist in the market scenario. Mostly all Japanese houses are small and they have balconies so this company made effort to make small cosy sofa as well as small decorative items which can be easily kept in the balcony which actually satisfied the customers to a great extent.
IKEA is a strong brand that is associated with innovative design of different types of furniture in both China and Japan. The main product of IKEA is furniture; therefore wood products are the most important non labour input of the company (Lynch, 2012). Currently, IKEA is considered to be the third largest seller of woods products. It provides modern furniture with the design of western style and the design is elegant. It is reinforced by its innovative products for their mass market. IKEA provides home furniture to decorate home, it is selling furniture that is well designed such as cooking appliances, bedding as well as lightning products, bathroom fitments, book cabinets, kitchen fittings etc (MacLean and MacIntosh, 2012). It provides wide range of products to the customers for their living requirements. It understands the need of the customers and its target prospects to provide variety of products so that the customers are highly attached upon its name and brand.
In China the pricing strategy of IKEA is low to make their products more affordable to the customers. In China, its price is decreased by 12% in the year 2002 to attract more customers towards their business. In present, they launched a new strategy, it describes that the price of the products are decreased by 20% for the home furnishings products (Mamula, 2012). This low pricing strategy make an effect to attract the customers more towards them and it also helps to expand their market share. It helps to differentiate their brand form their competitors.
In Japan, the prices of the products are not market based, it is cost based. The cost based price market has risk because where the costs of the products are high; the company should be priced out of the market. But still the price of the furniture is lower than the customers have expected. Therefore, the chosen pricing strategy of IKEA give an opportunity to differentiate the actual costs as well as it becomes advantageous on Japanese market.
IKEA is a strong brand that is associated with innovative design of different types of furniture in both China and Japan. The main product of IKEA is furniture; therefore wood products are the most important non labour input of the company. Currently, IKEA is considered to be the third largest seller of woods products. It provides modern furniture with the design of western style and the design is elegant (Meadows and Dibb, 2012). It is reinforced by its innovative products for their mass market. IKEA provides home furniture to decorate home, it is selling furniture that is well designed such as cooking appliances, bedding as well as lightning products, bathroom fitments, book cabinets, kitchen fittings etc. It provides wide range of products to the customers for their living requirements. It understands the need of the customers and its target prospects to provide variety of products so that the customers are highly attached upon its name and brand (Mooradian, Matzler and Ring, 2012).
In China the pricing strategy of IKEA is low to make their products more affordable to the customers. In China, its price is decreased by 12% in the year 2002 to attract more customers towards their business (Nolan, 2012). In present, they launched a new strategy, it describes that the price of the products are decreased by 20% for the home furnishings products. This low pricing strategy make an effect to attract the customers more towards them and it also helps to expand their market share. It helps to differentiate their brand form their competitors.
In Japan, the prices of the products are not market based, it is cost based. The cost based price market has risk because where the costs of the products are high; the company should be priced out of the market. But still the price of the furniture is lower than the customers have expected. Therefore, the chosen pricing strategy of IKEA give an opportunity to differentiate the actual costs as well as it becomes advantageous on Japanese market.
In China, the communication with the customers is a big difference compare with rest of the world. The catalogue of the product is distributed in the store and in other markets to aware the Chinese people about their home furnishing furniture (Nolan, 2012). Then IKEA starts a Television show where they offered different advertisements regarding home decorating. The message in the advertisement is that life may be made better as well as easier with very small means.
In Japan, the showroom of IKEA is part of their promotion strategy that attracts the customers by presenting their products in real life housing conditions. As the living of public in different in other countries therefore the adaptation is sparingly vital. Japanese home are small in size, therefore IKEA opened 70 mini showrooms on their store, that are small in size, same size as the typical room of the Japanese to convince the understanding of their small scale living.
China is growing rapidly but as comparison to their growth IKEA is unable to expand their business. But after that they expand their business in China (Norton, Mochon and Ariely, 2012). They open large showrooms and customers can come and see the products. Customers can also go to website and choose the products, because IKEA starts online selling to buy products easily.
In Japan, the distribution strategy of IKEA is quite different. Normally any business company buy a land and build their store on it, but IKEA uses large stores contain may showrooms to present the products to their customers (Peñaloza, Toulouse and Visconti, 2012). When IKEA first enters into the Japanese market, it is just a mass retailer. They open a small store as because Japanese consumers prefer small stores to buy products. After knowing about the market knowledge of the Japanese they come to know that size of the store matters in selling furniture. Therefore at the second time when IKEA enters into Japan, they launched a mega store with car parking areas and child care area.
IKEA has a unique strategy to work in the same way in every countries of the world. It keeps the price of the products low that is attractive to the customers. The base of IKEA’s marketing strategy is merchandise that means the range of the product as well as the price. Price of the products is low in comparison to the customer’s finding in other stores. They aim to deliver high value at a low price (Petit, 2012). The location of IKEA stores is accessed by car that is the mode of transportation for the customers. The environment of selling their product is also same that is the same colour, design, store layout, same level of service. The advertising and promotion strategy of IKEA is carried out by catalogue. In the catalogue, models are used in the pictures to differ their products from others (Li, 2010). IKEA promotes their products by direct selling, sales promotion and advertising. These are the marketing m ix strategies of IKEA to spread their business worldwide. IKEA is being recognized as a universally brand for its home furnishing furniture, designing of the products and for its low price as well as good quality. The price is low therefore people can afford to buy it. Therefore, in short IKEA’s marketing strategy has been summarized as those products are standardized. Thus, by combining their different strategies like low price as well as searching niches, the company successes in the market.
In the Asian countries, IKEA faces competitive challenge due to weak control of the government on its intellectual property (Pitt and Koufopoulos, 2012). From social point of view, its business gets an opportunity to fight against their market share. However, the issue of population aging as well as the policy of one child should be considered as the company targets the middle class people to compete in the market. Its population ageing as well as policy of one child should result on its future business growth. The political as well as economic factors are the vital elements for IKEA that should be considered to enter into a new market. All the Asian countries including China and Japan have to develop its technology. The lack of core technology increases the cost of the company by buying the license for technology (Raimbault and Barr, 2012). The improvement in research as well as manufacturing industry should expand its business, and can also increase its profitability.
The most important thing is to change the process of serving to the customers. Thus, the operational cost is to be lowered; therefore the volume is increased that allows lowering the cost of goods. To increase the volume, it requires handling the people as well as service better (Roberts, 2012). They need to improve their customer care area due to lack of its policy to lower the cost. Therefore, the organization should train its employees to be more efficient in selling the products. IKEA has a problem in the supply chain management as well as capacity management. Supply chain is developed to maintain the stocks of items which are the biggest challenge; therefore, it is better to prepare for its threat. Therefore, this area is needed to improve to progress in their business and IKEA gains market share as well as capital. IKEA is a retailer those designs their own products. To gain higher profitability in the business, IKEA involves the empowering of co-workers (Scharf, 2012). The company is not taking too many decisions, it would be better to make the decisions in stores or factories that are close to both customers as well as suppliers. Therefore, IKEA have to maintain a strong group of co-workers to take the right decisions to support the marketing strategies of the company.
IKEA has managed capitalise of its cost leadership and ensured that by using transnational strategy the company meets the local demand through differentiate their products. IKEA chooses to enter the market to maintain their brand images and to compel joint ventures as well as franchising. This strategic decisions help IKEA to compete in the market and earn some returns due to cost leadership in the market (Dess, 2012). As IKEA is expanding in Asia, therefore, to maintain the customer loyalty they should have to keep promoting their products and its marketing strategies. IKEA needs a technology that will forecast their level of accuracy depending on its past as well as future marketing environment. It helps to improve the function of the company and it will increase the profitability of its business. Innovation is needed to add value for developing the organization. It has a unique development strategy (Harapiak, 2013). They are introducing new technologies to maintain consumers and suppliers relationship. They are focusing on technological growth by provision of online products as well as supply chain management that contributed to the growth of IKEA’s business. . The current marketing strategy of IKEA is effective in expanding their economy. The business objective of IKEA is its low price strategy and to sale more products through advertising (Nada, Raizel, David, Yvette & Melissa, 2014). It needs to cash into its recession and increase its sales by lowering the price and checking the quality of its products.
The niche market of IKEA does not work in any country. The lower price of the products leads doubt in the mind of the customers that the quality of the products is not good. It has limited capability to manufacture due to its own global sourcing strategy. Its global economy recession will reduce the buying power of the consumers. The customer loyally is the key success factor to compete in the market environment that adds value to the future of the business.
IKEA should set a target to double the revenue, and China will be the important contribution in it, within the supply as well as retail sides. As IKEA grows faster in China than any other Asian counties thus the market revenue will grow double by 2020. Therefore, IKEA should try their best to change into supply product sale from supply base.
Conclusion
In the case study, it is being concluded that IKEA cooperates with the customers and they try their best to give the best services to the customers. They promised to give products at low price and well-designed furniture. As IKEA is a famous international company, thus it gives a new lifestyle to their customers by its good quality products and services. It gets success in the market of China as well as Japan. They can get cost leadership when IKEA gets more cooperative with the local suppliers. IKEA has a great future; it needs to take some aggressive role in the marketplace as because its sales are stagnant and prices are on its rise. Its business plan does not match with any other organization, it does a unique business. The company needs to change its technology, they have to be more web based that would reduce the cost of its transportation as well as logistics. The current marketing strategy of IKEA is effective in expanding their economy. The business objective of IKEA is its low price strategy and to sale more products through advertising. It needs to cash into its recession and increase its sales by lowering the price and checking the quality of its products.
The strategic decisions help the company to compete in the market and earn some returns due to cost leadership. As IKEA is expanding in Asia therefore to maintain the customer loyalty they should have to keep promoting their products and its marketing strategies. Innovation is needed to add value for developing the organization.
Reference list
Alex Schmidt, (2012). Ikea-fying Los Angeles: Financing the familiar. Boom: A Journal of California, 2(2), pp.105-107.
Brennan, R. and Brennan, R. (2008). Contemporary strategic marketing. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan.
China teaches IKEA limits of homogeneity. (2009). Strategic Direction, 25(11), pp.43-45.
Combe, I., Rudd, J., Leeflang, P. and Greenley, G. (2012). Antecedents to strategic flexibility.European Journal of Marketing, 46(10), pp.1320-1339.
Editorial Board. (2012). Technology Analysis & Strategic Management, 24(10), p.ebi-ebi.
Goretsky, M. (1983). Frameworks of strategic marketing information needs. Industrial Marketing Management, 12(1), pp.7-11.
Heaven, D. (2012). Robot learns using IKEA-style instructions. New Scientist, 216(2886), p.24.
Henningsen, B. (2012). Jennie Mazur: Die ,schwedische‘ Lösung. Eine kultursemiotisch orientierte Untersuchung der audiovisuellen Werbespots von IKEA in Deutschland. Studia Neophilologica, 84(2), pp.230-233.
Hill, C. and Jones, G. (2012). Strategic management essentials. [Mason, Ohio]: South-Western.
Ivarsson, I. and Alvstam, C. (2010). Upgrading in global value-chains: a case study of technology-learning among IKEA-suppliers in China and Southeast Asia. Journal of Economic Geography, 11(4), pp.731-752.
Johansson, U. and Thelander, Å. (2009). A standardised approach to the world? IKEA in China.International Journal of Quality and Service Sciences, 1(2), pp.199-219.
Lasserre, P. (2012). Global strategic management. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan.
Lynch, R. (2012). Strategic management. Harlow, England: Pearson.
MacLean, D. and MacIntosh, R. (2012). Strategic change as creative action. International Journal of Strategic Change Management, 4(1), p.80.
Mamula, T. (2012). Role of marketing metrics in strategic brand management. Marketing, 43(1), pp.49-61.
Meadows, M. and Dibb, S. (2012). Progress in customer relationship management adoption: a cross-sector study. Journal of Strategic Marketing, 20(4), pp.323-344.
Mooradian, T., Matzler, K. and Ring, L. (2012). Strategic marketing. Boston, MA: Pearson Prentice Hall.
Nolan, S. (2012). Change management. Strategic HR Review, 11(5).
Nolan, S. (2012). Knowledge management. Strategic HR Review, 11(6).
Norton, M., Mochon, D. and Ariely, D. (2012). The IKEA effect: When labor leads to love. Journal of Consumer Psychology, 22(3), pp.453-460.
Peñaloza, L., Toulouse, N. and Visconti, L. (2012). Marketing management. Abingdon, Oxon: Routledge.
Petit, Y. (2012). Advancing project and portfolio management research: applying strategic management theories. Strategic Direction, 28(9).
Pitt, M. and Koufopoulos, D. (2012). Essentials of strategic management. London: SAGE.
Raimbault, C. and Barr, A. (2012). Emerging risks. Farnham, Surrey: Gower.
Roberts, T. (2012). From ‘new materialism’ to ‘machinic assemblage’: agency and affect in IKEA.Environ. Plann. A, 44(10), pp.2512-2529.
Scharf, E. (2012). Value Proposition and Human Capital: strategic marketing practices. Review of Business Management, pp.216-233.
Schirone, D. and Torkan, G. (2012). Food in IKEA: A Strategy to Support the Core Business. BMR, 1(4).
Theodosiou, M., Kehagias, J. and Katsikea, E. (2012). Strategic orientations, marketing capabilities and firm performance: An empirical investigation in the context of frontline managers in service organizations. Industrial Marketing Management, 41(7), pp.1058-1070.
Tsiotsou, R. and Goldsmith, R. (2012). Strategic marketing in tourism services. Bingley: Emerald.
Vecchiato, R. (2012). Strategic foresight: matching environmental uncertainty. Technology Analysis & Strategic Management, 24(8), pp.783-796.
Volo, S. (2012). Strategic Management in Tourism. Tourism Management, 33(4), pp.1000-1001.
Wilson, T. (1986). Strategic industrial marketing. Industrial Marketing Management, 15(3), p.253.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download