Ikea in China

IKEA is a world famous furnishing company known for selling Scandinavian-style furniture and other home-based goods. The company has over 230 stores, with operations carried out in over 42 countries with well over 70 000 employees. The stores themselves can occupy 410 million shoppers per year. It is a Swedish based company built on the idea of offering a wide range of well-designed, functional home furnishing products such low prices, that a majority of people will be able to afford them. The IKEA group is currently solely owned by the INGKA Foundation through a holding company, unlisted on any stock exchange.

In this report I will be examining Ikea in the Chinese market. First I will carry out an analysis of the company using Porter 5 Forces and SWOT frameworks. After this I will highlight the key issues of IKEA in China, which I will discuss market entry of IKEA in China. Finally, I will discuss my recommendations for IKEA in the Chinese market. Appendix and references therein.

Product – In terms of product, the author will perform an analysis among the IKEA competitors and identify whether this product line is appropriate or not. Is this product line serves the customer expectations? In addition, the author will provide recommendations on the changes should be made in how the products are being handled where applicable and necessary.

Besides, IKEA also offers product diversification for new market segments such as specific furniture for office and traditional furniture for older richer people. Therefore, IKEA business model had a little adjustment when the company’s focus on selling not only furniture but a prosperous lifestyle to the customer with developed complementary services like restaurant, cafe, and supervised children play area. Hence, IKEA redefines its image as an ideal place for family hangout in the weekend without compromising their vision of always affordable price for their stylish design

IKEA is using a different operation strategy from their competitors. The operation of IKEA has to cope with large volume because their products are highly repeatability and specialised. The variety of products the operation needs to create is low to medium as they offer

Touch experience play an important role for the perception that respondents have towards IKEA. The most common and interesting phenomenon is that always see people sleeping on the bed, sitting on the sofa chatting with friends and hold the pillow. Our respondents said that they like this kind of experiential shopping which they could touch and experience everything in IKEA that make them feel good.

The marketing strategy also had its problems (CHU, Valerie). IKEA started opening stores in China in 1998, which was a fast growing economy back then. It led to a couple of problems. One of the main problems was that the prices, considered low in Europe, were far above average in China. Keeping IKEA’s global branding promise, that everyone should be able to buy its products, in mind, the high prices created confusion among the Chinese consumers. Therefore, IKEA had to change its strategy. It started targeting the young middle-class population. By presenting itself as an aspirational European brand, IKEA chose to target a particular group instead of the whole

IKEA is known as the biggest furniture company in all over the world. The specialization of IKEA is

Considering the previous mission statement with a unique customer vision IKEA is clearly antagonistic with specific customers’ needs. That lack of adjustment to customer needs is the main reason for not getting the same results in China than in Northern Europe.

Today IKEA is progressing towards being one of the top furniture retailers in the world. In 2002, they served 286 million customers through 154 stores resulting in $12 billion in revenue. Although IKEA has several stores placed around the world, they are not always thought of as the most popular furnishing store in America. All the stores are self-service and are based on a do-it-yourself shopping experience. There are few contacts with customer service representatives within the stores, except for when the customer enters the transaction phase of their buying experience.

Founded in 1943 by Ingvar Kamprad, IKEA is, over 60 years later, the world largest furniture retailer, providing products in a flat packing concept and at low prices. They have 226 stores in Europe, Asia, and America with revenues of $17.7 Billion as of August 2005. 70% of their marketing communication is based on their famous annual catalog. There are many environmental factors that affect IKEA’s global and domestic marketing decisions. An analysis of those factors, the influence of the global economic interdependency and the effect of trade practices and agreements, the demographic and physical infrastructure, the cultural differences, social responsibility and ethics versus legal obligations, the effect of political systems and the influence of international relations and the Foreign Corrupt Practices Act of 1977, and finally the effect of technology are discussed herein.

IKEA is the largest furniture chain in the world, and in 2011 the Swedish company operated over 270 stores in 25 countries. In 2011 IKEA sales soared to over $35 billion, or over 20% of the global furniture market. Most of its stuffs believed IKEA will massive growth throughout the world in the coming decade because IKEA could provide what customer wanted: good design, and good made contemporary furniture with an affordable price. In one word, IKEA’s global approach focuses on simplicity, attention to detail, cost consciousness, and responsiveness in every aspect of its operations and behavior. (Jones, 2013)

IKEA is a manufacturer of home and business furnishings who offer interior furnishing products to consumers in several countries across the globe. Before IKEA plans on expanding and entering any new market, they are required to obtain a clear understanding of what consumer behaviour and requirements are in that particular market. There are basically two types of Markets which include Consumer Market and Business Market.

At the outset, it may be useful to characterise IKEA in terms of the characteristics of demand (also known as the four Vs, see Slack et al. p 20). First, IKEA is clearly a high volume operation – as indeed most international retailers are – which lends to systematising operations but which implies capital intensive processes and therefore cost considerations will be crucial. Second, IKEA offers a large number of products (up to 14000 depending on the country/store) so there is high variety in the

IKEA’s strategy before the mishaps in America could be characterized as going against the norm charting their own path to success using low priced manufactures to secure lower selling prices aimed to target those who were of older age and of middle class standing. Their new strategy was to target those of a younger demographic, young married couples, college students, and 20-30 something singles. By reemphasizing design, promoting through hip quirky advertisements, and encouraging consumers to do away with their old furniture, IKEA revenues doubled in a four-year period. IKEA today has adapted somewhat of a local customization strategy where their store layouts will resemble that of many local household layouts as proven by their success in China where they failed to expand beforehand. They also keep their prices extremely low in some areas as China by sourcing a large percentage of products in the area of operation.