International Marketing of Ikea Essay

card of ContentsTable of Contents11. Executive Summary12. Introduction13. Internationalization24. Foreign Market Segmentation and Targeting35. Environmental analysis55.1 SWOT Analysis65.2 Environmental Analysis of Host Country- mainland mainland mainland chinaw atomic number 1885.3 From the linear perspective of IKEA International Group106. International merchandising Objectives117. Foreign Market Entry St scoregy118. mathematical produce/Service Mix Preparation148.1 Product adaptation148.2 Product publicity158.3 Product equipment casualty158.4 New product schooling168.5 Market expansion168.6 Service Mix169. Conclusion17Appendices181. Executive SummaryThis root emphasizes on the analysis of the overseas expansion of the global stigmatise named IKEA, who has already built a competitive returns in the international piece of furniture competition. It has the largest quit of mart place shargon and got huge success in europium which leads it to dramatize to Asia and di fferent market of the human being. Analysis of both the purlieual aspects in china shows that chinaware is the outgo pastoral to invest in, although t present ar still some weaknesses and threats exists.2. IntroductionIKEA is the foundations largest furniture seller which founded in 1943. In 2009, the worlds leading marketing research organizations of Inter firebrandselected into Global speed of light Most Valuable Brands list, the IKEA ranked 28th for close to 12 billion U.S. dollars in brand value, which is al airs increasing. IKEA stores were founded in the nearly important shopping domains of 240 stores in Europe, the north America, Asia and Africa. IKEAs success in the retail industry can be attri stilled to its vast experience in the retail market, product differentiation, and be leadership. This report will analysis the international marketing strategy of IKEA as follows aspects internationalization, foreign market segmentation and targeting, intragroup and external line of products environment based PEST and SWOT analysis, international objectives, foreign marketing submit strategy and product/ servicing mix preparation.3. InternationalizationInternationalization appears when the comp each expands its R&D, production, selling and other business activities into globalization markets (Hollensen, 2004). IKEA group is the most internationalized retailing of furniture world total. Chairman Ingvar Kamprad readableed his first furniture in 1943. He spent almost ten long time on figure of speeching and growth the brands from accouterments order business to furniture business in Swedish. In 50s of last century, laboured domestic counterparts extrusion, IKEA was forced to go abroad to find suppliers of raw clobbers, but to find low approach instead. This is the IKEAs first globalization of production attempt. Since in 1953, the first abroad store was reached successfully in Danmark. Then IKEA rapidly expanded to the whole European re gion. With the success of global sourcing, In the out fronthand(predicate) 70s, the Swedish furniture market was stagnant, IKEA natur alone toldy turn their attention to the international market.Then IKEA group began a huge globalization of market from that meter. In the road of international expansion, IKEA Annual Report (2002) showed that Inter IKEA Systems B.V given franchises as part of a detailed international expansion scheme. IKEA implemented the brand integration strategy, in order to form the absolute control of the brand. IKEA is not content with merely control of even the worlds largest furniture products channel, IKEA group would hope that their own brands and its own proprietary products can eventu all in ally coating the world. IKEA pioneered the brand integration sensory systeml, which achieve the manufacturer brands and retail brands to fusion of commercial brandsperfectly.Based on this concept, IKEA has been insisted all products by their own personally desig ned and gull the patent, each year to a great(p)er extent(prenominal) than 100 designers worked in the day and night to ensure that all products, all of the patent in order to achieve all the products be marked Design and Quality, IKEA of Sweden targets. So for IKEA is implicated, it didnt get the so-called upstream manufacturers pressure, or any manufacturer could give it so-called distribution chain commission. In terms of IKEA is the worlds exactly success of the organization to put up both channel management and product management, its integrated brand strategy is the large key to the successful integration of industrial chain.4. Foreign Market Segmentation and Targeting archaean in this year, IKEA has opened many stores and market was precise mature in the Europe. Until 1985 IKEA decided to go far the North America market. Although it didnt achieve success like experience across the Europe in the stolon of in the the States, IKEA has adopted adaptive strategies acc ording to local actual situation. It got the finally success in the USA market. Forthwith it expended quickly in the Asia. IKEA has sixsome areas in the world until now, which is Europe, North America, Middle East, Asia Pacific and Caribbean. At present, IKEA is developing the Asia market and existed markets realize six countries. Three Asia countries are selected to penetrating and expanding by screening dish as follows. IKEA had furniture market and wanted to expand in Singapore and China, In addition, Korea is very skillful market for IKEA while not yet opened. Singapore is the create country, but come under the world financial crisis and slump in global trade impact, this exceptionally open delivery (exports of goods and services show over 200% of GDP) GDP fell by 9.5% from the first quarter of 2008 to the first quarter of 2009( attachment 1). semi head-to-head breathing in fell from 2008s levels, which declined by 0.5%. In order to deal with weakness in private consumpt ion, government expenditure accelerated to promote and enhance the publics consumption of 8.3% (Appendix 2). Korea is likewise well-developed country in Asia. Despite the world economic deep impact on Korea, Korea staged a fast(a) recovery in 2009. GDP grew by 0.2% in the year (Appendix 3). Weak private consumption rebounded in the beginning early 2009 (Appendix 4), which is the most obvious change in durable goods and services. Consumersentiment improved during the year. China, the economic rate and consumption rate are the spicyest over these Asia countries. GDP is forecast to grow by 9.6% in 2010. harvest-tide will be stronger in the first half of 2010.China economic situation is superb (Appendix 5).Private consumption growth is forecast to speed up to 12% in 2010, from 9.0% in 2009, responding to rising incomes and improving consumer authority (Appendix 6). Based on the above considerations, IKEA should consider expending Asia market. In my opinion, China is worth of invest ment. Because of large area and population, IKEA should open in all capital cities in China. From opened the first store in 1998, IKEA developed shadowyly in China. According to the IKEA Web site, Chinas market identity is the largest supplier as a worth of 15 billion U.S. dollars market every year, not is the biggest sales market. Currently, IKEA has 350 suppliers in China, 21% of the worlds goods from China. Because of Chinese consumer awareness of its own position with IKEA dislocation, this is precisely an important factor of the slow expansion of IKEA in China. With the rise of local home office chains, as well as foreign opponents attack, to manage the position in the Chinese domestic market, IKEA must expand. Publicly available data, now IKEA hold home products market in China account for 43% of the share. To sum up, IKEAs expansion and development is infallible and very beneficial in China.5. Environmental AnalysisIKEA International Group, a furniture group aims to set up customers with variety of good-looking& inexpensive home products worldwide, is said to be an miracle of business in the last century. flat it has over 200 retail stores in over 30 countries. It needs considerable of analysis before entering foreign markets. 5.1 SWOT AnalysisStrengths of IKEA Well bangn in China. Chinese consumers k bleak IKEA as a big brand before it entered China market, so this helps IKEA to enter Chinese market to a greater extent smoothly. highly reputation. As IKEA is a globally brand, Chinese customers regard it more reliable than other furniture companies. inactive relationship. IKEA could get materials at a reasonable price due to the stable relationships that between IKEA and its suppliers. Plate packing.By using plate packing, IKEA could knock down cost from transportation and storage. Environmental protective and healthy material for customers. What material IKEA choose are both environmental protective and healthy, which enable customers use IKEA products without trepidation. Weaknesses of IKEA Much reliant on Europe Market. 82% IKEA stores set in this region so IKEA will have difficulties to face the Asia market. (Ikea get together Kingdom (2005) www.ikea.co.uk Accessed 23rd Nov 2005) Unreasonable rout design. When shopping in IKEA you have to walk along the unaccompanied aisle IKEA set and will get no way to go backward. Whats more, you still have to go along the aisle till the item you want although you have decided what to sully. This may cost customers lots time on it. Inflexible promotion. Due to the low price, there is no more room for IKEA to provide with promotions on products. High price for Chinese consumers. Although products price in Chinese market are almost lowest in the world, many Chinese consumers still can not afford them. IKEA should price the products based on the Chinese actual situation in order to get profit. Distribution problems. In China, popularization of cars is not high like IKEA oth er market, so it will take several long time for customers to wait for the distribution from IKEA and also they will be charged a high amount of distribution fee for it. Opportunities of IKEA Variety in goods categories. There are about 9,500 householdhold items in IKEA, which is far more than other furniture companies. Customers will have more chance to choose from when shopping at IKEA. fountain IKEA. What IKEA advocated is that to live a green purport so this can be a good steer which attracts customers. Threats of IKEA Professional center fields. Some big professional malls such as professional bathe mall, professional kitchen mall maybe one big threat, customers may prefer the professional mall when they just buy bathroom or kitchen products. Other brands. There are many household brands in Chinese market now, such as B&Q, Macalline, etc. Some of them are local brands so they know Chinese market better than IKEA. Change of customers needs. Customers needs willnot be the same all year long, IKEA have to research frequently and find out what is profitable in order to launch profits.5.2 Environmental Analysis of Host Country- ChinaPolitical systemChina is a socialist country powered by the Communist Party and a new Peoples Republic of China was established in 1949. In 1978, China initiated the reform and open policy which emancipated the mind of Chinese people and make them become innovated in the future. The year when IKEA has first entered Chinese market was 1998 and it was just the 20th anniversary since Chinese reform and open policy in 1978. As a developing socialist country, China is sportsmanlike to most people and groups in rest of the world and it is really of great potential because it was more and more independent as China is developing day by day, many international groups have agnise how potential the China market would be and then started to locate there branch companies in China at that time. As a developing country, China will a lways persist in victorious the positive attitude towards all the advantageous investments from abroad. In the incoming year 2001 China accessed to the World parcel out Organization successfully, which makes China a more open country and market. Economical environment in ChinaThere are 8 cities (in 6 provinces) (one of the eight is opening currently) in China where IKEA Group located its retail stores. Beijing, Shanghai, Liaoning, Jiangsu, Guangdong, Sichuan, etc. The forms below are showing the contrast of economical phenomenon between these locations and the rest. From the appendix 7 we can see the national average of disposable income in 2008 is about 15000yuan per capita, while the disposable income per capita in the six locations are mostly far more than the average figure. This means IKEA positioned itself in a more economic developing area while its target customers have high total income and disposable income. Appendix 8 is part of the household consumption expenditure by region in 2008.It is conduct that the six IKEA retail locations are all at the higher level of the consumption of expenditure than other areas. The high consumption expenditure in these six locations shows more buying potential to products. Appendix 9 is part of the total investment in fixed assets in the whole country by status of adaption and region in 2008.Most of the foreign investment in six provinces (Beijing and Shanghai are direct-controlled municipalities) are higher than other areas where IKEA didnt locate its retail stores at. This illustrates that the more the foreign investment an area has the more open the area will be, the more easily the people accept the foreign products and ideas. Social environmentDemographics people and DensityChina has the largest amount of population in the world. In other world, it is the biggest potential market in the world. The eight cities where IKEA located his stores in all have large amount of population, ee particular(a)ly Shangha i& Jiangsu& Guangdong because they are all along the coast in China. Places along the coast in China always have high density of population for there are more chances to get money and good development for individual at those places. Population stands for the purchasing power while more population means more potential purchasing power. Living standardsYouth in China are more open object than before, they will after whatever they like from abroad. As the development of economic and the quickening pace of life some so-called white collars in China dont have much time and money to buy some luxurious furniture and IKEA is a good survival of the fittest for them because what IKEA initiates is simple, durable and affordable furniture. In China, it is a fashion action to buy furniture from IKEA. 5.3 From the perspective of IKEA International Group IKEA located its Chinese headquarter in Beijing at the beginning when it came to China but in 2003 the headquarters move to Shanghai because IKEA regards Shanghai a central city of China for it has the convenient sea transportation as well as the air transports which are advantages for IKEA, an international group couldnt live without transport. IKEA relocated its Asiatic headquarter from Singapore to Shanghai which shows the great appreciation to large potential market in China. 6. International Marketing ObjectivesAccording to the previous analysis, the advantages and disadvantages for IKEA to develop in China are clear. Now IKEA have to make its marketing objectives in China market according to the analysis above. IKEA has high reputation among Chinese youth member of mouth can be a good way of advertisement so its targeting audience should be young person. In this case, lower the cost of operating a retail store is what should do next. The products in IKEA China are good but the delivery fee is terribly high. This will reduce the trueness of customers. There are eight (one of the eight is opening soon) IKEA r etail stores in China till 2010, as the World Exposition is coming, economic in Shanghai is going to greatly boom, so hope to open 1or 2 more stores outside the central Shanghai next year would be better. As the previous analysis we can see there are still some cities have the potential to run for a IKEA retail store so IKEA could take a few cities into account such as Hangzhou, Tianjin, etc.7. Foreign Market Entry StrategyHaving done all the analysis about chinas market penetration, we are now facing the decision of which foreign market initiation mode to use. Several factors need to be given full scrutiny before we choose from the grouping of entry modes. Internal factors are the deciding roles here in the strategy which should be considered with priority. They are mainly concerned with the firm itself. Ownership advantagesIt can be unders overlyd as asset-based advantages which include the firms mental imagery ability, reputation, origin of country, potential of future growth and so on. Apparently, Ikea Group has both the tangible and intangible resources to enter Chinese market, even the brand name itself is a huge selling point. What the brand stands for are fictive design, durability and functionality, and all of the three are not quite transferable, thus the transaction cost here is high, so we recommend joystick venture as its entry mode further into Chinese market. situationHow the furniture be shipped from A to B onto the shelf for display is important, since it has much to do with the cost of the business. Since Ikea has entered into china, most of the furniture is imported from Sweden.Undoubtedly, this approach increases cost dramatically. Cooperate with local partner can help Ikea build good relationship with local suppliers. Further more, furniture manufacturing industry shows the tendency of transfer the production facilities to developing countries which offers relatively low labor cost, huge consuming market and stable political and ec onomic environment (Capdevielle, Li & Nogal 2007) From this point of view, joint venture is a better choice which offer a great time and opportunity for Ikea boost its future plan of turning China into the supply center of in Asia. (Carpell 2006) Internationalization Experience & Global Strategy toward China According to Ikea website, up until August 2009, it had 267 stores and had trading service offices in 26 countries and 28 distribution centers and 11 customer distribution centers in 16 countries.(http//www.ikea.com/ms/en_GB/about_ikea/facts_and_figures/index.html). Ikea opened its first store in China in 1998, and in the past 12 years it had up to 7 stores in mainland China, most of which are joint ventures. Shenyang Store is coming soon, planed to open in the middle of the year. Ikea expects to have 10 large stores up and running in China by 2010. (The China business review, 7-8, 2004) It strongly proves that Ikea has confidence and ambition in China. However, it is easier sa id than done. To accomplish its expectationIkea still got two more stores to construct. It should speed up in this plan. Considering this background, Chinas market penetration can greatly reduce cost and risk. External factors should also be given careful consideration. They are basically having things to do with the overall target market environment. Social-cultural FactorWhen carry out the penetration plan, marketers should be cautious about Chinas specific features, such as the diverse cultures which is bred by the vast territory, various kinds of business practice, different consuming philosophies, and all of these are quite difficult for foreigners to grasp on. In entering into a new market, the region size, rate of market and potential purchase power shall be the determinant parameters, so a local helper is needed. Political/ Economic FactorBefore china entered WTO, government requires all foreign company to cooperate with local partner in order to help domestic go-ahead t o developtheir business and learn the advanced management skills 1. Although the regulation had already been ended, not many firms shifted from joint venture to wholly owned store. Although the trend for future stores is wholly owned mode, it is still too soon to risk all the Ikea stores switch to this mode. From all the above, we strongly recommend the next few stores to open in the east part of China use the entry mode of joint venture to further expand its market, and strengthen its place in China.8. Product/Service Mix PreparationProduct and service are the essential elements in the development of company, the product of IKEA is designed by the purpose of simplifying, and the service believes the rule of do-it-yourself. However, with the special culture, economy and life style in China, IKEA should take some necessary change on its product, strategy, brand and service. 8.1 Product adaptationFirst, it is the endurance and practicability of product need to strengthen. Though IKEA has its own requirement and running play on the flavor of product, according to the latest research (Li 2009), it seems just aim at some special product, such as bedroom furniture, chair. Meanwhile, the equipment of kitchen class and bookcase are not as good as them. Thus, IKEA should even off attention to their entire product, every product needs to be test by certain standard. Second, IKEA has too much product, which makes the table of contents be also long. As there is too much choice for customers, it makes them nervous on how to choose the most suitable one. That is to say, IKEA needs to condense the table of product and makes it clear and simple, the customer would find the product they want first. 8.2 Product publicityIKEA used a lot of advertising in Europe and the United States, but there are so few in China and these ones are simple and bored, it makes large number of people know little about its product. On the other hand, the product of IKEA use environmental protecti on of materials and advanced ones, but most customers do not know them, because IKEA has few actions to explain it in China, while it is doing enough publicity in Europe. Therefore, IKEA should put more nothing and time on advertising and publicity, such as television advertising, as there is a very large population watching TV.Moreover, itis useful to support some event, for example, Sichuan Earthquake. Also it is important to make them evoke and attractive, it would give the design concept of DIY to the customers. 8.3 Product priceIKEA is well known as good quality and cheap price because of its centralized purchasing and professional logistics, and it makes most people have ability to buy them. besides in China, the price is higher than others, this makes most customers just look them. So there are some useful ways help IKEA reduce the high price. First, it is necessary to build a new production base in China, as now the production base is in Malaysia, which provides the produ ct to the Asia. This way would avoid the import tariff, because the import tariff in China is a big one. Second, it also helps IKEA reduce the transport costs, whether transport by air or by ship, the cost is not a petty number. Third, there are many small finished factories in China, IKEA should take more material from them, not in overseas. What is more, IKEA should give them a certain size of order, this helps make the price lower for competition. 8.4 New product developmentAs it is known that there is a too lager population in China, it makes the house of China be smaller than other countries, it means that there are limited spacing for pose the furniture. Thus, a good idea for IKEA is to develop the new product that can be folded, it saves the space for customers, and this also makes the customers would buy more products due to it needs little space. 8.5 Market expansionIn 1998, IKEA came into the Chinese market first in Shanghai, from then to now, it has pasted twelve years, but the number of IKEA place in China is only 7, meanwhile, it has 240 ones in the world. From the data, you can know the speed of its development in China is so slow. It loses much choice. Hence, IKEA should build many new shopping places in the important cities, such as the southeast of China, because the cities in this area develop fast and the consumption capacity of customers is suitable for IKEA. 8.6 Service MixThe service in Europe is do-it-yourself, but the situation is not the same inChina, most people in China do not have cars, so customers need IKEA provide home delivery service, IKEA do it, but the charge of it is high. For example, a customer buys a small chair of 79 yuan, but the cost for delivering is 60 yuan, it is not worth for customers. Therefore, IKEA should reduce the rate of delivering charge, and it is effective to provide the installation for free, as almost all of the competitors support the free installation. Another strategy is using some staffs to introd uce and recommend the product for customers, because Chinese people is different from others, they like someone talking the information to them, sometimes they also accept the staffs endurance on the product.9. ConclusionTo sum up, IKEA has become a successful international company with a wide range of products, and its global experience and unique strategy has led it occupy the large market share. But there are also some problems blocking its development in other countries because of the different culture, economy and lifestyle. So it is time for IKEA to carry out the new strategy on balancing its brand, product, service and management in order to expand new market, and take more advantages in the competition.