Solution
Robert answered on
Dec 25 2021
2. Market entry strategies that IKEA adopt in China and Japan respectively
China
In 1998, IKEA opened its first furniture store in Beijing, China. The company core target customers
are the middle class young people which are around 30 years old. IKEA realized that different
strategy need to be use while entry a new market. Lee et al (1998) states that China has numerous
differences in culture, political, economic and business models compare to Sweden. Among the
challenges, Trompenaars et al. (2004) illustrates that as a new business entry, language is one of the
main ba
iers for IKEA enter China market. To win Chinese customers heart, IKEA has the Chinese
translation named of “Yi Jia” which means comfortable and family.
Globalization is the cu
ent trend for most of the companies nowadays. However, Brooks et al.
(2004, P.233) illustrates that there is certain level of risk to invest in foreign country. To gain market
share in new entry countries especially Asia, IKEA corporate and business strategies determine its
sustainability and competitive advantage among competitors in future.
First of all, IKEA decided to joint venture with local companies in China due to one of the macro-
environmental element which was China government policy. Capdevielle et al (2007) elucidates that
China practice joint venture policy to gain mutual benefits and principal of equality for their nation.
Dealing with entirely different culture, IKEA adapted passed experience in globalization to analyze
China market. Joint venture strategies add value to IKEA by sharing risk of losses. Bragssington et al.
(2003, p.106) points out that full analysis should be conduct in order to informed the expansion
decision to contribute the success in investment.
To continually growth IKEA business after joint venture, the firm adapted localization strategy to suit
local Chinese culture. For example, the independent (2005) illustrates that IKEA localization strategy
consists of offer wide range of Chinese market products that tailor customers preference as well as
the design of showroom is constructed accordance to Chinese style. Despite of it, IKEA also focus on
Chinese sub-culture to lure the local customers. Copeland et al. (1986) states that Chinese
preference on decoration in red color during Chinese New Year which means good luck and fortune.
Recent years, one of the most exclusively IKEA localization effort was during Chinese New Year. In
2006 Chinese New Year, many IKEA products designed with red rooster to welcome the Chinese year
of rooster.
Japan
In the beginning of the 21st century, Japan has started to become more and more attractive
emerging market for foreign investments. The Japanese government has succeeded to keep the
inflation rate low, the economy was recovered and there was a high increase in plant and equipment
investments. The service sector of Japan was growing as well and all of these factors have led Japan
to become the world's second largest economic and technologically advanced power after U.S.A.
(Encyclopedia of the Nations)� Due to the growing economy the Japanese furnishing sector has
expanded and became a focus of many local and foreign companies. One of the reasons why IKEA
decided to enter in 2006 is the deregulation of Japanese Large Scale Retail Store Law which affected
the ability of foreign companies to invest in Japan.� (Japan External Trade Organization) Another
positive change which occu
ed concerning the furniture sector is the consumers' encouragement
and interest of seeking household products for self-designing their homes. (The Local Sweden's
News in English) All of the above mentioned factors are important for the IKEA consideration to
choose the Japanese market to enter. Since Japan is economically, politically and technologically
stable the cost and risk related to operating a business there are relatively low.
IKEA chose Japan because of its stable economy and consumer's interest in Western furniture. In
2006, the Swedish furniture retailer entered Japan with a directly owned mega store located in
Tokyo. (Japan External Trade Organization) Owning their subsidiary, IKEA has a tight control over the
store's operation and receives the full profit of its sales in Japan. The scale of entry the second time
in Japan was a large one which resulted in a big advantage of the company over its competitors. Not
all firms have the resources to manage a production of a large scale since it is riskier and the
company needs to be familiar with the market. Therefore, by entering on a large scale and make
such a commitment on their strategy gives customers and distributors the impression that IKEA is a
famous and strong company which has a long run operations and ideas. This makes IKEA an
attractive and stable company which influences the competition on the market.
IKEA has successfully settled in Japan in its second try although the problems it needed to face and
deal with. One of the main difficulties the company had to cope with is the cultural distance which
has a major influence on the Japanese customers - their lifestyles, type of household products, and
their behavior in general. Although IKEA is a big furniture retailer with a serious experience of going
internationally, the company had to manage a problem related to the significant cost reducing
advantage in its operation; the self-assemble kit or "flat packs" was a downfall for IKEA since
Japanese people were not familiar with assembling furniture by themselves. (Wijers-Hasegawa,
2006) This problem has emerged from the cultural distance between the IKEA in the Japanese
market which leads the company to a failure. The company had to consider significant factors
egarding adaptation of the products they offer in Japan such as advertising, promoting, and
packaging. In order to deal with the mentioned challenges in the Japanese market IKEA considered
to make a market research in order to gather the required knowledge of understanding what
Japanese customers want and need.
3. Marketing mixes in China and Japan
When entering a new market, a company should choose how to approach it and to which degree it
must adapt their strategy to the local conditions.55 In general, Ikea uses a rather standardized
approach to the foreign markets. Having a unique concept, doing things the other way around than
the traditional furnishing business and benefiting from Scandinavian style, Ikea stood for something
different from the local, domestic competition on the foreign markets. Having three distinct features
– function, quality, and low price – the company basically copied the developed concept
worldwide.56 The standardized approach, according to the theory, gives many benefits, such as
economies of scale in production and distribution, lower marketing costs, consistency in
and
image, ability to leverage good ideas quickly and efficiently every market throughout the world,
although the marketing mix can vary. It ca
ies the same
and name or logo. Its values are identical
in all countries, it has a substantial market share in all countries and comparable
and loyalty. The
distribution channels are similar.”58 Ikea as a
and matches to that description in a rather high
degree. The concept all over the world is the same.
Worldwide Ikea’s main target group is younger people and young families. The uniqueness of the
concept, including a light Scandinavian furnishing style, showrooms, flat-pack and self assembling,
gave Ikea the same advantages in each country that it had in Sweden in the early days.59 Moreover,
a part of Ikea’s strategy is to inspire their global customers with Swedish family values. “In our world,
home is the most important place and having children is the most important thing. Go home in time
to see your children. That is the concept we want to inspire in people here”, says Kullberg.60
However, even a global
and that seeks to educate consumers, as Ikea does, can not allow a fully
standardized strategy. According to Dahlvig, different countries, languages, laws, and all other
factors have to be taken into consideration.
China
Product
The product is anything that satisfies our want or need and product that can be marketed is
including physical goods, services and so on. (Philip kotler). The product decision also included
aspects such as delivery a
angement financing warehousing and things that useful for people.
(Philip kotler).according to IKEA management they did not did any differentiations in their product
anges and way they conduct when going international especially on French and Chinese market. (E.
Lewis; Cyan Communications) .Product in Swedish and France, there is no major differences
etween products. (E. Lewis; Cyan Communications)In a research the author found out that all of
those products were same for example kitchen and dining room, living room, bedroom, the house
organization, decoration, lighting, and so forth....