Type: Research Essays
Sample donated: Agnes Burns
Last updated: August 23, 2019
Ingvar Kamprad founded IKEA in Sweden in 1943.Mr. Kamprad started by selling door-to-door, offering goods from stationeriesto watches, wallets and etc. Through innovation and determination, IKEAeventually became a success in Sweden and that success led Mr. Kamprad toexpand his company worldwide, opening over three hundred stores around theworld. However, IKEA faced much biggerproblems on its expansion to China. IKEA opened up in China through a joint venturewith the purpose of probing the market, establishing local needs as well asfinding a good strategy to do business in a new terrain. Soon enough, IKEArealized that the strategies they have to come up with would be very differentfrom the ones that they had previously employed, considering the difference inlifestyle and culture of different places.
For example, people in Chinaprefer a different style of furniture—mostly western—so IKEA would have to makesome modifications to its designs. Moreover, Chinese apartment sizes alsodiffer so the furniture built would have to be customized to fit according tothe apartment rooms. The location of IKEA stores also can no longer be insuburbs like the European IKEA stores. Since the people in China mostly travelby public transportation, such as trains, it would be a wise suggestion to haveIKEA stores built next to railway networks. Another strategy that IKEA shouldchange would be the target customers.
Normally, IKEA would be targeting massmarkets, but in China, where people see western products as aspirational, it isbest for IKEA to target the younger, middle class citizens who would have ahigher income, a better education as well as knowledge on western style. Thenormal “low” prices that IKEA sold its products for in European countries were viewedas higher than the regular prices in China, so IKEA had to be really careful insetting the price of its products. I would suggest IKEA try to cut down on theprice of its raw materials in order to lower the prices to fit in more with theaffordable price range. Besides that, other competitors in the Chinese marketmade it hard for IKEA to sell its products, considering that the competitorswere using IKEA’s catalogue—one of the best ways IKEA has used to promote itsfurniture—to copy the design and sell it at a cheaper price. IKEA’s solution tothat problem would be to promote their furniture through China’s social mediaand “Weibo” instead, which proves to be rather effective in promotion.
Oneother problem IKEA said they faced was that due to most consumers in Chinahaving a tendency of being price-sensitive and that the suppliers don’t havethe necessary technology, the charging of plastic bags and making of greenproducts would have difficulties in being implemented in China. As such, due toextra costs necessary should IKEA provide the suppliers with the neededtechnology, IKEA backed down from its standards just to stay in the market,deciding to keep at low prices. Based on careful research, these are theproblems that IKEA had faced when opening its stores in China as well as someof the suggestions or actions that IKEA has actually done to overcome it.