Type: Research Essays
Sample donated: Byron Christensen
Last updated: September 20, 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. One other problem IKEA said they faced was that due tomost consumers in China having a tendency of being price-sensitive and that thesuppliers don’t have the necessary technology, the charging of plastic bags andmaking of green products would have difficulties in being implemented in China.As such, due to extra costs necessary should IKEA provide the suppliers withthe needed technology, IKEA backed down from its standards just to stay in themarket, deciding to keep at low prices. Based on careful research, these arethe problems that IKEA had faced when opening its stores in China as well assome of the suggestions or actions that IKEA has actually done to overcome it.