The most prominent furniture shop in the world is a Swedish firm called IKEA. The business operates in 55 nations and employs more than 76,000 worldwide (Roy, 2020). The global market leader’s success can be attributed to its comprehension of the customer and target prospect’s wants, the potential of its segment, and the modification of its niche. IKEA does market research and uses various techniques to enter overseas markets. However, the difficulties it encountered in China were significantly greater than in the US. The company’s revenue increased quickly as new stores were created. Still, its regional locations in China were not profitable due to difficulties balancing global integration strategies and national responsiveness.
IKEA Strategies in International Retail
One of the earliest larger retailers to reach the Chinese market was IKEA. IKEA uses a standardization strategy, which describes how and to what extent marketing activities like pricing, product, venue, and promotion are appropriately altered across all national boundaries in which the corporation works. The ‘one-design-suits-all’ campaign enables IKEA to initially succeed by selling a single design to all consumers worldwide. Still, subsequently, industry experts questioned whether all cultures would accept the strategy or if it would offer other culturally diverse commodities that would provide sustained demand for their products across diverse societies throughout its existence.
The key areas of variance were the key areas: the size, organization, color scheme, type of activity being performed by the participants, and the number of people involved (Burt et al., 2021). For instance, a photo of a lounge featuring IKEA furnishings and four men and a woman designer was displayed in the Swedish copy. The woman, however, was not included in the Saudi Arabian version.
Challenges of the Market in China
IKEA had a specific way of operating before entering the Chinese market. However, it was eventually obliged to alter its methods to compete and maintain a beneficial business arrangement with the locals. Pricing was one of the main concerns. Prices were considered reasonable in America and Europe and were expensive to the average Chinese person. Contrarily, since inexpensive labor and raw materials were widely available, IKEA furniture’s price tags were lower than those of Chinese-made furniture, and its design fees were also wholly waived.
Changes in Global Integration Strategy for the Chinese Market
The IKEA supply chain was initially standardized for the Chinese market before becoming more locally focused and finally more integrated into the regular global IKEA supply chain. Over the ten years under consideration, the type of market orientation connected to the significant business model components evolved (Burt et al., 2021). Some previously market-driven components were more strongly influenced by market behavior, while the initial orientation was strengthened as IKEA established itself in the market. To optimize the use of domestic resources, IKEA made sure to construct a few factories in China.
Over 30% of IKEA’s product line comes from China, while about 65% of its resources are acquired domestically (Roy, 2020). This tactic significantly decreased production costs and assisted in finding a solution to the issue of excessive import taxes. Additionally, the company narrowed its attention to young, native Chinese from middle-class families (Roy, 2020). These people are seen as educated, exposed, higher paid, and knowledgeable about various styles, especially those from the west. IKEA’s efforts to position itself as a company from the western world were aided by focusing on this demographic. The corporation benefited from the change in aim since it kept up its aggressive targeting of the rest of the world.
Conclusion
Thus, it is clear from the data that most Chinese clients value how contemporary furniture from IKEA is arranged following their culture. In that aspect, IKEA is working to close the gap to increase sales. Given that the majority of respondents thought the products were acceptable, IKEA’s products in China are highly valued by the Chinese culture in terms of design. The fact that IKEA’s product is highly received in the market and that the consumer groups recognize the firm’s efforts with its products gives it an advantage in China.
References
Burt, S., Dawson, J., Johansson, U. & Hultman, J. (2021) The changing marketing orientation within the business model of an international retailer – IKEA in China over 10 years, The International Review of Retail, Distribution and Consumer Research, 31(2), 229-255. Web.
Roy, D. (2020). Impact of Consumer Market Preferences on Expansion Strategies: Strategies Used by IKEA in the International Market. Centria University of Applied Sciences.