Student Number: 130487304
Working Title: Ikea’s entry strategy in China
The essay is mainly about the multinational corporation-IKEA’s new entry strategy in China. At the beginning, the essay presents the company’s background and the main marketing strategy. Then it illustrates the target market segmentation not only in China, but also in US. Facing the different countries ‘conditions, IKEA adapts the appropriate tactics. Besides, the essay highlights the way that IKEA initially take the joint venture strategy, and then makes the transition to the Greenfield investment. On the basis of this main theory, the essay maintains how the strategy is formulated and implemented, which examines IKEA’s activities in detail. Although the way of entering China market has its limitations, the recommendations of the last part are cater to the problems existing in China market.
IKEA founded in Sweden by entrepreneur Ingvar Kamprad in 1943, and then has become the word’s most successful global retailers. (Moon, 2004) Sales mainly includes about 10000 products like seat and sofa series, office supplies, bedroom series, kitchen series, lighting series, home storage series, children’s products series, etc. Low prices are the cornerstone of IKEA’s ideal business concept. The basic idea of the entire IKEA product is that low prices can make a wide variety, beautiful and practical household supplies for everyone. In addition, they also constantly strive to every thing to do better and more simple, more efficient and more cost-effective.
The main strategy of IKEA highlight offering customers low priced contemporary designed, functional products. (Bloomberg, 2005) The manager of IKEA Long Island capitalizing on this:” We look at the competition, take their price, and then slash it in half” (Bloomberg, 2005,) To achieve this, IKEA reinforces the product development and reducing costs by streamlining operations with local suppliers, strengthens long-term relationship with their suppliers. In Europe, the developed countries, IKEA positioning itself into the low price, well designed and durable household products provider, which are popular in low and middle income families. However, the prices in Europe and North America were considered low, but were higher than the average in China. So IKEA made different entry strategies for their products according to various countries’ conditions.
Target Market Segmentation
Nowadays there are no such traditions that children inherited their furniture from their forefathers, the younger generations are prefer to purchase low costing but trendy and portable contemporary furniture instead. (Hill & Jones, 2005) Therefore the main design concepts of IKEA are catering to the young, low-to-middle-income families. Moon illustrates IKEA’s target market in the US as” someone who traveled abroad, liked taking risks, liked fine food and wine, had a frequent-flier plan, and was an early adopter of consumer technologies.”(2004,pp8) Thus it can be seen the US consumers trend to try new products or technological ones, moreover, the demand for eco-friendly and green products are dramatically increased in America recently, IKEA has changed its product plan in US to increase its use of waste or recycled materials, charging for plastic bags and asking their suppliers for green products accordingly.
However, in China, there are no such concepts to pay extra for plastic bags and using the necessary technologies to provide green products, and high prices in China are also the biggest barriers as well, for this reason the standard of IKEA in china should be changed. The main target segmentation is young middle-class and females around 30 years old, and the locations of stores are all in big cities, like Shanghai and Beijing. Because the majority of consumers are higher incomes and well educated, which can more aware of western styles and IKEA’s brand name