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Global Expansion of IKEA

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Fyllenia Procou

on 12 March 2014

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Transcript of Global Expansion of IKEA

Global Expansion of IKEA
History
Indian Market
China
IKEA's Current Position
Price
IKEA's Culture
IKEA and branding
Country Specific Advantages
Working hard
Being Conscious
Swedish Design
Transparency
Down to earth approach
Responsibility
Firm Specific Advantages
Matching everyday needs
Affordable solutions
Operational efficiencies
Innovation
Products based on Swedish Lifestyle
Historical Influences
Communication: understanding the know-how of the company
Uniqueness
Connecting people
Corporate brand image and Corporate organizational culture


Culture and Global markets
Differences between people- nations
Values of the culture influence the business
Culture and Leadership
IKEA and Global Trends
Analysis of the global furniture market
US kept the leading position with 118 Billions USD sales
Emerging markets played the key role in accelerated growth
-India brought 315% growth through hypermarket retailing channel
Western Europe was affected by economies and price competition

Consumer Trends in the furniture market
Consumer confidence is a key factor in driving home furnishing sales
Correlation between disposable income growth and home furnishing sales growth
Households change (smaller homes demand)

IKEA changes the competitive scene
Consumer awareness in-general:
Functional, less option of furniture
Fixed set of designs
IKEA's Expansion in emerging Markets
Japan
IKEA Entering the Indian Market
Why is India an opportunity:
Growing Middle Class
Youthful Population
Increase labor mobility
Demand for better living standards
Challenges in India
Political Regulations
30% Local sourcing
Store Location
Land price and availability
Consumer Preferences and Attitudes
Reluctance to the DIY Concept
Cultural Influences
Traditional Home Interior
Mainstream channel to the home furnishing
- Hypermarket
- Department stores: 1% shares increased between 2007 to 2012 due to the success in China
- Internet: Western and Eastern Europe has significant growth to gather younger consumers

Consumer awareness after IKEA’s emergence:
Furniture consumption has been treated in an emotional nature
The design of furniture reflects personality
Less permanent than in the past
Frequently change rather than invest for life

Three areas to distinguish
its competitive edge

1. Product
Adaptable and customizable (Diversified in different markets)
IKEA changed and shift the brand preference due to its trendy styles at low price.

2. People & planet positive
Sustainable and eco-friendly
Transparent design process to ensure consumers understand how does IKEA put consumers’ lives into product design

3. Co-workers
Reform transactional to relational
Bring each product with a story to tell

Challenges


Low price-strategy created confusion among aspirational Chinese consumers while local competitors copied its designs
Emerging markets are not ready for environmental-friendly practices
Chinese people do not like the "do it yourself" idea
How did IKEA respond to the challenges:
In 1974 IKEA decided to enter Japan, however it failed to win the Japanese consumers therefore it pulled out in 1986.

Why IKEA failed?
No adaptation of business strategy
Perceived the uncertainty level and physical distance as small
Lack of experiential and market specific knowledge
Consumers not ready for flat pack living and not convinced of assembling their own furniture

First Round
Second Round
Re-entering the Japanese market in 2002

Why did IKEA succeed ?

It recognized the necessity of strategies for adaptation in the marketing mix
Japanese homes are small, therefore adaptation of products was needed
Cost-base price strategies – lower than customer expected
IKEA offered home delivery and assembly for an extra charge
Adaptation of IKEA’s communication strategy- TV commercial concentrating on small space living and educating consumers for the DIY concept

1943
1948
1953
1958
Furniture in IKEA range
The company opens the first IKEA store
IKEA is Founded


I
ngvar
K
amprad
E
lmtaryd
A
gunnaryd
The first Showroom opens in Sweden
Lessons Learned
from Japan and China
IKEA in the world market
Home furnishings have few strong brands, top five players accounting just 7.4% of value sales in 2012
IKEA is the number one brand;
- IKEA Market share 5%
- Ashley occupies over 1%
- Private labels have 7%
- Remainders of the market are fragmented
IKEA's Business Model- Cash and Carry Concept and IKEA's values
Consumers &
Cash and Carry
Carrying it yourself in-store
Customer responsible for the transportation of the products
Customers responsible for assembling the products
Producers &
Cash and Carry
Shorten supply chain as there are no middlemen
High Volumes of production
Economies of scale
Long-lasting relationships
Producers are able to compete in an international level
Advantages

Advantages and Disadvantages of the Cash and Carry Model
Low inventory carrying costs
High margin and high profits as IKEA buys directly from the producer
Consumers can find a whole home concept in one place
Quality of the products is good
Disadvantages
The company assesses all risk
Consumer has to understand the Cash and Carry concept
In terms of consumers the products offered are based on the reality of the consumers
• Real customer needs in life at home
• Real space
• Real wallets
In terms of suppliers the products offered are based on the reality of the suppliers
• Materials
• Techniques
• Big Volumes


How IKEA manages its attributes
Minimizing Costs
Lowering Prices
Higher Volume
Corporate Social Responsibility
"Responsibility beyond furnishing"
Environment
WWF
Earth's Resources:
Suggestions for energy saving solutions to customers
People
IKEA Foundation
Soft toys Campaign
Marketing Strategy
Keep the existing global business model in terms of:

Cash and Carry Model
IKEA experience through the store concept
Affordable solutions for the many people


So what are they going to change?
Enhance their services
Shop assistance
Offers for delivery
Assembling of the products
Product modification to meet the local needs and tastes
Promotional activities
Understand the changing living conditions
Educate the consumers over the "DIY" concept
Take into consideration the strong values of family
Restaurant Adaptability
Meet dietary requirements
References
Thank you for your attention!
Any
QUESTIONS?

Kling K., Goteman I., 2003. IKEA CEO Andres Dahlvig on International Growth and IKEA’s unique corporate culture and brand identity. Academy of Management Executive, Vol.17 No1.
Capell, K., 2006. Ikea’s New plan for Japan. 25 April 2006, BusinessWeek, Available at: http://www.businessweek.com/stories/2006-04-25/ikeas-new-plan-for-japan (Accessed: 4 March, 2014)
Chu,V., Girdhar, A. and Sood, R., 2013. Couching tiger tames the dragon, 21 July 2013, BusinessToday, Available at: http://businesstoday.intoday.in/story/how-ikea-adapted-its-strategies-to-expand-in-china/1/196322.html (Accessed: 5 March, 2014)

Euromonitor International, 2013. Inter IKEA System BV in Home and Garden (World), Euromonitor Global Market Information Database

Euromonitor International, 2013. Home Furnishings: Category Overview, London: Euromonitor International

Euromonitor International, 2013. Home furnishings in India. Euromonitor International.

Euromonitor International, 2013. Ikea might need to revise its business model for India. Euromonitor International.

Euromonitor International, 2012. Ikea announces long-awaited plan for India. Euromonitor International.

Forbes India, 2013. Ikea not led by calendar but by long-term decisions [Online]. Available from: http://forbesindia.com/video/video/ikea-not-led-by-the-calendar-but-by-longterm-decisions/35807 [Accessed: 10 March 2014].

Hatton, C., 2013. IKEA in China: Store or Theme park? 4 November, 2013, BBC
Available at: http://www.bbc.co.uk/news/world-asia-china-24769669 (Accessed: 7 March. 2014)

Los Angeles Times, 2006. IKEA to Try Japanese Market Again, Available at: http://articles.latimes.com/2006/apr/24/business/fi-ikea24 (Accessed: 1 March, 2014)
Ponder, N., 2013. Consumer Attitudes and Buying Behavior for Home Furniture. Mississippi State

Samad, S.A., 2014. Business Model and Competitive Strategy of IKEA in India. Journal of IBS Center for Management Research. pp. 1-17

Sousa, C. & Bradley, F., 2006. Cultural Distance and Psychic Distance: Two Peas in a Pod? Journal of international marketing. Vol.14. no 1, pp 49-70. p. 53

Better Quality
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