IKEA, nowadays the leader in the furniture industry worldwide, has built its strategy since the 1960’s on several key success factors: excellent quality of their products, social and ethical responsibility, real marketing concept with large inventory and parking space, family experiences, unique brand identity, and last but not least the low-cost strategy (selling self-assembly features cuts operational and transportation costs and generates great economies of scale). If IKEA succeeded in implementing its strategy over the world, the leader faced some problems coming to China: marketing and pricing issues. When Ikea came to China to open stores, they faced a big issue regarding the prices: consumers were not ready and willing to buy Ikea’s product as it was unfordable for them and preferred to buy more brand-value products. The low-cost strategy failed as western products are seen as valuable and more aspirational. Indeed, purchasing low-priced materials and having suppliers in China was another key factor that Ikea didn’t have when they implemented their first store in China. The company started to build factories in China and to inspect quality locally with the aim to increase local sources and then to avoid high import taxes (since 15 years, the company was able to reduce by 60% their prices). We have to highlight that institutional factors prevent IKEA to have its own stores and subsidiaries: the company was able to reduce its costs when new policies allowed foreign companies to do so. IKEA has to focus on the price strategy: being green or creating stylish furniture would increase the prices; the company had to skip some of their usual key success factors. Once Ikea was able to deal with this issue, they needed to change their target: if it was the mass market in the rest of the world, it has been different in China. First, the company needed to adapt itself regarding Chinese consumers’ needs: Chinese people were looking for small (adapted to their tiny apartment) and user-friendly furniture. Shopping in China is also about the experience in the store, and then IKEA has to reinvent their store in compliance with Chinese people’s way of living. Regarding the target, they decided to choose the young middle-class which had better incomes and education by communicating in a different way with them than in western countries – with social media rather than with catalogues.
References IKEA’s global marketing strategy (2011). IKEA internationalization. Retrieved on 15th August 2012 from: http://www.123helpme.com/ikeas-global-marketing-strategy-view.asp?id=165535
IKEA Success in Chinese Furniture, Yihong Li, 2007: http://www.theseus.fi/bitstream/handle/10024/17554/jamk_1198235756_7.pdf?sequence=2
How Ikea adapted its strategies to expand in China, Business Today, 2013: http://businesstoday.intoday.in/story/how-ikea-adapted-its-strategies-to-expand-in-china/1/196322.html