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Executive Summary: IKEA is known globally for its low prices and

innovatively designed furniture. In China, however, it faced peculiar problems. Its

low-price strategy created confusion among aspirational Chinese consumers

while local competitors copied its designs. This case study analyses how IKEA

adapted its strategies to expand and become profitable in China. It also assesses

some lessons the company learnt in China that might be useful in India, where it

plans to open its first store by 2014 and 25 stores in 10 to 15 years.

Swedish furniture giant IKEA was founded by entrepreneur Ingvar Kamprad

in 1943. He began by selling pens, wallets and watches by going door to door to his

customers. When he started selling his low-priced furniture, his rivals did

everything to stop him. Local suppliers were banned from providing raw material

and furniture to IKEA, and the company was not allowed to showcase its furniture

in industry exhibitions. What did IKEA do? It innovated to stay in business. It

learnt how to design its own furniture, bought raw material from suppliers in

Poland, and created its own exhibitions. Today, IKEA is the world's largest

furniture retail chain and has more than 300 stores globally.

In 1998, IKEA started its retail operations in China. To meet local laws, it formed a

joint venture. The venture served as a good platform to test the market, understand

local needs, and adapt its strategies accordingly. It understood early on that

Chinese apartments were small and customers required functional, modular

solutions. The company made slight modifications to its furniture to meet local

needs. The store layouts reflected the typical sizes of apartments and also included

a balcony.

IKEA had faced similar problems previously when it entered the United

Home Business Today LBS Case Study July 21, 2013 Story

Valerie Chu, Alka Girdhar and Rajal Sood Edition:July 21, 2013

Couching tiger tames the dragonThis case study analyses how IKEA adapted its strategies to expand and become profitable in

China. It also assesses some lessons the company learnt in China that might be useful in India.

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States. The company initially tried to replicate its existing business model and

products in the US. But it had to customize its products based on local needs.

American customers, for instance, demanded bigger beds and bigger closets. IKEA

had to make a number of changes to its marketing strategy in the US. The

challenges it faced in China, however, were far bigger than the ones in the US.

As the company opened more stores from Beijing to Shanghai, the company's

revenue grew rapidly. In 2004, for instance, its China revenue jumped 40 per cent

from the year before. But there was a problem - its local stores were not profitable.

IKEA identified the strategic challenges and made attempts to overcome them. One

of the main problems for IKEA was that its prices, considered low in Europe and

North America, were higher than the average in China. Prices of furniture made by

local stores were lower as they had access to cheaper labour and raw materials, and

because their design costs were usually nil.

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IKEA built a number of factories in China and increased local sourcing of materials.

While globally 30 per cent of IKEA's range comes from China, about 65 per cent of

the volume sales in the country come from local sourcing. These local factories

resolved the problem of high import taxes in China. The company also started

performing local quality inspections closer to manufacturing to save on repair costs.

Since 2000, IKEA has cut its prices by more than 60 per cent. For instance, the

price of its "Lack" table has dropped to 39 yuan (less than five euros at current

exchange rates) from 120 yuan when IKEA first came to the Chinese market. The

company plans to reduce prices further, helped by mass production and trimming

supply chain costs.

High prices were one of the biggest barriers in China for people to purchase IKEA

products. IKEA's global branding that promises low prices did not work in China

also because western products are seen as aspirational in Asian markets. In this

regard, IKEA's low-price strategy seemed to create confusion among Chinese

consumers.

The company realised this and started targeting the

young middle-class population. This category of

customers has relatively higher incomes, is better

educated and is more aware of western styles. Targeting

this segment helped IKEA project itself as an

aspirational western brand. This was a massive change

in strategy, as IKEA was targeting the mass market in

other parts of the world.

IKEA also had to tweak its marketing strategy. In most

markets, the company uses its product catalogue as a major marketing tool. In

China, however, the catalogue provided opportunities for competitors to imitate the

company's products. Indeed, local competitors copied IKEA's designs and then

offered similar products at lower prices. IKEA decided not to react, as it realised

Chinese laws were not strong enough to deter such activities. Instead, the company

is using Chinese social media and micro-blogging website Weibo to target the urban

youth.

IKEA also adjusted its store location strategy. In Europe and the US, where most

customers use personal vehicles, IKEA stores are usually located in the suburbs. In

China, however, most customers use public transportation. So the company set up

its outlets on the outskirts of cities which are connected by rail and metro networks.

The China expansion came at a cost. Since 1999, IKEA has been working on

becoming more eco-friendly. It has been charging for plastic bags, asking suppliers

for green products, and increasing the use of renewable energy in its stores. All this

proved difficult to implement in China. Price-sensitive Chinese consumers seem to

be annoyed when asked to pay extra for plastic bags and they did not want to bring

their own shopping bags. Also, a majority of suppliers in China did not have the

necessary technologies to provide green products that met IKEA's standards.

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The main problem for IKEAwas that its prices,considered low in Europe andthe US, were higher than theaverage in China

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Helping them adopt new technologies meant higher cost, which would hurt

business. IKEA decided to stick with low prices to remain in business.

As IKEA prepares to enter India, its China experiences will come in handy. It

understood that in emerging markets, global brands may not replicate their success

using a low-price strategy. There always will be local manufacturers who will have a

lower cost structure.

It is more important what customers think about the

company rather than the other way around.

IKEA wanted to be known as a low-price provider of

durable furniture, while Chinese consumers looked

at IKEA as an aspirational brand. It is likely that

Indian consumers will also look at IKEA in a similar

way.

The company also learnt that emerging economies are not ready for environment-

friendly practices, especially if they result in higher prices.

IKEA, famous for its flat-pack furniture which consumers have to assemble

themselves, realised that understanding the local culture is important - Chinese

people hate the do-it-yourself concept and Indians likely do so even more.

IKEA may face some India-specific challenges such as varying laws in different

states ruled by different political parties. This could make its operations, especially

distribution and logistics, a bit challenging. IKEA already has had to wait a long

time to get permission to open stores in India. The delay in policy-making at the

state level could be even longer.

Indian customer preferences and economic environment are similar to the Chinese

market.

IKEA will likely have hopes of attracting India's urban middle-class buyers who are

keen on decorating their homes with stylish international brands. The company has

learnt that doing business in emerging markets is a different ball game for a

multinational company. IKEA did well to adapt in China, although it took

numerous changes to its strategies and more than 12 years for the company to

become profitable in the Asian nation.

Ikea's India rollout will be slow: Prof Nirmalya

Kumar

The success of IKEA in China is an interesting adaptation

example by a global retailer. Yet, it may not be much of a

predictor of IKEA's fortunes in India. This may have less to

do with IKEA and more to do with the economic policies of

India.

Chinese competitors copiedIKEA's designs from its catalogueand then offered similar productsat lower prices

FDI in retail in Indiahas been a non-

Safari Power SaverClick to Start Flash Plug-in

A well-designed foreign direct investment (FDI) policy

should have resulted in a rush of much-needed foreign

investment to India, upgrading of the supply chain, modernisation of the retail

sector, as well as more choices for consumers with lower prices. Instead, FDI in

retail, like in higher education, has been a non-starter, hopelessly mired in

special-interest politics. The rules are so onerous that a mass retailer such as

IKEA will find it hard to meet them without penalising customers with higher

prices and lower choice.

Also, it will be difficult for IKEA to find the type of location (size, off a highway,

with great links to a major metropolis) that is crucial to the success of its

business model. This will mean the first store will take much longer to open

than Indians expect and the rollout will be painfully slow. Fortunately, as a

privately held company with a longterm orientation, IKEA will persevere where

more impatient publicly held firms may have given up.

For India to kick its economy back to the growth rates necessary for meeting the

aspirations of its citizens, we need to roll out the red carpet for foreign investors

instead of red tape. Competition law and trade policies are supposed to ensure

that a free competitive marketplace exists, with easy entry and exit, not protect

existing competitors from new entrants.

Capitalism without failure is like religion without sin.

Prof Nirmalya Kumar, Professor of Marketing and Director of the Aditya

Birla India Centre at London Business School

The main challenge is to adapt: Yelena Zubareva

There is no formula for success that fits all marketing

strategies when a global brand decides to try a new market,

except perhaps unconditional acceptance and

responsiveness to changes. The greatest challenge is to

adapt constantly. It's essential for successful marketing

campaigns to take into consideration the local approach

versus the global/regional desire for standardisation. A

onesize-fits-all approach is a rare reality. A consistent

global brand promise is a desirable asset but what makes a

real difference is to be brave and ready to change the target audience and build

a differentiating promise.

IKEA made all necessary adjustments to make sure there was no mismatch in

its growth ambitions and brand promise. Becoming an aspirational brand which

is blogging with the Chinese middle-class youth is an unexpected twist in its

brand proposition. IKEA demonstrated courage to get the most relevant

changes. By courage I mean all big corporations are ready to shift production,

work with local sources, overcome legal requirements but not too many of them

starter, hopelesslymired in special-interest politics:ProfNirmalya Kumar

It's essential forsuccessful marketingcampaigns to takeinto consideration thelocal approach:Yelena Zubareva

are ready to adapt a brand proposition that suits the level of development the

market and consumer perception require.

IKEA is a strong brand that understands that growing globally requires

sacrifices and innovation from global teams, and they are ready to listen,

respect and learn from the local environment. The European headquarters'

excitement to enter new markets with proven best practices is something of the

past, proving that the real shift in the global mindset is to recognise that local

versus global can bring optimum results.

Yelena Zubareva, Regional Marketing Manager, FWS/OEM SHELL

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Posted by: Vaibhav Annam

July 25, 2013

IKEA is a sturdy, innovative and adaptable brand. This is evident from the fact that the

furniture maker survived through early years of its existence when its rivals did everything

possible under the sun to stop it. Its brand proposition across the globe for years has been

offering the lowest priced furniture. Many brands would be carried away by this school of

thought of sticking to their brand proposition which often leads to a dangerous

phenomenon better known as core rigidity.

Markets around the world cannot be painted with same brush. Though consistency in

offerings is quintessential for a brand, relevancy in a market comes first. Had IKEA even

attempted to compete for offering the lowest priced products in Chinese market, it would

have miserably burnt all its five fingers. It is well-known that China's innovation is in re-

engineering and not at conceptual level. This is the reason why IKEA chose not to be

bothered by Chinese competitors imitating its catalog of offerings and rather concentrated

on establishing a strong presence among the urban youth. IKEA was not shy of re-

branding and thus has survived in a fiercely competitive Chinese environment. Change, as

they say, is the only constant.

Entering India would be an entirely different ball game for IKEA. While some similarities

can be drawn from the Chinese experience, uncertain government policies and cryptic

customers will make it awfully challenging for IKEA to establish itself in this land of

Maharajas. But the elephant in the room is finding a location for its first store, which

would be a long process as IKEA is patient enough to wait till the best place is found. With

increasing wealth and changing habits of the Indian customer, it would be interesting to

see if IKEA will position itself as a low-cost furniture brand or an aspiration for the vast

youth population of the country.

Posted by: Sabyasachi Mitra

July 24, 2013

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As Ikea prepares to enter India it could definitely learn from its experience in China. There

is bound to be some similarities in both the markets ( of the two countries) but there will

be dissimilarities as well, specially because of the time gap. Ikea entered China in 1998 ,

more than 15 years ago so Ikea cannot blindly follow the strategy (or strategies) of China

while setting up its operations in India. First lets talk about the similarities that is likely

Pricing: Ikea in all probability would not be able to price its products below the price of

local retailers in India. So it cannot position itself as a low-cost furniture., it will be better

to position itself as an affordable priced product . Ikea will not be able to compete with

local local manufacturers in the low cost segment, specially , with the falling value of the

rupee most Indians will perceive the price as affordable ( or even high ) although it may be

low-priced compared to Europe standards, prices which can be considered low in Europe

can be perceived high in India . Aspiration brand for the middle class and high-income-

middle-class: Western brands in India will find it difficult to position itself as a low-priced

brand . AirAsia, an airline company of south-east Asia could successfully position itself as a

low-cost airlines but that would not have been possible for a western airline. South-east

Asian company could easily position itself in that segment with aggressive pricing, schemes

and offers. Indians will require modular , functional and adjustable solutions like the

Chinese.

Like in China the apartments in India are small and require space-saving technology and

solutions to save space, instead of king-size beds , large closets , huge cupboard and

wardrobes, Indians will require tailormade solutions for themselves. In fact an Indian may

like personalized products to suit their tastes and apartment sizes. Coming to the

dissimilarity that is likely 1.) When Ikea entered china in 1998 it faced the problems of high

import tax , if it were to enter in China in 2013 it would have found that the taxes have

reduced. Most countries around the world have reduced taxation to encourage

globalization and open market policy . Trade agreements and treaty have also played a role

in taxes coming down even in china which is one of the countries that protected its local

manufacturers from external competition even though the Chinese government has

fiercely supported local production still the taxes now have been reduced considerably

from the 1998 levels. When Ikea enters India in 2013 it will find far friendly taxes which

will allow it to import products which it cannot produce locally in India . To start with Ikea

can have a 80: 20 proportion of imported items, it should gradually try to increase the

share of locally manufactured products from 2% to 70% in the next four years . 2.)

Although India a vast country like China the difference is that of varying cultures and

languages in India . In India Ikea would find different culture and traditions in each and

every state . In china Ikea did not have to adapt to so many varying cultures.

Challenges that are likely to be faced by Ikea in India Ikea will find a cosmopolitan culture

in the cities and metros where it is likely to open its stores first. My neighbour's apartment

may have a completely different layout than mine , my neighbour may be in a nuclear

family while I may be living in a joint family so though we are neighbors we may have

varying needs and tastes it is for this customized solution that in India customers go to the

nearby carpenter to make furniture as per their need and choice people prefer personlised

products rather than a readymade product so Ikea will find it difficult to follow a one-size-

fits-all policy in India, alternatively Ikea may try to change consumer behavioral patterns

of customers so companies like Kellogs have patiently tried to invest in changing consumer

behaviour . Kellog for years have tried to educate customers to include cereals in their

breakfast after considerable investment Kellogs has been successful in changing the diet

habits of Indian consumers to include cereal as a breakfast option . 1.) Apart from

unorganized furniture manufacturers, Ikea is going to get some stiff competition from

some organized retailers in the furniture space ., . some of these retailers are backed by

large industry houses and company with deep pockets like Godrej ( Godrej Interio ) and

Future Group ( home town Big Bazaar) because of the relative late entry of Ikea in India it

will find quite a number of competitor in the organized retailing segment, in fact furniture

is one of the sectors where of late there has been a number of entrants in the organized

retailer space, some of these players are established in their business of modular furniture,

some of the names who have entered the furniture retailing space in the last 5 years are:

Godrej Interio , Hometown ( BigBazaar) , Durian, Zuari, Modfurn, StyleSpa , Gautier,

Heritage , Damro , Featherlite , Mobel Furniture , Irony , Neelkamal, Giani, Supreme,

Swagath Moulded, Steelco, Hettich, Featherlite , Estillo , Elegant , etc. to name a few ., . out

of these Neelkamal , Swagath Supreme are essentially producers of plastic furniture which

gives the customer cheap alternative to wooden furniture ., . while irony and steelco are

essentially iron and wrought iron furniture manufacturers .,. featherlite also is in the

category of mould furniture which uses a combination of different material ,. Godrej offers

customers both the options of steel furniture ( for office mainly ) and wooden furniture (

mainly for home use ) ., . some furniture stores like Gautier ( France ) and Fettich (

Germany ) are foreign brands that have started operating in India during the last decade .,

. when a big player like Ikea enters the market there is generally a shake out with takeover ,

merger and acquisitions ., . as a strategy Ikea could acquire some of these brands and use

its network of retail chains to start its operations in India. Ikea could also go into some tie-

ups with few of these retail chain stores as they already have an established footprint in the

country Suggestions ( strategy in India , going forward ) :

SUGGESTION : One of the challenges that Ikea will face in India is regarding the

distribution channels which channel or channels should it adopt? For setting up retail

stores it will face some tough questions ., . should it locate its store in the suburbs or on the

outskirts of the city or within the city ., . if Ikea establishes the stores within the city then

the real estate cost ( rentals etc. ) will drive the price of its products to higher levels ., . on

the other hand if the store location is on the suburbs few customers will visit the stores

because of the transportation problems in the country ., . most cities in India does not have

good connectivity through public transport ., . the road congestions and narrow roads

prevents the customers from using their own vehicles unless otherwise absolutely required.

1.) One of the options of distributing can be the one which has already been discussed

above , Ikea could acquire some established store or enter into a distribution agreement ., .

using the distribution channels of established stores will keep a check on the costs and help

Ikea to keep its price affordable ., . 2.) The second option through which Ikea could retail is

through online retailing ., . apart from its own website , Ikea can use some established

online players in the online retailer segment ., . some online stores like Flipkart ,

Homeshop 1 8 ( Home Shop 18 ) , Snapdeal ( Snap Deal ) , O L X ( Olx.Com ) , Myntra ,

Jabong , Yebhi , Rediff Shopping , Indiatimes ( Times Group ) etc. can be used by Ikea as

its online platform ., . online sales will get increasing important and Ikea should have a

substantial presence in this area ., . 3.) Ikea can go for something completely new ., . a

distribution channel which has not yet been tried by any company ( any furniture retailer )

., . Ikea can go into an agreement with developers in displaying their products in the

apartments which are yet to be sold ., . this type of tie-up will be mutually beneficial for

both Ikea and the developers ., . the developers can attract customers by showing a model

home which is fully furnished ., . customers who purchase the apartment will have the

option to choose from a fully furnished apartment or an unfurnished apartment ., .

furnished apartment is still an alien concept in India ., . here builders hand over an

unfurnished apartment for which the customer has to take the hassles of furnishing it from

scratch ., . to furnish it properly the customer spends another about 1 5 % - 20% of the

property price ( in addition to the price of the apartment ) ., . in addition it is a time taking

process for the customer ., . if the customer finds that it saves time and money to take a

furnished apartment that too from a reputed brand of furniture , the customer would be

interested in that option ., . as of now the customer is put off by furnished apartments as

the furniture is generally from some un-reliable ( or unknown ) manufacturer ., . if the

customer gets product warranty and other services which is reliable then he would be

definitely interested in buying a furnished apartment ., . Ikea can enter into such tie-ups

with top developers of India having presence in more than one state ., . real estate

companies like - Unitech , Dlf ( D L F ) , Parsvanath , Raheja , Hiranandani , Ansal ,

Purvankara , Tata Housing , Godrej Properties , Indiabulls , Merlin Group , Ideal Group

etc. are some of the top most developers in India ., . Ikea can reach its target customers ( a

customer who is buying a new house ) using this way of tie-up with developers ., . it will

cost much more for Ikea to rent retail spaces as distribution channels and display areas ., .

tie-ups with builders ( developers ) will allow Ikea to minimize costs and keep the prices

affordable ., . builders will also be interested if Ikea pass on a percentage of the products

sold ( furnished apartments sold ) ., . Opportunity ( target market ) : As per Merrill lynch

data there are 210000 Indians whose worth is more than a million dollar ., . there are 35

million tax payers in India ., . this is just 3 % of the total population ., . while the scope is

huge in terms of numbers the challenge is to effectively reach the targeted 3% of the

population ., . this 3% is scattered and is not homogeneous ( not homogeneously

distributed ) ., .

Also as per the income tax data there are 42800 Indians who have declared that their

annual income is Rs. 1,00,00,000 /- ( 10 million I N R ) or more ., . These 42800 people

whose annual income is in excess of INR 10 MILLIONS , consist of the wealthy category (

super rich ) ., . Ikea can have a special range of super premium products to target this

category of customers ., . What these figures state undoubtedly is that there is a huge

opportunity and market lying for Ikea in India ., and the market is largely untapped with

only a miniscule of population using branded furniture ( from organized retailers ) ., there

is no short cut to success and no ready made prescription for becoming successful in the

Indian market ., . but we can prescribe a few suggestions which Ikea may find useful while

operating in India : 1.) Innovative approach ( like innovative distribution channel as

discussed above ) ., . 2.) Flexibility ( flexible approach ) ., . 3.) Quick adaptability ( adapt to

the Indian culture and adopt the Indian values ) ., . 4.) Personalised and customised

solutions .,. customised products to suit one's individual needs .,. personalized product to

cater to one's individual requirement ., Hope these approaches will help Ikea to garner a

sizable market share in India and gather momentum in its business operations after

entering India ., . gaining momentum from the beginning is important in a robust market.

Reply 0 0 AbuseWord | Share

Posted by: Prasanna V

July 23, 2013

IKEA's experience in China shows that its low-pricing strategy confused the consumers as

they looked upon IKEA as an aspirational brand and did not see it as a mass-market

retailer. This gap in communication can be avoided in the Indian market if IKEA plans to

have a strong promotion strategy that targets the middle class people and explain them the

value proposition and the pricing of their offerings (flat pack furniture, lighting, rugs,

plastics and so on).

Apart from their pricing and promotional strategies, the product offering also plays a

crucial role in India. It is advisable that they set liaison offices in India and understand the

Indian consumers first before foraying into the market. Here, the stress is on the mass-

market retailing aspect considering two major factors:

1. They can leverage the local sourcing that will result in reduction of cost.

2. For a global brand entering India, it augurs well if they are "Globally consistent, but

locally relevant".

Reply 1 0 AbuseWord | Share

Posted by: Shugato Banerjee

July 22, 2013

The case is an excellent example of a global corporation adapting and adopting to suit local

preferences. The fact that IKEA has always had to innovate through its history has helped

it to survive in difficult markets. Flexibility in what IKEA offers to its customers in terms of

customization has become the DNA of the brand. Its success in China and the lessons

learnt may not be very relevant in India because of the present political scenario and FDI

regulations. However, the greatest challenge for IKEA in India, which is seldom

highlighted in discussions is the fact that we are not comfortable with the 'Do-It-Yourself'

style when it comes to furniture. IKEA needs to invest a lot of resources into educating

Indian consumers about this if it intends to convert footfalls into robust sales.

Reply 0 0 AbuseWord | Share

Posted by: Akanksha Singh

July 21, 2013

In a developing economy like China, where global organizations have to face a lot of

challenge in terms of prices from the local merchants, IKEA has really shown its potential

to tame Asian markets. Ikea's low cost mass production strategy worked wonders in China.

The upper-middle class people wanted branded furniture at affordable prices and Ikea

provided that. It also used social media to make the youth aware of its products and

designs and remained ignorant to the fact that the local vendors were trying to copy their

designs. These experiences will be definitely useful when Ikea plans to enter into the

Indian markets but the strict FDI norms in the country, the rules and restriction offered by

the different state Governments will be a hard task for the organization. The company has

to cater to the local market and provide furniture at affordable prices and actively use

social media sites for promotional campaigns. Also it's clear that the South Asian markets

are not very conscious of the environment and do not like to pay for the polythene bags.

This implies for Indian markets also. In order to be successful in Asian markets, Ikea is

adopting numerous strategies, Will it lose its original positioning?

Posted by: Harshal Thakare

July 19, 2013

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THE INDIA TODAY GROUP India Today Aaj Tak Headlines Today Business Today Men's

THE INDIA TODAY GROUP India Today Aaj Tak Headlines Today Business Today Men's

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This entire case study helped us to understand importance of local customer needs and

their perception toward your brand.This case study also shown us how the IKEA kept

flexibility in their marketing strategy as per costumer zone making little changes to their

already established product.

Reply 0 0 AbuseWord | Share

Posted by: Ashna Garg

July 19, 2013

IKEA is an exemplar of a dynamic business which adopted itself according to its

environment rather than giving up and closing down because of the external environment.

It has truly followed 'The Law of Survival of the Fittest' by Charles Darwin. It is interesting

to know and learn how IKEA developed its roots in Sweden inspite of facing hostile

competitors and not only Sweden but the whole globe. Many learnings can be taken from

IKEA's brand adaptation in China. China is like the father of manufacturing cheap

consumer goods and is one of the biggest exporter of these goods around the globe. Entry

into the market might have been easy, but sustaining in it is commendable. Surviving and

getting success by a foreign company in a country like China erases the myth that only

designer and high end brands can do well everywhere. It can be seen from the case study

that IKEA found an innovative way every time it went to expand in another country as in

the United States and China. It takes a huge effort and resources to find a new idea every

time an organisation plans to expand. In the US, it had to make furniture according to the

needs of American customers, who demanded bigger beds and bigger closets, which was

very different from what IKEA manufactured originally, compact and foldable furniture.

Whereas in China, it had to decide its focus market unlike other countries where it covered

mass market. Not only this, it had to bring about changes in its marketing strategies, its

production strategies. So it was a complete topsy-turvy of what IKEA does originally. IKEA

is planning to open its store in India in 2014 and in just over 10 months, the Swedish

furniture major got the approval to set up stores across India with a phased investment of

Rs.10,500 crore. What could be a better explanation than this to tell about a company's

growth and success !

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Posted by: Rama Gurubaran V

July 18, 2013

IKEA is an excellent example of the prevailing marketing paradigm - "Marketing Concept",

which has been evolved through Production, Product and Selling concept. Furnitures in

India, is a highly unorganized segment and a potential opportunity for the company. IKEA,

through its success in China, has proven its expertise in experience marketing and constant

innovation to adapt to the change. The learnings we can get from the case: 1.Target the

right segment - It targets middle class population in China. From the success of

McDonald's and KFC, we can conclude that Urban middle class is the right segment in

India. 2. Understand local consumer needs - True to every market and should be employed

in India too. Similar to Chinese market, a typical Indian middle class customer don't prefer

larger beds due to space constraings. 3. Low prices - When IKEA is planning to cater to a

mass segment, price should be at the low end as in China 4. Environment friendly -

Retailers like Big Bazaar charge for plastic bags due to Govt regulation and IKEA won't

find difficulty in doing the same 5. 'Do-it-Yourself' - This model would work in India as

Indians are fond of getting attracted to new things. 6. Promotion: Social marketing is the

best to target urban middle class.

Posted by: Seemanchal Mohanty

July 16, 2013

Low cost in a developed market environment is not necessarily low cost in an emerging

market ,this is what most companies fail to understand .costs are cut ,discount offered etc

but these methods sometime reduce the perceptible quality of the product.IKEA even had

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to face street smart local manufacturers who were quick to create similar product at

fraction of the low cost the IKEA provided.the way IKEA observed the local consumers and

targeted audience by projecting itself as a aspirational brand (increase in social presence)

and developing stores at strategic location(to crack the transportation problem) helped

them to win in china without compromising profits.

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Posted by: Pavitra

July 15, 2013

IKEA's brand adaptation in China has many lessons for global companies looking to

expand into new markets or countries. Lesson 1 : It is imperative for the company to have a

thorough understanding of the local culture, people's habits and preferences(as is also seen

from the Kellog's case in India wherein Indians do not prefer cold milk with their cereal).

Lesson 2 : The company may have a stellar product/service, but if the pricing is not right, it

will never translate into profits. Here, low prices triggered confusion of the brand

positioning and high prices invited rivalry. The solution here was to cater to a niche of

westernized, urban youth. When we analyse this case using Porter's 5 forces, we can see

that : Bargaining power of suppliers is medium, as IKEA needed suppliers as much as the

suppliers needed Forex. Bargaining power of buyers is high as new markets, new rules,as

consequently power is with the buyer. Threat of new entrants is low as few are unique to

IKEA's positioning as a DIY global furniture manufacturer Threat of substitutes is low, as,

well, one does need furniture (unless one can make do with carpets) Inter-firm rivalry is

quite high, with local manufacturers coming out with similar designs at lower prices and

lastly, complementors play a big role here in the form of a. Chinese culture - Here people

are not very happy with the do-it-yourself concept b. Infrastructure - The fact that most

people use the public transportation also affects the sale of IKEA.

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