School of Business C-thesis in Business Administration, 10p Course code: EX0010 Supervisor: Leif Sanner 2006-06-07

“One Design Suits All” -A Case Study of Ikea in Shanghai, China

Neelima Srivastava

Grace Fei Andersson

ABSTRACT

DATE: 2006-06-07 LEVEL: Bachelor Thesis in Business Administration AUTHORS: Neelima Srivastava & Grace Fei Andersson Bangatan 3D Aspa 508 72228 Västerås 731097 Köping nsa02001@student.mdh.se gan02003@student.mdh.se ADVISOR: Leif Sanner TITLE: ‘One Design Suits All’ -A Case Study of IKEA in Shanghai, China PROBLEM: In today’s time of globalization, for a company to be successful

in foreign markets, it is important for a company to adapt itself to the local market preferences. However Ikea, the Swedish company sells a “typically Swedish” mix of homogeneous products worldwide and does not adapt to local market preferences. China is a culturally diverse market compared to that of Sweden. Ikea continues its standardization strategy in Shanghai, China.

PURPOSE: The aim of our thesis is to investigate the consumers perception

towards Ikea’s standardized marketing mix strategy, in Shanghai.

METHOD: We have used qualitative as well quantitative method in this thesis. The primary data (through questionnaire and telephone interview) and secondary data (from literature, articles, company reports and internet, have been gathered to get information on standardization strategy of Ikea, in Shanghai.

RESULT: We have found out that Ikea has succeeded quite well with its standardization strategy in Shanghai. Although there is no product specially designed for the local market, the typical Swedish designed products are highly appreciated by the consumers in Shanghai. The consumer’s acceptance towards this standardization strategy is rather positive.

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TABLE OF CONTENTS

1 INTRODUCTION ............................................................................................................. 1 1.1 Background .......................................................................................................................... 1 1.2 Statement of the problem .................................................................................................... 2 1.3 Statement of the purpose..................................................................................................... 3 1.4 Research questions............................................................................................................... 3 1.5 Delimitation .......................................................................................................................... 3 1.6 Structure of the report......................................................................................................... 5

2 RESEARCH METHODOLOGY ...................................................................................... 6 2.1 Choice of topic ...................................................................................................................... 6 2.2 Choice of research method.................................................................................................. 6 2.3 Research Design ................................................................................................................... 7 2.4 Research approach to data collection................................................................................. 7

2.4.1 Primary data .................................................................................................................................... 7 2.4.2 Secondary data................................................................................................................................ 8

2.5 Questionnaire ....................................................................................................................... 8 2.6 Interview with Customer Service Ikea, Shanghai............................................................. 9 2.7 Target group......................................................................................................................... 9 2.8 Sampling ............................................................................................................................... 9 2.9 Case Study .......................................................................................................................... 10 2.10 Validity and Reliability...................................................................................................... 11

3 THEORETICAL FRAMEWORK................................................................................... 12 3.1 Marketing mix.................................................................................................................... 12

3.1.1 Product .......................................................................................................................................... 13 3.1.2 Price .............................................................................................................................................. 13 3.1.3 Promotion...................................................................................................................................... 13 3.1.4 Place .............................................................................................................................................. 13

3.2 Standardization .................................................................................................................. 14 3.3 Culture and consumer behavior ....................................................................................... 15

3.3.1 Hierarchy of needs ........................................................................................................................ 15 3.3.2 Individualism and collectivism ..................................................................................................... 16

3.4 Chinese Culture.................................................................................................................. 17 3.5 Familism.............................................................................................................................. 17

4 Facts on Ikea, China and Shanghai............................................................................... 19 4.1 Description of Ikea............................................................................................................. 19

4.1.1 Ikea history.................................................................................................................................... 19 4.1.2 Ikea in the world............................................................................................................................ 19 4.1.3 Ikea’s vision .................................................................................................................................. 20

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4.1.4 Facts and Figures........................................................................................................................... 21 4.2 Description of China ..................................................................................................................... 22

4.2.1 Shanghai........................................................................................................................................ 22 4.2.2 Economy ....................................................................................................................................... 22 4.2.3 Housing conditions and real estates .............................................................................................. 23

5 EMPIRICAL FINDINGS ............................................................................................... 24 5.1 Product................................................................................................................................ 24 5.2 Price..................................................................................................................................... 24 5.3 Promotion ........................................................................................................................... 24 5.4 Place .................................................................................................................................... 25 5.5 Target group in Shanghai ................................................................................................. 25

6 Result and Analysis of Questionnaire ............................................................................ 27 6.1 Results of questionnaire .................................................................................................... 27 6.2 Analysis of questionnaire .................................................................................................. 33

7 Conclusions and recommendations................................................................................ 35

REFERENCES ....................................................................................................................... 37 Appendix 1 ........................................................................................................................................... 40

Questions asked to Ikea customer service in Shanghai ............................................................... 40 Appendix 2 ........................................................................................................................................... 40

Questionnaire to Consumers in Shanghai..................................................................................... 40 List of Figures ......................................................................................................................... 42

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1 INTRODUCTION This chapter presents a general view of the research subject, background and problem

description. Furthermore, we gave a description of the aim of the study and also of

delimitations. This chapter concludes with the structure of the report.

1.1 Background In this era of globalization, companies are taking part in the emerging global economy and

establishing themselves in foreign markets. Companies who want to do business on a global

market and achieve success must understand that customer behaviour is dependent on cultural

background. Global marketing does not necessarily mean providing the same product in all

countries, but offering local adaptations around a standardised core.1

Ikea’s international expansion began in 1974 and today Ikea has emerged as a global

player in one of the most highly fragmented industries in the world.2 “One-design-suits-all” is

one of Ikea's global strategies.3

Swedish company Ikea, one of the world’s largest furniture retailers, opened its first

store in Shanghai, China in 1998. China, a dynamic market offers challenges as well as risks

in terms of language barrier, varied cultural, demographic and market specific needs. China

boasts the world's fastest-growing economy as millions join the ranks of the middle class.

Furniture is a culture-bound product in China. We have conducted literature research and

survey in order to gather information on Ikea, its standardized marketing mix strategy, its

success and to contribute an understanding in managing culture difference in Shanghai.

"When Ikea first entered China, the store was considered too expensive for its target

consumers--young, professional couples--and the company lowered its prices,4 according to

Ulf Smedberg, marketing manager of Ikea China. Ikea is now planning to open 2 stores

annually in China up to 2010.

1 International retailing (MKT501C2) 2 IKEA Managing Global Expansion Business Strategy Case Studies Collection 3 IKEA’s Globalization Strategies and its Foray in China Business Strategy Case Studies Collection.htm 4 China Business Review, article ” IKEA with Chinese Characteristics”by Paula M. Miller

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1.2 Statement of the problem In today’s time of globalization, for a company to be successful in foreign markets, it is

important for a company to adjust the marketing mix elements to each target, bearing more

costs but hoping for a larger market share and return, this is so called adapted marketing mix.

The market concept holds that marketing programmes will be more effective if tailored to the

unique needs of each targeted customer group. Consumers in different countries have widely

varied cultural backgrounds, needs and wants, purchasing power, product preferences and

shopping patterns. Because these differences are hard to change, the marketing strategy

should then be tailored to fit the specific values and behaviours of the culture, thus most

marketers adapt their products, prices, channels and promotions to fit consumer desires in

each country.5 McDonald’s, for example, has adapted to local cultural values and traditions

rather than trying to implement a standard approach across the world. The company uses the

same basic operating formula in its restaurants around the world but adapts its menu to local

tastes.6 By modifying the marketing mix to make the product appeal to local cultures may

result in increased costs, but in long-run, gain more market shares and return.

The other extreme is standardised marketing mix, using basically the same product,

advertising, distribution channels and other elements of the marketing mix in all the

company’s international markets.7 In other words, creating a world brand to serve the entire

global. Companies deliver greater values to consumers by offering reliable, high quality

products at lower prices. The advantages of standardization include keeping costs down and

building global brand image. Many companies have tried to launch their world product.

Gillette, for instance, according to the company’s estimates, up to 1.2 billion people use at

least one Gillette product daily. Geillette enjoys economies of scale by selling a few types of

razor blades in every single market.8

However, standardization is a relative concept, even some standard global brands need

some adjustments when local wants cannot be changed or avoided. Coca-Cola is sweeter or

less carbonated in certain countries. 9

On the contrary, our research company Ikea, the Swedish home furnishing giant offers a

wide range of products with 100 percent uniformity worldwide. However, Anders Dahlvig,

Chief Executive, sees no need to tailor Ikea stores to local markets: 5 Philip Kotler, Veronica Wong, John Saunders, Gary Armstorng p.230 6 Philip Kotler, Veronica Wong, John Saunders, Gary Armstorng p.231 7 Philip Kotler,Veronica Wong, John Saunders, Gary Armstorng p.230 8 Philip Kotler p. 394 9 Philip Kotler p. 394

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‘Whether we are in China, Russia, Manhattan or London, people buy the same things. We

have the same range everywhere - we don’t adapt to local markets. If we were to adapt we

would just become another retailer in that region or city. The whole idea is to be unique -

uniquely Scandinavian and uniquely Ikea’.10

China is a dynamic market with a completely different language and culture compared to

that of Swedish culture. Chinese culture gives the Chinese people their basic identity. The

unique value of Chinese culture is shaped by a tradition of four thousand years of history and

the same language. Confucianism is undisputedly the most influential thought, which forms

the foundation of the Chinese cultural tradition and still provides the basis for the norms of

Chinese interpersonal behaviour.11

Furniture is a culture bound product, however Ikea sells a “typically Swedish” mix of

products in every country in which it does business and does not adapt to local market

preferences. China is a culturally diverse market compared to that of Sweden. Despite the

need for culture sensitivity, Ikea continues its standardization strategy in Shanghai, China. We

have tried to describe, identify and analyze Ikea’s standardized marketing mix strategy in

Shanghai.

1.3 Statement of the purpose The aim of our thesis is to investigate the consumers’ perception towards Ikea’s standardized

marketing mix strategy, in Shanghai, China.

1.4 Research questions

How do consumers perceive Ikea’s standardised marketing mix strategy?

1.5 Delimitation The authors decided to make a case study on Ikea’s standardization strategy of ‘one design

suits all’. The study was restricted on Ikea’s activities in the geographical business area in and

around Shanghai due to lack of time and resources. No comparison with any other local

furniture companies has been made in this paper.

10 Financial Times, 8/2/01 11 Pye, L.W. (1972). P.18

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We have selected the newly redesigned, Ikea store in Shanghai that reopened in 2003

to investigate the problem questions.

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1.6 Structure of the report

Introduction

Research Methodology

Theoretical Framework

Empirical Findings

Analysis

Conclusions

Appendix

Fig 1: Structure of the Report, Own Source

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2 RESEARCH METHODOLOGY We aimed to find an appropriate method to gather information about Ikea and its

standardization strategy in Shanghai. The information gathered would help us in analyzing

and drawing the conclusion about what has allowed Ikea to be successful with a

highly standardized marketing mix in Shanghai.

2.1 Choice of topic We wanted to write on an international company that has achieved success in doing business

with a country with same cultural background but also with a country with different cultural

influence. So, we decided to write about the world’s largest furniture retailer Ikea. China, one

of the world’s strongest growing markets and is a culturally diverse market in comparison with

Sweden. Therefore we considered the Ikea Shanghai case would be a good choice for studying

standardisation and cultural influence.

2.2 Choice of research method There are two main types of methodological approaches in literature study, qualitative method

and quantitative method. Qualitative and quantitative research represents different research

strategies and that each carries with it striking differences in terms of the role of theory,

epistemological issues and ontological concerns.12

The quantitative research can be constructed as a research strategy that emphasizes

quantification in the collection and analysis of data. Quantitative method enables researchers

to understand better the social structures.

By contrast, qualitative research is a research strategy that usually emphasizes words

rather than quantification in the collection and analysis of data.13

We have chosen both quantitative and qualitative method to accomplish this research.

The qualitative method is used when collecting findings from interview with Customer

Service, Ikea Shanghai, documents, articles and literature to create an analysis of the data

obtained. The quantitative data from the result of questionnaire is applied to display the

12 Alan Bryman, (2004) p. 15 13 Alan Bryman (2004), p. 266

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consumer preference of Ikea’s products. The information gathered from both methods was

used to reach a conclusion about the Ikea concept among consumers in Shanghai.

2.3 Research Design Cross-sectional design is often called a survey design, entails the collection of data on more

than one case at a single point in time in order to collect a body of qualitative data in

connection with two or more variables, which are examined to detect patterns of association.14

The advantage of using the cross-sectional research design is that it is relatively inexpensive

and takes up little time to conduct. Many outcomes can be assessed and one can estimate

prevalence of outcome of interest because sample is usually taken from the large population.

We have used Cross-sectional design for our research work as in this study our aim in this

study is to investigate about the consumer’s perception towards Ikea’s standardized marketing

mix strategy, in Shanghai.

2.4 Research approach to data collection The research method refers to the choice of technique for collecting empirical data15.

The research findings and data used in this paper have been qualitative, and furthermore in

secondary and primary form. We have integrated two types of data in connection with our

research study: the secondary data, and the primary data.

2.4.1 Primary data

Primary data was collected specifically for the research needs at hand.16

We gathered the primary data from response of Ikea consumers in Shanghai through a

questionnaire. Questionnaire was conceived with few fixed and alternative questions. Despite

of their hard effort, the authors were not successful in taking interview of marketing manager

in Ikea Shanghai, as the Ikea management has been occupied with their expansion in China.

We have also collected primary data through a telephone interview to Customer Service, Ikea

Shanghai. The information gathered concerned Ikea’s marketing-mix strategy in Shanghai.

14 Alan Bryman (2004) p .41 15 Alan Bryman (2004) pp. 26-27 16 Alan Bryman (2004) pp. 26-27

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2.4.2 Secondary data Secondary data was already published data collected for purposes other than the specific

research needs at hand.17

In secondary data, the information was collected through secondary information like, books,

articles, newsletters, databases and internet sources. In this research, we gathered the

secondary data for the theoretical framework. The theories from various areas were collected

from documents, articles and books to create an analysis of the data obtained. Secondary data

has also been collected by the use of databases such as ELIN, Emerald and ABI/Inform

through the university webpage link. Other secondary information was gathered via Google

Scholar too.

2.5 Questionnaire A questionnaire is a formalized schedule for collecting data from respondents.18 With a self-

completion questionnaire, respondents answer questions by completing the questionnaire

themselves.19

In consistence to research questions authors have used a self-completion questionnaire

to collect results (primary data). For convenience, we have chosen the close –end form of

questions, in which possible answers were provided for selection.

We tried to find out people's opinions, preferences, feelings, likes and dislikes about

Ikea, its products and services in Shanghai. We had prepared and organized the questionnaire

in Mandarin language due to language problem. The questionnaire attached in Appendix

section is only in English, as the Chinese characters could not be displayed on computers that

do not contain Chinese language program. Ikea consumers within the age group of 20 to 45

had been taken into consideration.

The questionnaire was sent by email to Mr. Chen Wengbing, a close contact of us. We

chose this method because they considered questionnaire to be the best way to investigate this

due to lack of time and resources. The questionnaire was conducted in Shanghai through Mr.

Chen Wengbing, who is running a marketing research agency within car industry in Shanghai.

Mr. Chen handed out the questionnaire to 110 customers who had been shopping at Ikea

on Saturday in Ikea Store in Shanghai. Before handing out the questionnaire it was made sure

17 Thomas C.Kinnear and James R.Taylor, p. 143 18 Thomas C.Kinnear and James R.Taylor, p. 353 19 Alan Bryman, (2004) p. 132

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by Mr. Chen that the consumers had done purchasing in Ikea and between 20 and 45 years

old. We finally received response from 100 customers of Ikea, Shanghai. For each question

the subjects were asked to fill in to what extent they agreed to a certain statement or question.

2.6 Interview with Customer Service Ikea, Shanghai There are several types of interviews. We had used telephonic interview to gather reliable

information for our case study. The telephonic interview was selected as a tool for data

gathering to receive objective opinion about the reality. Interview was conducted by us in

Mandarin through telephone rather than face to face. We contacted the Customer Service via

telephone on a working day and introduced ourselves to the customer service, Ikea Shanghai.

We explained to her our motive of taking this interview. After her consent to help us with our

queries about Ikea Shanghai’s marketing-mix, interview was conducted with questions

relating to Ikea’s marketing mix in Shanghai. We were successful in gathering some reliable

information through the Customer Service. The information obtained through interviews is

one of the bases for our information research.

2.7 Target group We hope that out research will be helpful to entrepreneurs and companies who want to go

global and achieve success in foreign market with a standardized strategy. Our target group

are also the business students of Mälardalen University and also the tutors of the business

department.

2.8 Sampling Sampling is the act, process, or technique of selecting a suitable sample, or a representative

part of a population for the purpose of determining parameters or characteristics of the whole

population.20 There are three primary kinds of samples: the convenience, the judgment

sample, and the random sample. They differ in the manner in which the elementary units are

chosen.

20 Mugo Fridah W (2000) p.178

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A convenience sample results when the more convenient elementary units are chosen from

a population for observation. A judgment sample is obtained according to the discretion of

someone who is familiar with the relevant characteristics of the population. This may be the

most important type of sample. A random sample allows a known probability that each

elementary unit will be chosen.21

The sample used for this case study consisted of people shopping at Ikea, Shanghai at

least once. They were chosen to give us an understanding of the customer’s perception

towards Ikea’s standardized marketing mix strategy, in Shanghai. This can be done especially

a case study – the researcher selects the sample based on whom they find appropriate for the

study.

For our research work, Ikea consumers within the age group of 20 to 45 had been taken

into consideration. This segment was then divided into age groups of 20-30, 31-35, 36-40 and

41-45. The questionnaire was conducted in Shanghai through Mr. Chen Wengbing, who is

running a marketing research agency within car industry in Shanghai. For each question the

subjects were asked to fill in to what extent they agreed to a certain statement or question.

This helped us in analyzing the customer’s perception about Ikea’s standardized marketing

mix in Shanghai.

2.9 Case Study A case study entails the detailed and an intensive analysis of a single case. As Stake (1995)

observes case study research is concerned with the complexity and particular nature of the

case in question.22

We found the case study suitable as the purpose of our research work is mainly

descriptive. In this case study we are interested in international company Ikea and its

standardized marketing mix strategy in foreign countries. Ikea has been successful with its

standardization strategies in mostly all the countries where it has done business. Background

to Ikea have described in introduction chapter. The purpose and problem statement are also in

Chapter one. The questions discussed in questionnaire and interview with Ikea Customer

Service are based on the purpose of our research and are relevant to the theoretical

framework.

21 Mugo Fridah W (2000) p.106 22 Alan Bryman (2004), pp 48-49

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2.10 Validity and Reliability Validity is concerned with the integrity of the conclusions that are generated from a piece of

research. Internal validity referred to the fit between the notions and the operational

(measurable) definitions while external validity a fit between the measure values we get when

we use an operational definition and the reality. Reliability is concerned with the question of

whether the measures that are derived for concepts in social sciences (such as poverty, radical

prejudice, deskilling, religious orthodoxy) are consistent.23

We prepared and organized the questionnaire in Mandarin (Chinese language) so that

respondents can easily understand it and survey was conducted in Shanghai. The

questionnaire was handed out to consumers, limited to the extent that only the individuals

who had been shopping at Ikea at least once answered the questions concerning Ikea’s

marketing mix. We gathered some important reliable information by contacting Customer

service, Ikea, Shanghai via telephone.

All secondary information had been gathered by qualified information sources:

literatures in international marketing, Marketing management, Chinese daily newspapers,

articles and Ikea Company’s home page and brochures. These helped us to increase validity

of the report.

23 Alan Bryman (2004) p. 28

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3 THEORETICAL FRAMEWORK In this chapter, we illuminate the most relevant theories that can help to enhance

the understanding of the empirical data and later to analyze it in depth. This

chapter starts with a general outlook on Marketing mix and then followed by description of

standardization. Further follows the facts on culture and consumer behavior, describing the

determinants of cultural influence on consumer behavior.

3.1 Marketing mix The marketing mix is the set of marketing tools the firm uses to pursue its marketing

objectives in the target market.24 There are four components in the marketing mix, called four

Ps, which are price, product, promotion and place (distribution). Marketing-mix decisions are

made for influencing the trade channels as well as the final consumers.

Fig 2: Marketing Mix25

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24 Philip Kotler (2003) P.15 25 Marketing-Mix 2006

3.1.1

3.1.2 Price

3.1.3 Promotion

3.1.4 Place

Product A product is defined as “anything that can be offered to satisfy a want or need. Products that

are marketed include physical goods, services, experiences, events, places, persons,

properties, organizations, information, and ideas, according to Philip Kotler.26

Product decisions include aspects such as product feature, quality, packaging, services,

advertising, customer advice, financing, delivery arrangements, warehousing, and other things

that people value.

According to Philip Kotler, price is defined as “The amount of money charged for a product

or service, or the sum of the values that customers exchange for the benefits of having or

using the product or service.”27 Price is the most important element of the marketing mix,

since it is the only factor that generates revenue due to the fact that other three elements

produce cost. Although prices are the easiest marketing mix element to adjust,28it is still

challenging for international companies to set prices.

Sales promotion, a key ingredient in marketing campaigns, consists of a diverse collection of

incentive tools, mostly short term, designed to stimulate quicker or greater purchase of

particular products or services by consumers or the trade.29

Place decisions are those associated with channels of distribution that serves as the means for

getting the product to the target customers. The distribution system performs transactional,

logistical and facilitating functions.

Distribution decisions include market coverage, channel member selection, logistics, and

levels of service.30

26 Philip Kotler (2003) P.15 27 Philip Kotler and G. Amstrong ( 1996) P.340 28 Philip Kotler (2003) P.470 29 Philip Kotler (2003) P.609 30 Marketing-Mix, Quick MBA

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3.2 Standardization Expanding across borders has increased competition for international marketers. All though

customer needs vary, customized products seem to be favorable to serve different target

groups. Still, some global companies have tried to prove the opposite, using one standard

range of products and services to serve the entire global.

A company’s decision to pursue a specific product strategy primarily depends on three

factors: (1) whether the product function or the need satisfies is the same or different in a new

market, (2) whether particular conditions surrounding product use can affect company

strategy; and (3) whether target market customers are financially able to buy the product.

These three factors greatly influence the product strategy chosen31, standardization or

adaptation.

The standarlization topic has been a source of considerable debate since early 1990s,

surveys of international agency practioners confirmed overall optimism about the increasing

expectations of standradized marketing . Since the beginning of the 1990s, Unilver, Mars, and

P&G, among others, began to steamline their brand portfolios by seeking greater marketing

effectiveness with fewer brands, moving away from complicated multinational portfolios

toward what are called “harmonized global brands”32

Standardization means offering identical products worldwide at identical prices via

identical distribution channels, supported by identical sales and promotion programs.

Assumed homogenization of needs across borders is the most frequently mentioned reason for

standardization.33

Standardization helps in creating a uniform worldwide corporate image, a world brand

or global brand with a global image. Harvard Professor Theodore Levitt argues this view of

focusing on similarites across world markets because of increased world travel and worldwide

telecommunications capabilities, consumers the world over are thinking and shopping

increasing alike. Tastes, preferences, and motivations of people in different cultures are

becoming homogeneous.34 Theodore Levitt states, “ The world is becoming a common

market-place in which people-no matter where they live-desire the same products and

lifestyles.”35 Companies that make their profits by following the trend of globally

homogenizing needs and preferences achieve, as a result of standardization, economies of 31 Jeannet & Hennessey (1995) p.363 32 Mihailovic & De Chernatony (1995) 33 Marieke de Mooij (1998) p. 25 34 Thomas J.Reynolds and Alyce Byrd Craddock (1988) pp.43-54 35 Theodore Levitt pp.92-102

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scale in procurement, logistics, production, and marketing, and also in the transfer of

management expertise, all of which is eventually supposed to lead to lower prices. 36

Complete standarization of product design results in a substantial saving of production

and research and development costs and will allow a company to take full advatage of

economies of scale. Aside from these obvious advantages, a uniform brand image avoids

confusion, universal guidelines and quality standards, better access to know-how and the

experience of other countries37 are other factors that support standardization.

Standardized products are more easily accepted in less affluent markets. Conditions in

less affluent markets ( under-supply economies and less competitive markets) may make

multinational companies less conscious of being ultra-competitive. Also, in less sophisticated

markets, foreign products tend to be preceived as superior to local products.38 But affluence is

increasing worldwide, and consumers are becoming more sofisticated and governments more

protective of local values. This will result in decreased acceptace of products from other

countries with values that are not appreciated by indigenous populations.39

3.3 Culture and consumer behavior In the 1870s, the anthropologist Edward Taylor defined culture as “the complex whole which

includes knowledge, belief, art, morals, law, custom, and other capabilities acquired by man

as a member of society.”40 The determinants of culture include language, social structure,

religion, political philosophy, economic philosophy, and education. 41

Although consumer behavior has strong universal components, it is important to stress

its cultural impact on consumer behavior. Here are several essential points of cultural

influence on consumer behavior are worth considering in some detail:42

3.3.1 Hierarchy of needs Maslow’s hierarchy of needs is a theory in psychology that Abraham Maslow proposed in his

1943 paper A Theory of Human Motivation, which he subsequently extended.43 The five

components of hierarchy of needs are self-actualization, esteem needs, social needs, safety

36 Marieke de Mooij(1998) p.198 37 Marieke de Mooij (1998) p.198-224 38 James, W.L, & Hill, J.S (1991) pp.65-71 39 Marieke de Mooij (1998) p.30 40 Charles W.L. Hill ( 2005)p.91 41 Charles W.L. Hill ( 2005)p.91 42 Usunier, Jean-Claude p.15 43 Maslow's hierarchy of needs 2006

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needs, physiological needs, from top to botton hierarchical level.44 When a need is reached

and satisfied, the next level need is in place to replace it.

The level of economic development naturally has some influence: in a less developed

economy people usually have more basic survival needs. However, dominant values may

clash with the pragmatic idea that you have to be able to buy food before buying a refrigerator

to keep the food fresh. The theory of hierarchy of needs is not actually true when different

cultures get involved. Some cultures (for example, Hindu) encourage needs of self-

actualization (the highest level), the satisfaction of which does not necessarily imply material

consumption. The need for safety (shelter and basic personal protection) is not satisfied

according to the same criteria in different cultures.45

3.3.2 Individualism and collectivism The 5-Dimension model was developed by Geert Hofstede, who analyzed data collected by

IBM to try to find an explanation for the fact that some concepts of motivation did not work

in all countries in the same way. This model is based on 30 years of quantitative research. The

original database was from an extensive IBM database between 1967 and 1973. Later,

additional Chinese Value Survey was conducted in 23 countries by Michael Harris Bond.46

Among these five dimensions, we have only chosen individualism and collectivism, which we

considered relevant to our study.

The contrast individualism and collectivism can be defined as “people looking after

themselves and their immediate family only, versus people belonging to in-groups that look

after them in exchange for loyalty.” In individualistic cultures, one’s identity is the person,

people are “I” conscious, express private opinions, and self-actualization is important;

individual decisions are valued more highly than group decisions. In an individualistic

culture, people give priority to the task; in collectivistic cultures priority is given to

relationship with people. In individualistic cultures, there is more explicit, verbal

communication. In a collectivistic culture, people are “we”-conscious, their identity is based

on the social system to which they belong and avoiding loss of face is important. In

individualistic cultures the person is viewed as an independent, autonomous entity with a

distinctive set of attributes (traits, abilities, motives and values). In collectivistic cultures

44 Marieke de Mooij (1998) p.142 45 Usunier (1993), p.15 46 Marieke de Mooij (1998) p.75

16

individuals are fundamentally dependent on each other. The self cannot be separated from

others and the surrounding social context. Self-reflection is more common among

individualists than collectivists because for the latter their relationships to others are more

important than self-knowledge. 47

Sweden is viewed as individualist whereas Asian countries in general as collectivists. In

the Collectivistic Chinese society (and in other Asiatic societies), the individual is not “inner-

directed” at all but controlled by a need for not losing face. “Face” is lost when the individual,

either through his action or that of people closely related to him, fails to meet essential

requirement placed upon him by virtue of the social position he occupies.48

3.4 Chinese Culture The core values of Chinese culture are unique and consistent, shaped by a tradition of five

thousand years of history and maintained by the same language. Nevertheless, Confucianism

is undisputedly the most influential thought, which forms the foundation of the Chinese

culture tradition and still provides the basis for the norms of Chinese interpersonal behavior.49

The basic teaching of Confucius is regarding human relationships, humanity, righteousness,

propriety, wisdom and faithfulness.50 One of the important values of Chinese culture is

bearing hardship. The contemporary Chinese culture consists of three major elements:

traditional culture, communist ideology and, more recently, western values.51

3.5 Familism Among the five fundamental human relations, three of which relate to family relations are:

Parent and child, husband and wife, and brother and sister, which clearly show the importance

of family in Chinese society and account for its paternalism.52 A Chinese individual must

always take into account all the members of the family when making a purchase decision,

compared to an interactive decision-making process undertaken by husband and wife in the

West where important household expenditure is concerned.

47 Mreieke De Mooij (1998) p.75 48 Ho, D.Y.F. (1978) pp.41, 391-402 49 Pye, L.W “ China: An introduction” 1972 Boston: Little Brown 50 Ch’en, C (1986). Neo-Confucian terms explained. New York, Columbia University Press. 51 Ying Fan “ A classicification of Chinese Culture” 52 Ying Fan “ A classicification of Chinese Culture”

17

As the smallest unit in society, family plays a central roll in China. Family has huge

impact on an individual’s upbringing as well as its purchasing behavior. It is tradition for

Chinese children to live at home until they get married.

18

4 Facts on Ikea, China and Shanghai In this chapter presents the facts and information about Ikea, China and finally Shanghai

acquired by secondary sources through books, articles and internet.

4.1 Description of Ikea Ikea, with a standardized strategy across the world, market a Swedish-Scandinavian design,

heavily promoting and selling modern, low priced, world-standard and dependable products.

Ikea’s marketing strategy is "To offer a wide range of well designed, functional home

furnishing products at prices so low that as many people as possible will be able to afford

them." 53 The company targets the young educated people of all ages with low income, likely

to start family, looking for value and is willing to do a little bit of work serving themselves.

Ikea emphasizes mainly on do-it-yourself strategy.

4.1.1 Ikea history IKEA was founded in 1943 in Älmhult, Sweden by Ingvar Kamprad. The name Ikea was

formed from the founder's initials (I.K.) plus the first letters of Elmtaryd and Agunnaryd, the

farm and village where he grew up.54

IKEA originally sold pens, wallets, picture frames, table runners, watches, jewelry and

nylon stockings—whatever Ingvar found a need for that he could fill with a product at a

reduced price. Furniture was first added to the Ikea product range in 1947 and, in 1955, Ikea

began to design its own furniture.55

At first, Kamprad sold his goods out of his home and by mail order, but eventually a store

was opened in the nearby town of Älmhult. It was also the location for the first Ikea

"warehouse" store which came to serve as a model for Ikea establishments elsewhere and on

March 23, 1963, the first store outside Sweden was opened in Asker, a Norwegian

municipality outside Oslo.56

4.1.2 Ikea in the world

53 IKEA/our vision-a better everyday life 54 IKEA/timeline-the full story 55 IKEA/timeline-the full story 56 IKEA/timeline-the full story

19

The globalization strategy developed by Ikea, is a home-based strategy built around a

Swedish concept calling for furniture that are clean, modern, efficient, functional, sustainable

and competitive price wise. Ikea sells furniture and additional accessories for

accommodations worldwide and the company has a reputation for selling inexpensive, self-

assembled furniture.

Ikea opened its first store abroad, in Oslo in 1963, then in Denmark in 1969, in

Switzerland in 1973, Germany in 1974, Canada in 1976, Australia in 1977, the Netherlands in

1979, France in 1981, Belgium in 1984, United States in 1985, Italy in 1989, Hungary and

Poland in 1990, Czech Republic United Arab Emirates in 1991. Ikea continued to expand its

stores to Spain, China, Russia and Portugal between 1996 and 2004.

There is a grand total of 231 Ikea stores in 33 countries/territories and earning

$18,498,843,822 in revenues. The Ikea group has 90,000 co-workers and operates in 44

countries. Ikea has 28 distribution centers in 16 countries that supply goods to Ikea store.

Ikea’s mainland China stores belong to the Ikea Group and operate as joint ventures.

4.1.3 Ikea’s vision Ikea’s vision is to create a better everyday life for the many people and their business idea is

to offer a wide range of home furnishings with good design and function at prices so low that

as many people as possible will be able to afford them. Their business idea is to create value

and partnership with the customer.57

In order to give the many people a better everyday life, Ikea asks the customer to work as a

partner. The product range is child-friendly and covers the needs of the whole family, young

and old. So together they can create a better everyday life for everyone.

Sweden has an international reputation for safety and quality you can rely on, and Ikea

retailers take pride in offering the right quality in all situations. In Ikea, quality is not

compromised for the sake of cost.

Many people associate Sweden with a fresh, healthy way of life. This Swedish lifestyle is

reflected in the Ikea product range. The freshness of the open air is reflected in the colours

and materials used and the sense of space they create: blond woods, natural textiles and

untreated surfaces.58

57 IKEA / our vision – our heritage 58 IKEA / our vision – our heritage

20

4.1.4 Facts and Figures Sales 1995-2005

Fig 4: The IKEA Group Sales (1995- 2005) 59

We can see from the chart above that sales grew constantly from 1995 to 2005. Sales for the

IKEA Group for the financial year 2005 (1September2004 – 31 August 2005) totaled 14.8

billion euros ($18,468,104,898 ).60

Fig 5: Sales and Purchasing by region61

The pie charts above show where sales and purchasing were generated in the year 2005. The

biggest sales were achieved in Europe with 81%, followed by North America with 16% and

Asia and Australia with only 3%. The biggest purchasing was achieved in Europe with 67%,

followed by Asia with 30% and North America with only 3%.

59 IKEA/facts & figures-figures 60 IKEA/facts & figures-figures 61IKEA/facts & figures-figures

21

4.2 Description of China China is a fast-growing market, ranked as the largest country in the world with its

population of 1.3 billion, and has experienced continuous economic growth of 9 percent a

year over the past 25 years.62 During the past eight years China has seen a huge surge in

homeownership as authorities did away with state-allocated housing and subsidized rentals.

Because many apartments are typically empty shells sold without paint, lighting or even

flooring, the market for home furnishings has taken off.63

Having joined the World Trade Organization (WTO) in 2002, China is now officially

fully open for business and may soon be the biggest economy in the world.64 Joining WTO

has opened a new chapter in Chinese politics to allow foreign enterprisers to have a business

structure of wholly foreign Owed enterprise which was not possible before 2002. China is

Ikea’s latest expansion market since 1998.

4.2.1

4.2.2

Shanghai Shanghai is the largest city and seaport in China. It is a centre of industry base, technique,

finance, information, commerce and culture. Its background and most developed

infrastructure have made Shanghai a unique place to China as well as to the outside world.

Economy The income levels of urban and rural residents have kept rising along with Shanghai’s

economic development. In 2004, the average per capita annual disposable income among

local urban residents reached 16,683 Yuan ($2,100), up 12.2% from the previous year in

terms of comparable prices. Families with an average annual per capita disposable income

exceeding 20,000 Yuan ($2,500) accounted for 27.2% of the total. The average per capital

annual disposable income among rural residents reached 7,337 Yuan ($917), up 10.2% and

the number of rural families with an average annual per capital disposable income exceeding

8,000 Yuan ($1000) reached 36.8% of the total.65

62 DFJ DragonFund China 2006-05-25 63 Article: “Ikea Goes Even More Cut-Rate to Draw Chinese Shoppers” by Mei Fong, Washington Post 64 Tim Ambler And Morgen Witzel “ Doing Business In China” 65 Shanghai Daily----English Window to China News.htm 25 April, 2006

22

4.2.3 Housing conditions and real estates The city has residential buildings of 257 million square meters, or 73.6% of the city total. By

the end of 2004, more than 94.1% of local residents lived in new homes with garden or

courtyard style apartment buildings and 92.5% of housing had all necessary amenities. In the

urban districts, the average per capita living space reached 14.88 square meters 8.2 square

meters more than the 1990 figure. Meanwhile, the average per capita use space reached 20.4

square meters.

In rural areas, the average per capita living space reached 59.8 square meters and more

houses were equipped with washrooms.66

Fig 6: New Housing and Urban Average per Capita Housing Space67

66 Shanghai Daily----English Window to China News.htm 25 April, 2006 67 Shanghai Daily----English Window to China News.htm 25 April, 2006

23

5 EMPIRICAL FINDINGS

In this chapter presents the empirical findings about Ikea and its marketing mix in Shanghai

that are acquired from primary information through customer service Ikea, Shanghai.

5.1 Product According to customer service Shanghai Ikea in Shanghai offers more than 7,000 products for

the home under one roof: sofas, beds, tables, chairs, textiles, kitchen utensils, flooring, rugs,

kitchens, bathrooms, lamps, kids' soft toys and plants. No specific item is produced for the

Chinese market. IKEA also features a 170m2 children's playground and a 500-seat restaurant.

A well-designed product can create a distinct competitive advantage. Ikea products are

modern and are functional enough for everyday use. Ikea sells the same products of

Scandinavian design. All products that sold in Shanghai store are produced in China.

Ikea continues its “flat packaging strategy” in Shanghai.

At the check out reception, customers can show the receipt to get a local home

delivery for a fee. Ikea also offers long-distance delivery to major cities in China by charging

a fee, a fee-based assembly services. Ikea store in Shanghai is opened daily from 10.00 to

22.00, just like any other department stores in China.

5.2 Price We were told when concerning price, Ikea did reduce prices when first entered China, the

store was considered too expensive for its target consumers--young, professional couples, so

the company lowered its prices. With the rapidly increasing wages in the Shanghai the store's

prices are no-longer considered high-range store in Shanghai. A typical Ikea customer earns

about Yen 3,000 ($400) per month.

5.3 Promotion According to customer service, Ikea posts in-store instructions and design advice, publishes

brochures and catalogues, and operates a detailed website to help Chinese customers

understand the Ikea concept. People do not get catalogues delivered at home by Ikea. Ikea

24

also advertises on the local Chinese newspaper in Shanghai, as the target group is generally

information seeker and newspaper reader.

Ikea is well known and successful in the western world for its DIY (do-it-yourself)

principle but in Shanghai, China, where labor is cheap, the DIY notion had not taken hold in

the beginning. We were told that Ikea tried to get the idea to the public that they can save

money on do-it-yourself assembly without sacrificing style and quality.

Ikea translated and transformed its brand name into Chinese character, YIJA, mentioned

customer service. In China, YIJA means “pleasant and comfortable home” which can be easily

associated with IKEA product categories. YIJA matches the desired symbol of the Chinese

value of “familism”.

According to customer service, Ikea offers discounts every month. Some items are

selected and given a discount. The store's room settings are full of furnishing and decor ideas.

Ikea also produces brief TV spots that show living areas before and after Ikea’s magic touch.

IKEA uses a variety of methods to obtain market data on Chinese customer knowledge.

Ikea people have been conducting home visits, city visits, telephone surveys to identify what

knowledge the customer has, how much money they have to spend, and what their needs are.

5.4 Place Usually IKEA stores open relatively far out in the suburbs, but in Shanghai, Ikea is

strategically located in the heart of Xu Jia Hui, No.126 CaoXi road, Shanghai, a booming

residential and commercial hub of Shanghai.

Customer service also mentioned that Ikea is situated at the crossroad of a major elevated

highway and a light railway line. Ikea is also within walking distance from a public bus

terminal. There is a huge basement car park and a basement taxi stand for customers. Ikea

contracts out its taxi service exclusively to a local taxi company, Qiang Sheng Taxi so that

customers enjoy prompt and premium taxi services. The Shanghai store has almost 1,000

parking places.

5.5 Target group in Shanghai Ikea target group in Shanghai is middle class young professionals between 20 and 35

years old but the store now attracts an increasing number of customers closer to age 45.

Many customers are families with children or are double-income or well-educated couples

without children. Ikea's customers are generally better educated, earn higher incomes, and

25

travel more than the average Chinese. And, like most Ikea shops around the world, more than

50 percent of Ikea customers are women.

26

6 Result and Analysis of Questionnaire In this survey, consumers within the age range of 20 to 45 had been taken into consideration.

This segment was then divided into four age groups of 20-30, 31-35, 36-40 and 41-45. The

total number within each age group then divides all figures collected for each category to

obtain the percentage of consumers. We then put the data into Excel to obtain a staple

diagram to illustrate the result.

6.1 Results of questionnaire 1. Gender

Age Male Female Total

20-30 7 5 12

31-35 25 22 47

36-40 20 12 32

41-45 4 5 9 0%

10%20%30%40%50%60%70%

Con

sum

ers

(in %

)

20-30 31-35 36-40 41-45

Age Group of Consumers

Gender

Male

Female

The consumers who answered the survey, within the age group 20-30, 58% were male and 42% female;

within the age group 31-35, 53% were male and 47% female; within the age group 36-40, 63% were

male and 37% female; within the age group 41-45, 44% were male and 56% female.

2. Which level of education do you have?

0%10%20%30%40%50%60%70%

Con

sum

ers

(in %

)

20-30 31-35 36-40 41-45

Age group of comsumers

Education level of consumers

High school

College

University

Age High

school College University Total

20-30 8 2 2 12

31-35 10 10 27 47

36-40 10 5 17 32

41-45 5 0 4 9 When asked about their education level, within the age group 20-30, 66% had high school

education, 17% college degree and 17% university degree; within the age group 31-35, 21%

had high school education, 21% college degree and 58% university degree; within the age

group 36-40, 31% had high school education, 16% college degree and 53% university degree;

27

within the age group 41-45, 56% had high school education, 0% college degree and 44%

university degree.

3. Specify your civil status.

0%

20%

40%

60%

80%

Con

sum

er (i

n %

)

20-30 31-35 36-40 41-45

Age group of consumers

Civil status of consumers

Single live withparent

Single livealone

Married withchild

Married withoutchild

Age

Single live with

parents

Single live

alone

Marriedwith child

Married without child Total

20-30 8 1 1 2 12 31-35 5 6 25 11 47 36-40 1 5 20 6 32 41-45 0 0 7 2 9

When asked about their civil status, within the age group 20-30, single live with parents were

68%, single live alone 8%, married with child 8% and married without child 16%; within the

age group 31-35, single live with parents were 11%, single live alone 13%, married with child

53% and married without child 23%; within the age group 36-40, single live with parents

were 3% single live alone 16%married with child 62% and married without child 19%; within

the age group 41-45, single live with parents were 0%, single live alone 0%, married with

child 78% and married without child 22%.

4. Which is your annual income level?

Age 10,000-40,000

40,000-80,000

80,000-100,000

Above 100,000 Total

20-30 9 2 1 0 12

31-35 8 21 11 7 47

36-40 7 18 4 3 32

41-45 3 3 2 1 9

W a e age group 20-30, annual income 10,000-

40,000 Yuan were 75%, 40,000-80,000 17%, 80,000-100,000 8%, above 100,000 0%; within

gro 31- annu ncom

80,000-100,000 23%, above 100,000 15%; within the age group 36-40, annual income

0,000-40,000 Yuan were 22%, 40,000-80,000 56%, 80,000-100,000 13%, above 100,000

0%

20%

40%

60%

80%

Con

sum

ers

(in %

)

20-30 31-35 36-40 41-45

Age group of consumers

Annual Income level of consumers10,000-40,000 Yuan40,000-80,000 Yuan80,000-100,000 Yuanabove 100,000 Yuan

hen sked about their income level, within th

the age up 35, al i e 10,000-40,000 Yuan were 17%, 40,000-80,000 45%,

1

28

9%; within the age group 41-45, annual income 10,000-40,000 Yuan were 33%, 40,000-

80,000 33%, 80,000-100,000 22%, above 100,000 12%.

5. How often do you shop at Ikea?

Age Seldom Few times Often Total

20-30 5 4 3 12

31-35 12 30 5 47

29

the age group 41-45, 22% answered just

36-40 10 19 3 32

41-45 2 4 3 9

When asked about frequency of shopping at Ik

seldom, 33% few times, 25% often; within

few times, 11% often; within the age group 36-

often; within the age group 41-45, 31% answ

6 ha t Ik op nvironment?

Just okay Good Very good Total

ea, within the age group 20-30, 42% answered

the age group 31-35, 26% answered seldom, 63%

40, 31% answered seldom, 60% few times, 9%

ered seldom, 60% few times, 9% often.

20-30 31-35 36-40 41-45

Age group of consumers

0%10%20%30%40%50%60%70%

Con

sum

ers

(in %

)

Frequency of Purchasing

Seldom

Few times

Often

. W t do you hink of ea’s sh ping e

Age

20-30 4 6 2 12

31-35 6 16 25 47

36-40 2 22 8 32

41-45 2 3 4 9

When asked about the shopping environment at Ikea, within the age group 20-30, 33%

0%10%20%30%40%50%60%70%

Con

sum

ers

(in %

)

20-30 31-35 36-40 41-45

Age group of consumers

Shopping environment

Just okejGood Very good

nswered just okay, 50% good and 17% very good; within the age group 31-35, 13%

a the age group 36-40, 6% answered

just okay, 69% good and 25% very good; within

okay, 33% good and 45% very good.

a

nswered just okay, 34% good and 53% very good; within

7. What do you think of th es of Ikea products?

Age Cheap Acceptable Expensive Total

e pric

20-30 1 1 10 12

31-35 1 2 27 8 47

36-40 7 17 8 32

41-45 2 2 5 9

When asked about prices of Ikea products, within the age group 20-30, 8% considered cheap,

8% acceptable, 84% expensive; within the age group 31-35, 26% considered cheap, 57%

acceptable, 17% expensive; within the

Age group of consumers

0%10%20%30%40%50%60%70%80%90%

cons

umer

s (in

%)

20-30 31-35 36-40 41-45

Price

CheapAcceptableExpensive

age group 36-40, 22% considered cheap, 53%

cceptable, 25% expensive; within the age group 41-45, 22% considered cheap, 22%

cceptable, 56% expensive.

8 What do you think of the Ikea product design?

Age Just okay Good Very Good Total

a

a

20-30 1 5 6 12

31-35 0 18 29 47

36-40 4 15 13 32

41-45 2 6 1 9

When asked about Ikea product design, within the age group 20-30, 8% considered just okay,

42% good, and 50% very good; within the age group 31-35, 0% considered just okay, 38%

good, and 62% very good; within the age group 36-40, 12% considered just okay, 47% good,

and 41% very good; within the age group 41-45, 22% considered just okay, 67% good, and

11% very good.

0%10%20%30%40%50%60%70%

Con

sum

ers

(in %

)

20-30 31-35 36-40 41-45

Age group of consumers

Design

Just okayGoodVery Good

30

9. If you brought an Ikea bookshelf, how would you take it home?

Ikea

20-30 2 80%

100%

Delivery Service

When asked about Ikea delivery service, within the age group 20-30, 17% would use self-

delivery, 83% Ikea delivery; within the age group 31-35, 21% would use self-delivery, 79%

Ikea delivery; within the age group 36-40, 37% would use self- delivery, 63% Ikea delivery;

use self delivery, 78% Ikea delivery.

10. How would you like to assemble the bookshelf?

within the age group 41-45, 22% would

Age Self-

assembly Ikea-

assembly Total

31-35 20 27 47

36-40 12 20 32 40%50%

70%

Assembly service20-30 5 7 12

41-45 3 6 9

W would consider self-

assembly, 58% Ikea assembly; within the

assembly, 57% Ikea assemb thin the

assembly, 63% Ikea assembly; within the

assembly, 67% Ikea assembly.

Age Self delivery delivery Total

10 12

31-35 10 37 47

36-40 12 20 32

41-45 2 7 9

0%

20%

40%

60%

Con

sum

ers

(in

%)

20-30 31-35 36-40 41-45

Age group of consumers

Self deliveryIkea delivery

0%10%20%30%

60%

Con

sum

er( i

n %

)

20-30 31-35 36-40 41-45

Age group of consumers

Self-assemblyIkea-assembly

hen asked about assembly service, within the age group 20-30, 42%

age group 31-35, 43% would consider self-

age group 36-40, 37% would consider self-

age group 41-45, 33% would consider self-

ly; wi

31

11. What is your own experience towards Ikea product quality?

When asked about Ikea product quality, within the age group 20-30, 8% considered bad, 42%

acceptable, 33% good and 17% very good; within the age group 31-35, 11% considered bad,

25% acceptable, 53% good and 11% very good; within the age group36-40, 9% considered

a accept e, 44% g and 16% ery good; within the age group41-45, 11%

onsidered bad, 22% acceptable, 56% good and 11% very good.

od Total

0%10%20%30%40%50%60%

Con

sum

ers

(in%

)

20-30 31-35 36-40 41-45

Age group of consumers

Consumers view on Quality of products

BadAcceptableGoodVery Good

b d, 31% abl ood v

2 5

c

12. What do you think of Ikea’s return policy?

Age Good Very Go

20-30 4 8 12

31-35 10 37 47

36-40 5 27 32

41-45 2 7 9

n asked about Ikea’s return policy, w

6 ery d o 5 cons

p -40, 16 consid ed go , 84%

considered good, 78% very good.

Age Bad Acceptable Good Good Total Very

20-30 1 5 4 2 12

31-35 5 12 25 5 47

36-40 3 10 14 5 32

41-45 1 1 9

0%

20%

40%

60%

80%

100%

Con

sum

ers(

in%

)

20-30 31-35 36-40 41-45

Age group of consumers

Return Policy

GoodVery Good

Whe ithin the age group 20-30, 33% considered good,

idered good, 79% very good; within the

ry good; within the age group 41-45, 22%

7% v goo ; within the age gr up31-3 , 21%

age grou 36 % er od ve

32

13. What do you think Ikea should do in the future?

Reduce Improve Reduce delivery

Consumers Suggestion

Age Price quality cost Total 20-30 10 1 1 12 31-35 12 18 17 47 36-40 8 6 18 32 41-45 5 1 3 9

When asked about what Ikea should do in the future, within the age group 20-30, 83%

thought Ikea should reduce price, 8% improve quality and 9% reduce delivery cost; within the

age group 31-35, 26% thought Ikea should redu

reduce delivery cost; within the age group 36-40, 25% thought Ik

improve quality and 56% reduce delivery cost

should reduce price, 11% improve qua

6.2 Analysis of questionnaire When conducting the questionnaire, we had taken consideration into the group of people Ikea

targeting at in Shanghai. Therefore the first four questions concerning culture difference were

included, we asked specially the consumers’ civil status, education and income level.

The survey results show that the majority of Ikea customers in Shanghai are highly

ducated and earn higher incomes. Ikea’s target group in Shanghai is between 20-35 years

Although there is no product specially designed for the local market, the typical

wedish designed products are highly appreciated by the consumers in Shanghai. But there is

onsiderable number of consumers consider that the quality of Ikea product is not as good as

ey expected. Consumers have an opinion that besides cutting price Ikea should improve the

uality of its products.

0%

20%

40%

60%

80%

100%

Con

sum

ers(

in%

)

20-30 31-35 36-40 41-45

Age group of consumers

s

Reduce Price

Improve quality

Reduce delivery cost

ce price, 38% improve quality and 36%

ea should reduce price, 19%

; within the age group41-45, 56% thought Ikea

lity and 33% reduce delivery cost.

e

old, however it is evident from the results of the survey that the majority of customers

shopping at Ikea in Shanghai are from the age group of 31-40, and the potential purchasing

power is from the age group of 41-45, of which, 56% are female consumers.

S

c

th

q

33

The DIY (do-it-yourself) notion is still not much popular among the consumers and the

m hereas, this DIY notion is popular

mong the youngest group of consumers aged 20-30 who want to try something new.

As

sh on du del cos , as some consumers suggested in the survey.

Return policy is some g new Chine onsumers and is very much appreciated by them.

People in Shanghai also give good credits to Ikea shopping environment. Since the majority

mer’ ercept about Ikea’s product is positive, Ikea has succeeded quite well in

hanghai.

ajority of consumers use the Ikea assembly service. W

a

most of

sider re

the consu

cing it

mers do not have cars, rely on Ikea’s delivery service. Ikea

iveryould c t more

thin to se c

consu s p ionof

S

34

7 Conclusions and recommendations In the last 10 years, a lot of changes have taken place in China, both in economical and social

context. Although adherence to traditional Confucian values was common to all regions,

were considerable differences among regions on variable such as individualism and openness

to change (with Guangzhou and Shanghai ranking the highest on those dimensions, followed

by Beijing and Dalian and Chendu and Lanzhou) this implies the Chinese in Guangzhou and

Shanghai may be somewhat more “westernised”. They are less culture-bound, enjoying th

consumption

there

68 e

society, looking for a life style that is different from the former generations. This

pens up wide markets for foreign companies to introduce western products to Chinese

ustomers.

The survey shows that Ikea has performed well by offering standard range of products

nd services in Shanghai. The consumer acceptance towards Ikea’s standardization strategy is

ther positive. However the service Ikea offers is far from perfect. since the Chinese market

new and fresh, less sofisticated, different service methods should be implemented to serve

is specific market. In China due to the fact that the labor cost is cheap and people are not as

andy as Europeans, almost all customers are service-demending. The survey in this thesis

id not point out who assembly service refused people are. But the survey showed that the

ajority of consumers in youngest groups are willing to assemble the furniture themselves. In

ur opinion apart from posting in-store instructions and design advice, Ikea should post some

ssembly instructions to encourage people to follow their do-it-yourself concept.

When it comes to delivery service, it is considered most important in China, most local

ompanies even offer free delivery service to attract customers. It was clear however in the

urvey the majority (74%) of the cousumers that use Ikea delivery service have no other

ption, it is their only way of getting the furniture delivered at home. Thus it is a risk that

ther companies appear to be more service minded than Ikea. For Ikea to be more competitive

Shanghai market, we would suggest Ikea offer a assembly and delivery service in a bound

ackage to the customers that are willing to pay for the services.

When product offered at lower price in relation to quality, even some cultural sensitive

onsumers might be willing to compromise. Chinese consumers tend to perceive foreign

roducts as superior to local products. In the survey, some customers (10%) expressed their

oncern over quality. Does dropped in quality result in dropped in price? This is a question

e never got answer to it.

o

c

a

ra

is

th

h

d

m

o

a

c

s

o

o

in

p

c

p

c

w

68 Deresky, Helen (1997), p.70

35

Ikea image highly e , keeps the

roducts as homogenous as possible .The size and limited space in ordinary households in

dep nding on the standarlisation of marketing mix

p

Shanghai have already set Ikea products into test. Standarlisation does not mean 100 percent

uniformity. The solution can be either add some specific features to adjust to the local

households, or to provide decoration advice to help consumers save space.

When IKEA’s expansion plan continues in China, standarlisation strategy may not

work as good as in Shanghai. Since China is a diverse country, where regions are unequally

developed. More and more local features should be considered to balance regional

differences.

36

REFERENCES Sources:

Alan Bryman (2004), Social Research Methods, 2nd Edition, New York

Ambler, Tim(

2004), Doing Business in China, 2nd Edition, New York

jörk Stellan (1998), IKEA

harles W.L. Hill ( 2005), International Business , 5th Edition, New York

eresky, Helen (1997), International Management: Managing Across Borders and Cultures, nd Edition, Addison-Wesley

o, D. Y. F. (1978), The concept of man in mao-tse-Tung’s thought Psychiatry

ean-Pierre Jeannet & H. David Hennessey(1995), Global Marketing Strategies 3rd Edition

homas C.Kinnear and James R.Taylor, Marketing Research, An Applied Approach

th Edition

arieke de Mooij (1998), Global Marketing and Advertising , California

reieke De Mooij (2002), Translating Advertising Painting the Tip of an Iceberg

ugo Fridah W(2000), Sampling in Research

ihailovic & De Chernatony (1995), The era of brand culling

hilip Kotler, Veronica Wong, John Saunders, Gary Armstorng (2003), Principles of arketing, 7th Edition , Essex

hilip Kotler ( 2003), Marketing Management, 11th Edition , New Jersey

ye, L.W. (1972), China: An introduction. Boston: Little Brown.

hilip Kotler and G. Amstrong (1996), Principles of marketing 7th Edition

sunier, Jean-Claude, International Marketing: a cultural approach

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C D2 H J T

5

M

M M

M

PM P

P

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James, W.L., & Hill, J. S.(1991, June/July), International advertising messages: To adapt or

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ome Country

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J al Management: An ternational Journal ISSN: 1352-7606 Year: Jun 2000 Volume: 7 Issue: 2 Page: 3 - 10

Ch’en, C (1986), Neo-Confucian terms explained. New York, Columbia University Press

homas J.Reynolds and Alyce Byrd Craddock, The Application of the MECCAS Model to

dvertising Research, April-May 1998, pp.43-54

nternet sources:

ement.uta.edu/tpayne/MANA5321/ikea.pdf

.V. Haley, George

T. Haley, 2006 tm

Daily April 6, 2004)

n

H

Theodore Levitt, The Globalization of Markets

Ying Fan , A classicification of Chinese Culture, ournal: Cross CulturIn

T

the Development and Assessment of Advertising Strategy: A Case Study Journal of

A

I

http://manag

The logic of Chinese business strategy: East versus West: Part I by Usha C

http://www.icmr.icfai.org/casestudies/catalogue/Business%20Strategy/BSTR173.h Ikea Outlines Mainland Expansion Plan (Chinahttp://www.china.org.cn/english/Life/92256.htm

inChina/ChainStore/200409/29/t20040929_1955283.shtml

ml

EA’s Ulf Smedberg

Shanghai Daily----English Window to China News.htm, 25 April, 2006 ttp://www.shanghaidaily.com/bf_13_urban%20life.php

http://www.quickmba.com/marketing/mix/

IKEA to open 10 stores on China's mainland in 6 years, 2004-08-31 http://en.ce.cn/subject/Retailing Ikea to expand presence in China http://english.people.com.cn/200404/06/eng20040406_139576.sht IK http://www.sinomedia.net/eurobiz/v200302/qa0302.html

h

38

http://www.marketingteacher.com/Lessons/lesson_marketing_mix.htm

http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs

http://chinadaily.com.cn/china/2006-04/06/content_561325.htm

om/ms/en_GB/about_ikea/our_vision/heritage.html

eline/full_story.html

http://www.ikea.com/ms/en_GB/about_ikea/facts_figures/figures.html

keaNearYouView?storeId=24&langId=-

http://www.ikea.com/ms/en_GB/about_ikea/our_vision/better_life.html

http://www.ikea.c

http://www.ikea.com/ms/en_GB/about_ikea/tim

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32&catalogId=10103&StoreName=shanghai

http://www.socialresearchmethods.net/tutorial/Mugo/tutorial.htm

39

Appendix 1

inese market?

Shanghai?

4. What are the open hours of Ikea in Shanghai?

5. Do you have return policy there in Shanghai?

6. Where is Ikea located in Shanghai?

7. Does Ikea offer free delivery service in Shanghai?

8. Do the customers appreciate the DIY notion in Shanghai?

Appendix 2 Questionnaire to Consumers in Shanghai

Questions asked to Ikea customer service in Shanghai

1. Is there any product specially produced or designed for the Ch 2. Does Ikea distribute catalogues door-to-door in Shanghai?

3. How does Ikea promote its product in

Please specify your age. a) 20-30 b) 31-35 c) 36-40 d) 41-45

1. Gender a) Male b) Female 2. Which level of education do you have? a) High school b) College c) University

3. Specify your civil status? a) Single live with parents b) Single live alone c) Married with child d) Married without child

4. Which is your annual income level?

a) 10,000-40,000 Yuan b) 40,000-80,000 Yuan c) 80,000-100,000 Yuan

40

d) Above 100,000 Yuan

5. How often do you shop at Ikea?

7. What do you think of the prices of Ikea products?

a) Cheap b) Acceptable c) Expensive

ct design?

9. If you brought an Ikea bookshelf, how would you take it home?

a) Seldom b) Few times c) Often

6. What do you think of Ikea’s shopping environment? a) Just okay b) Good c) Very good

8. What do you think of the Ikea produ

a) Just okay b) Good c) Very good

a) Self delivery b) Ikea delivery

shelf?

b) Ikea-assembly

ur own experience towards Ikea product quality?

le c) Good d) Very good

y?

prove quality c) Reduce delivery cost

10. How would you like to assemble the book

a) Self-assembly 11. What is yo a) Bad b) Acceptab

1 2. What do you think of Ikea’s return polic

a) Good b) Very good 13. What do you think Ikea should do in the future? a) Reduce price b) Im

41

LisFig 1: Structure of the Report, Own Source…………………………………. 5

Fig 2: Marketing Mix……………………………………………………… 12

Fig ………………... 21

ig 4: The IKEA Group Sales (1995- 2005)……………………………… 21

Fig 5: Sales and Purchasing by region……………………………………….18

Fig 6: New Housing and Urban Average per Capita Housing Space………. 23

t of Figures

3: Countries that have IKEA stores……………………

F

42

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