IKEAcasestudy

Table of Contents Page No.Executive Summary2Introduction and Summary 3Case Study AnalysisIKEAs success with its standardized products 4Adaptation strategy in Chinese market 6Young people of all ages 7Target Market 7Is IKEA destined to succeed in China 8How can IKEA adapt to local consumer behavior In order to be successful in China 9Conclusion 9Recommendation 10, 11Reference 12Executive SummaryBackgroundIKEA, the worlds largest home furnishings retail chain, was founded in 1943 by a Swedish entrepreneur Ingvar Kamprad. IKEA offers standardized products worldwide that are Scandinavian in design worldwide. The unique idea of this famous brand is to offer the option of assembling products to customers. The design of the furniture is very modern and light as it is made of particleboard. The products are of contemporary design and function with the concept that is based on low price. High quality, convenience, affordability, consistency, functionality and good design are the essence of this world class home furnishing retailer.Challenges IKEA faced many challenges in terms of culture and business practices as well as socio-economic and political conditions in China. The biggest challenges were pricing, copycat producers and cheap labor cost for assembled furniture.AlternativesTo make the price more affordable for Chinese consumers IKEA has developed manufacturing units in China and collects raw materials locally. Due to country specific environment IKEA chose franchising in China. Because of cheap labor cost of Chinese assembled furniture IKEA offers reasonable fee-based assembling services. IKEA has built its stores near public transportation lines inside cities since only 20% of customers own cars in Shanghai. Recommendations IKEA needs to find more local suppliers to keep price lower. To understand local culture and purchasing habit, the company should carry out extensive market research. To attract more middleclass consumer huge adaptation is necessary. Extensive training for the employees and better supply chain management will solve customer service and out-of-stock problems for IKEA.Introduction and summary of the case studyIKEA is a famous Swedish furniture company that plays the best player in the home furnishing market. It entered the global market with an ethnocentric view of global marketing with their products.The products of IKEA are standardized with an assortment that is universally accepted. The cost leadership strategy of IKEA is secured by contract manufacturers. The company takes tremendous care to match manufacturers with products. IKEAs mission is to deliver home furnishings with good design and functions at very low price so that people from all walks of life can afford to buy them. Because of long term contracts IKEAs suppliers manufacture exclusively at low prices for IKEA where designers and suppliers work together to build savings-generating features into production. Consumers relationship with IKEA is a designer to user relationship where consumers become pro-sumers i.e. half producers and half consumers. Here customers are also suppliers of time, labor information, and transportation. Do-it-yourself (DIY) concept is where consumers save most by assembling the furniture themselves. Delivery services are provided by IKEA at an extra but reasonable cost. The large size of IKEA stores enables this company to include baby-sitting areas and cafeterias which in turn provides the value-seeking, car-borne consumers with a complete shopping destination. By not selling through dealers, the company hears directly from its customers. Chinese consumers refrain from complaining because of their cultural background and purchasing behavior. If they are not satisfied with any product they will stop buying the product or stop visiting the shop. IKEAs idea to directly connect with customer is to get first-hand reaction of the customer about a product.In China, Hong Kong and the United Arab Emirates where market is relative small or where uncertainty may exist as to the response to the IKEA concept, franchising has been used by IKEA. IKEA prices are at least 30 to 50 percent lower than fully assembled competing products because of large-quantity purchasing, low-cost logistics, store location, and the DIY approach marketing. The profit level has been maintained very successfully although the company has cut prices steadily. IKEA promotes its product using catalog which is uniform except for minor regional differences. The companys advertising goal is to generate word-of-mouth publicity through innovative approaches.IKEAs strategic positioning and value-added differentiation sets it apart from its competitions. Although IKEA off