2014

Research Proposal
IKEA in China

12/27/2014

Contents
Introduction ..................................................................................................................................... 1
IKEA in China ............................................................................................................................ 1
Marketing Mix ................................................................................................................................ 2
Product ........................................................................................................................................ 2
Price ............................................................................................................................................ 3
Place ............................................................................................................................................ 4
Location and store formats...................................................................................................... 4
Promotion.................................................................................................................................... 5
Chinas Promotion laws .......................................................................................................... 5
Advertising and promotion by IKEA in China ....................................................................... 6
IKEA Retail Marketing Mix Activities........................................................................................... 9
Analysis......................................................................................................................................... 12
SWOT analysis ......................................................................................................................... 12
Conclusion .................................................................................................................................... 13
Bibliography ................................................................................................................................. 14

Table of Figures
Figure 1: Timeline of the IKEA expansion in China ...................................................................... 1
Figure 2: Marketing Mix: Promotion - Room Setting .................................................................... 8

Introduction
IKEA is world famous Swedish household furniture company. IKEA stores have operated by the
IKEA Group and other franchisers grand total of 280 stores in 26 countries which customers a
total of 626 million visitors during the year (IKEA, 2009). IKEA Group had operations in 41
countries those 29 trading service offices in 25 countries and 27 distribution centers and 11
customer distribution centers in 16 countries all over Europe, Asia, Australia and North America
(ibid). According to its report, the IKEA have approximately 13.8 thousand co-workers
worldwide (ibid). And the sales in 2010 is reach to pass $33.6bn (IKEA, 2010).

IKEA in China
For IKEA the step into the Chinese market was a big step, maybe as big at the first step abroad to
Switzerland and the first store on foreign soil (Spreitenbach) in 1973 (Torekull, 1999). It meant
entering China and its potentially gigantic consumer market. IKEA targets different group of
people in China than in countries later in the IKEA life cycle (i.e., life cycle based on how long
IKEA has been on a market). The main target group is female customers 65 % of all customers.
Women, according to IKEA, stand for change in China and they welcome change (and IKEA see
them selves as providing the tools for change in at least one area). Men are also part of the target
group but more indirectly as women are the ones in the family having home furnishing interest
and making the actual decisions. IKEA has said it plans to set more than double its number of
stores in China by 2015. It announced last year it would invest $1.2bn in the next five years to
build the three regional shopping centres in Beijing, Wuxi, and Wuhan (IKEA CN, 2011).
IKEA holds the largest market share of Chinas furniture and fittings market in 2008
(Euromonitor International, 2009). And in 2011 fiscal year, IKEA launched a new slogan in
China: Be the family house leader, which shows their strong confidence and determination of
expansion in Chinese market (IKEA CN, 2011).

Figure 1: Timeline of the IKEA expansion in China

Source: www.ikea.com/cn/zh/
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Marketing Mix
Product
For IKEA the step into the Chinese market was a big step. Initially IKEA implemented its
standard strategies in China as IKEA implemented in Europe; as a result IKEA faced drastic
problems in China. For instance, IKEA is used to be perceived as having low prices in Europe
and U.S, this also one of the competitive cornerstones of the whole concept of IKEA there. But
this is not the case in China; here the perception is a fairly exclusive western retailer, a store of
expensive products for the higher middle class. Because of it IKEA was facing the problem of
Coping in China as many Chinese shoppers in IKEA were drawing pictures of the furniture and
scribbling down descriptions of the products but not necessarily buying them. Initially IKEA
offer entire range of products in China but Company observed that country most customers buy
what IKEA call market-hall products, i.e., everything but furniture. Another problem is that
Chinese see IKEA products as innovative and not traditional. Square tables are for example not
traditional (round tables are tradition) and many of the colors used are not traditional to the
Chinese. After facing a lot of problems, IKEA decided to change their strategies in China by
considering Chinese culture and Chinese consumer Behavior. Then IKEA targets different group
of people in China than in countries later in the IKEA life cycle (i.e., life cycle based on how
long IKEA has been on a market). The main target group is female customers 65 % of all
customers. Women, (age30-45) according to IKEA, stand for change in China and they welcome
change. Men are also part of the target group but more indirectly as women are the ones in the
family having home furnishing interest and making the actual decisions. Many from IKEAs
target group are what in China is known as the little emperors: the generation born into the One
Child Policy. While IKEA has accepted that to some extent, the main strategy has been to cut
more prices. IKEA tries to position itself as a company with a unique competence when it comes
to interior design. Helping customers with this is the basic message, rather than selling individual
products at low prices but at affordable prices. Many Chinese live in small apartments and IKEA
can help with smart solutions of for storage that makes life easier e.g. in China beds sold are
shorter (190cm) than standard-sized beds (200cm). Chinese live in apartments with balconies
and this space of the apartment is very important to the Chinese. IKEA has added settings in the
store that show how Chinese can furnish your balcony and a special balcony section in the stores.
So, IKEA offered products having cultural and traditional essence of Chinese like chopsticks,
wok with a lid and a cleaver, a special set of tea cups, small beds etc.
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Price
1) To fix prices that are subject to market regulation;

2) To fix prices within the guided range as set by the government;

3) To fix prices for new products subject to government-set or guided prices, except special

products for trial sales.

IKEA aims its target group on young low to middle income family. So it always try to keep cost
between manufacturers and customers down, which is the basis IKEA used to be successful in its
target market. According to what the IKEA China manager Ian Duffy said, IKEA will still
remain the low price strategy to make the products more affordable for more customers. The
IKEAs product price did decreased by about 12 percent in 2002 in China, which attracted more
customers to choose it. In present days, IKEA launches a new strategy called The Lowest Price
in Beijing. According to the new strategy, the price is going to be 20% cheaper than other home
furnishings stores. The Chinese are famous for their reluctance to spend their money. Due to this
reason, IKEA launches the low price strategy when entering the Chinese market while other
western retailers always set 20% to 30% higher price than local markets in China. The IKEAs
low pricing strategy in Chinas market does make a great effect on attracting customers and
helps it expands market share successfully. It also helps the brand be differential from its
competitors.

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Place
For IKEA the step into the Chinese market was a big step, maybe as big at the first step abroad to
Switzerland and the first store on foreign soil in 1973. It meant entering China and its gigantic
at least potentially consumer market. IKEAs customers are also well educated, living in big
cities in China. With increasing salaries of the target group, the target group for IKEA increases
every year. The customer in China buys less when they visit the store than the IKEA average
customer. But in Shanghai for example, the core customers visit IKEA more often than anywhere
in the world: 33% come every month. This means among other things that there is a need for
a lot of change in the store. The Shanghai store rearranges room settings at least seven times a
year, for new product or just for different holidays and campaigns etc. IKEAs offer is to supply
affordable solutions to Chinese customers, but the overall image is another one forcing IKEA to
offer other values to their Chinese customers. IKEA compares different countries by using a
typical IKEA basket of goods. The Swiss only have to work 2 months to buy the basket while the
Chinese will have to work 1 year and 6 months.
Location and store formats
The big-box IKEA format is unusual in China were shopping traditionally is done locally and
with specialist stores. IKEA stores in China are located closer to city centre than what is the case
in other parts of the world were IKEA stores are usually located well outside city centre and
suburbs. In China the location is closer to some type of city centre while the location is not
exactly down town. A location well outside the city would not have been ideal in China as
consumers do not have access to cars like European and US customers have. Here the stores
have to be where public transportation can take people, and where there is some kind of hub
where many people pass through. A good example is the Shanghai store which is very close to
several bus lines and one of the metro lines in Shanghai. However, as the Shanghai stores have
700 parking places under the store, IKEA is expecting Chinese shopping patterns to change in
the future. Public transportation to the store is a contributing factor to the service level: home
sending services are more common and more used here (while they are available also in other
parts of the IKEA world). Also, outside the store in Shanghai (and outside other IKEA stores in
China) you will see entrepreneurs setting up to transport home for people and also following that
with actually putting the furniture together for IKEA consumers in their homes.

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In the new Beijing store the large IKEA store outside Sweden interesting adjustments have
been made to the store format. The store here have wider aisles to cater for the fact that IKEA
stores in China have up to three times more visitors than IKEA store elsewhere in the world.

Promotion
Chinas Promotion laws
Advertising in China is regulated by the 1994 Advertising Law. The laws Article 3 stipulates
that advertising must comply with the requirements of the construction of socialist spiritual
civilization. Article 7 adds that it must uphold public morality and professional ethics, protect
national dignity and interest and that it must not hinder social stability, not harm the public
interest of society, neither impede the public order of society and violate good social customs,
and in particular must not have obscene, superstitious, terroristic, violent, or ugly content.
While this is mainly a regulatory body for the advertising business rather than for the content of
advertisements, it has a Department of Advertisement Supervision, whose functions include
guiding the work of advertising approval bodies; setting up a complete system of advertising
censors, and organize administrative responses to cases of illegal advertising activity. But
who the advertising approval bodies are remains unexplained, and as of mid-2006, the only
document of a regulatory nature issued by this department that was available on its website
concerned the banning of advertising of text messaging and telephone services with a sexual
content. Later in the year, it was the General Administration of Press and Publications the body
that is normally in charge of approving publications that, together with the State
Administration of Industry and Commerce, issued a ban on print advertising of abortions and for
treatments for eleven different diseases including AIDS, cancer, syphilis and epilepsy. Every
visitor to China will see innumerable slogans and posters put up to exhort citizens. To one study
by Jiang Zemins Three things Represents Important thought before displaying an ad in china;
not to spit, to be filial, or to be patriotic. These slogans not only just appear on walls: they are
also aired, for example, as advertising inserts in between episodes of popular kung fu movies
shown on long-distance buses, right next to mobile phone ads.

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Radio talk show hosts weave them creatively into their banter: for example, the hosts of a show I
heard on Hangzhous Traffic Radio chatted about the local dialect and then concluded we
should care for the elderly, thats a traditional Chinese virtue and also one favored by the Party.
When slogans do appear on billboards, their design and background uses the same landscapes as
the advertisements of travel agencies.
The slogans have multiplied, adapted to the times, and been harnessed by a variety of
government bodies as well as by private advertisers. A pop-up Internet advertisement for
Samsungs new MP3/MP4 player a product for teenagers in 2006 used the selling line The
Chinese Peoples Beloved Company, A Company Contributing to Chinese Society. According
to report, international advertising companies held 21% of Chinas advertising market in 2005,
including nearly all international brands and Chinas largest advertising clients.
Advertising and promotion by IKEA in China
Catalogue vs. Brochures
One of the big differences when it comes to communication with the consumer in China
compared to the rest of the world is the reliance on the catalogue. Here it is impossible cost and
reach wise to distribute it like in many other countries. The catalogue is distributed in the store
and in some of the primary market area but here the reliance is more on smaller brochures that
are sent out several times during the year. These brochures are produced by the same people in
lmhult in Sweden that produces the catalogue, in order to make sure that the brochures have the
same layout and IKEA feel as the catalogue itself.
PR Activities
PR activities are also important involves taking Chinese journalists to Sweden and lmhult,
teaching them about Sweden and IKEA and the roots of the company.

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 Out of Box Approach

IKEA is known for its out of box thinking when it comes to creating interest for IKEA and its
products. IKEA start a TV-show in which viewers were offered lessons in home decorating
IKEA have run many different ads in China, in TV, newspapers and in print. Themes in
campaigns are the same as everywhere in the world but with the Chinese twist (be different,
break tradition). Maybe the IKEA advertising line in China is a little softer than in other places
like in the UK. More humble advertising, do not stand out very much, friendly, home furnishing
solutions, educate the consumer, offer partnership for the future in new home furnishing
solutions. The ad featured below is typical: The message of the ad is Small changes, a refreshing
new life. Life can be made better, easier and nicer with small means. Small changes are the key
word in IKEA ads and in- store. Other ads that IKEA have run have the theme of do not be like
your parents, a theme that seems to speak directly to IKEAs target group of young women 2535 years old (Lewis, 2005).
Internet
The websites of the different stores in China is also argued to be important: the Internet is a
common source of information for the target group, the younger middle class. Also, this source is
used as a way to educate customers before coming to the IKEA stores.
IKEA Family
IKEA Family was introduced in China in 2007 that work well to attract Chinese customers.

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 Room setting
While the products available in the Chinese stores are basically the same as in any IKEA store in
the world, the stores do not look the same inside. What IKEA tries to do is to build the room
settings not like in the US, not like in the UK or Sweden but in a way that feels relevant to
Chinese customers with sizes of rooms and kitchens that are realistic by China standards. So
even with the same products, the aim is to make the store in Shanghai look very different from
the one in Malmo by the set-up of rooms. Thus basically the same product range but adaptation
in the store: presentation of goods and home solutions offered. In China the store layouts reflect
the layout of many Chinese apartments. One can find people in the Shanghai store that seem to
sleep in the beds and sofas, those that read a book with the feet on one of the tables in the room
settings, take a nap but IKEA try to put up with this as they hope that these people will later
return as customers.

Figure 2: Marketing Mix: Promotion - Room Setting

IKEA Home delivery

Ikea provides home delivery long and short distance as well as assembly service for a low
fee. IKEA has also created delivery drivers that also help assemble your IKEA furniture. These
pick-up trucks with drivers are lined up outside the stores

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IKEA Retail Marketing Mix Activities

Particulars

IKEA in general

IKEA in

IKEA in UK

IKEA in China

Sweden
Brand

name

is Brand name is Brand

IKEA

IKEA

Basically

Increasing
Merchandise

is Brand

IKEA

same Basically

products (95%)

name

local Centralized
few sourcing

is

IKEA

same Basically

products (95%)

name

same Basically

same

products (95%)

products (95%)

Centralized

Increasingly

souring

in

and sourcing

for

all

markets

(Russia), supply of bulky supply of bulky products

in

the

otherwise

and sourcing

local

products

from products

centralized sourcing nearby areas

and supply

Cutting prices

from assortment

nearby areas

Cutting

Cutting prices

prices

dramatically

Cutting prices in all

countries
Location

in

most Location in most Location in most Location closer to

cases well out of cases well out of cases well out of city centre, closer to
city centre, out of city centre, out city centre, out of public transport etc
town
(adjusted
Location &
Store format

use)

location of town location town

for

car (adjusted for car (adjusted for car

use)

use) Two floors,

Two floors, parking Two

outside
restaurant,
shop

location

floors,

store, parking

outside

Sweden store, restaurant,

no Sweden shop.

parking
store,

outside
restaurant,

Sweden shop - but

increasing

retail

planning laws but

focus

on

innovation
concerning format

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Two

floors,

underground
parking, restaurant,
Sweden shop, wider
aisles in store

Particulars

IKEA in general
Catalogue

is

IKEA in Sweden

the Catalogue

is

IKEA in UK

the Catalogue is the Catalogue is minor

base, advertising to base, advertising to base

fit the IKEA concept fit
to

local

the

tastes, concept

(but

IKEA efficiency
to

IKEA in China

its part,

is (smaller) brochures

local somewhat

are

humor and position, tastes, humor and questioned)

promotion

adjusted

the

advertising to fit the

position, promotion advertising to fit IKEA

increasingly

run increasingly

run the

concept,

concept

IKEA local tastes, humor

from stores, IKEA from stores, IKEA concept to local and

family is rolled out family
across

is

countries, established,

web is a tool that web

is

well tastes,
and and

position,

humor promotion
position, increasingly

an promotion

run

from stores, IKEA

increasingly is used information tool to increasingly run family

Market
Communication

to

was

on new markets as increase knowledge from

stores, introduced in 2007,

information tool to of IKEA concept, IKEA

family the web is a tool that

increase knowledge for

planning

the was introduced provides opportunity

of IKEA concept to visit.

in 2007 and is to

new

spreading,

the knowledge of IKEA

web

an concept

IKEA

customers

is

increase

to

information tool IKEA customers

to

increase

knowledge

of

IKEA concept,
for planning the
visit

and

for

giving access to
IKEA planning
tool
kitchen)

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10

(fix

new

Particulars

IKEA in general

IKEA in Sweden

IKEA in UK

The room settings The room settings The

room The room settings

are adjusted to fit are adjusted to fit settings

with

local

IKEA in China

are are adjusted to fit

tastes, with local tastes, adjusted to fit with

local

tastes,

size of rooms etc of size of rooms etc of with local tastes, size of rooms etc of
customers
The selling

countries

in Swedish customers
were

IKEA work
environment

DIY etc concept of

IKEA

DIY etc concept of increasingly

& service

IKEA
increasingly

is

size of rooms Chinese customers

etc

of

British

customers

More visitors than in

other IKEA stores in

DIY etc concept the world with the

is accepted the DIY of

IKEA

is same staff level

etc is the price increasingly

accepted the DIY you pay for low accepted the

etc is the price you prices

DIY etc is the

pay for low prices

price you pay

for low prices

DIY etc concept is

alien in a country
were labor is less
expensive,

with

prices not perceived

as generally low.

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11

Analysis
SWOT analysis
Strengths
IKEA have a strong internationally known brand attracting key demographic customer groups.
The business model is unique in its construction and execution with little direct competition.
Success has been driven from the price architecture offering value to the customer in innovation
and functional products. IKEAs strength today comes from their mastery of three key aspects of
the value chain: unique design capabilities, unique sourcing and tightly controlled logistics. This
means that they are able to produce products that are distinctive enough to provide market
recognition, secure sourcing for long runs at profitable levels, and reduce inventory costs through
regional warehouses which work very closely with stores.
Weaknesses
Ikea products largely come from Europe; a major priority is to develop relationships with more
Asian suppliers. IKEA should establish a large chain of Chinese suppliers to reduce the
manufacture cost. An increase in the amount of Chinese suppliers could potentially drive down
delivery expenses from suppliers to stores and thus increased savings could be reaped by both
Ikea and their customers.
Opportunities
There are several opportunities that IKEA can take advantage to ensure continued success of
IKEA in China.
IKEA plans for entering Chinese furniture market involved testing the waters in metropolitan
areas like Beijing and Shanghai where it opened its stores. Its a wise decision for IKEA to seek
out more markets in China before entering other cities. Foreign product brand always impresses
Chinese customers as expensive and luxury and is easier to win customers from big cities to
small cities.
Nowadays Ikea is aware that Chinese will purchase products that it offers and has an enormous
opportunity to seek out as many locations, both in the suburbs and metropolis locations. In
addition, providing good quality furniture with low price is a good opportunity for expanding
Ikeas business.
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12

Threats
China is a vast country and there are different customs, living style etc. Ikea maybe can cater to
North residents, but also possibly fail to win West part residents. In addition, Ikea is something
new and fresh to the Chinese customers. Even though Ikeas grasp on opening new markets
seems strong and its global buying and distribution network highly efficient. In the long run,
IKEA is just too far out of the mainstream Chinese culture, and self-service is something that
most Chinese will accept.

Conclusion
During initial stages of entry into new markets, IKEA has well gone through a phase of trial-anderror learning before it could hit the bull's eye. For instance, when the retailer entered USA, it
had to transform its traditional moose and advertising slogan, "IKEA: The impossible furniture
store from Sweden," to "It's a big country. Someone's got to furnish it," because the former was
projecting a wrong image of the retailer.
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 standardization. One
size-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 inspirational 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. 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 recognize that local versus global can bring optimum
results.

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13

Bibliography
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