IKEA’s International Marketing Strategy in China

AUTHOR: DAVIDSON OTIENO OMONDI

IKEA’s International Marketing Strategy in China

Introduction

The multinational furniture corporation, IKEA, has a global presence in more than 50 countries. The case of its entry into the Chinese market serves as a significant illustration of how macro-environmental factors can exert an influence on a firm's activities in an overseas market. This study aims to analyze the strategies employed by IKEA to overcome obstacles such as product imitations, pricing, and cultural disparities, which enabled the company to effectively penetrate and establish a foothold in the Chinese market. Furthermore, an examination will be conducted on how IKEA modified its marketing tactics and environmentally conscious methods to meet the demands of the Chinese market.

Ikea’s International Marketing Approach

IKEA bases its strategy for marketing internationally mostly on standardization, with some modest adjustments made to meet local requirements (Sahu and Purkayastha, 2018). The company's mission is to provide affordable furniture to as many people as possible, and it feels that a highly standardized approach helps sustain low prices. Because it considers its local operations to be superior and doesn't significantly alter its marketing methods when entering new regions, the company's strategy is best characterized as ethnocentric.

IKEA's strategy for international marketing may be analyzed using the E.P.R.G framework, which identifies four orientations towards it: ethnocentrism, polycentrism, regiocentrism, and geocentrism. IKEA's strategy is most appropriately characterized by its ethnocentric orientation because the firm considers its domestic operations to be superior and makes few changes to its marketing tactics when entering new markets abroad (Alzghool, 2020). IKEA contends that this strategy enables it to maintain low costs and provide affordable furniture to as many people as possible, even while standardization limits the ability of stores in international markets to react to local demands.

IKEA's marketing mix, which is essentially similar with very minimal adjustments made to meet local demands, is a prime example of their standardization strategy. IKEA sources the majority of its resources from one single location, therefore its goods are basically the same across all international markets. The constancy of IKEA's products in both domestic and international markets is proof that its designs are straightforward and simple to introduce into international markets (Wu, 2020). To accommodate regional preferences and variations in typical dwelling sizes, adjustments are however required. For instance, IKEA products are built larger in the United States to accommodate larger residences.

IKEA's pricing strategy aims to maintain low prices, and the DIY idea is a key component of this strategy in both domestic and international markets (Sahu and Purkayastha, 2018). The suggested room layouts are modified to fit local tastes and the average standard of homes in the international market because the company's stores are typically outside of urban areas. In-store dining options at IKEA also include Swedish meatballs, while regional preferences are taken into consideration through cultural adaptations.

IKEA's marketing strategy is extremely consistent; however, the corporation occasionally makes little adjustments. For instance, IKEA makes minor cultural adjustments to the in-store restaurant and adapts its catalog to local needs2023/7/16. Although IKEA has always relied primarily on catalog advertising, the firm has been shifting its communications online and launching the IKEA Family program in its international markets. The company's global expansion and growth demonstrate the effectiveness of IKEA's approach to international marketing. IKEA's strategy enables the business to keep a consistent brand image and provide consumers all around the world with inexpensive furnishings.

IKEA's strategy is not without its difficulties, though. The company's capacity to adjust to local demands and tastes may be constrained by the highly standardized strategy. For instance, IKEA had to make considerable changes to its products and shop design to accommodate local preferences after receiving criticism in Japan for its homogeneous approach (Sahu and Purkayastha, 2018). Additionally, in some regions where customers might be ready to spend more for luxury or higher-quality goods, IKEA's low-price strategy can present a problem.

How Ikea adapted its marketing approach for China

The Swedish furniture corporation, IKEA, sought to enter the Chinese market utilizing its standardized global marketing strategy. Nonetheless, this methodology proved to be ineffective, prompting the organization to reassess its marketing tactics and implement a greater number of modifications compared to those made for its other markets (Sahu and Purkayastha, 2018). IKEA adopted a polycentric approach by tailoring its marketing strategies to meet the unique demands of the Chinese market. This involved conducting extensive market research and adjusting its marketing mix accordingly. The value proposition of IKEA in China was redefined to position itself as an aspirational brand with Western-style offerings of good quality. The corporation was required to modify its value network to align with the Chinese market, resulting in a shift from a centralized sourcing approach to a localized sourcing strategy.

In order to uphold its cost-effective brand positioning, IKEA had to reassess its pricing tactics to ensure feasibility in the Chinese market. Certain prices were established at a rate that was 70% lower than the prices observed in IKEA stores situated in alternative markets (Prange, 2016). The standardization of products and designs has been maintained, albeit with minor adjustments to optimize their compatibility with the dimensions of Chinese apartments. In China, IKEA has modified its store location approach by situating its stores in the periphery of urban areas. In order to establish a connection with its consumer base in China, IKEA devised various marketing campaigns. The conventional catalog was deemed inadequate, prompting the implementation of promotional strategies such as television programs and Chinese social media platforms to disseminate the message that 'change is easy' and to educate Chinese customers on the subject of IKEA and interior design.

IKEA employed demographic segmentation in its efforts to segment the Chinese market, similar to its approach in European markets. Nevertheless, focusing on low-income segments in China was unviable for IKEA due to its inability to compete with domestic rivals who replicated their merchandise and provided more affordable pricing (Burt and Fk, 2008). The incapacity to rival local prices has impinged on IKEA's customary standing as a reasonably priced furniture retailer. Hence, IKEA endeavored to apply the segmentation, targeting, and positioning strategies it had executed for its European markets to the Chinese market. Nonetheless, the implementation of a standardized approach was deemed ineffective, as the clientele frequenting the establishments did not align with the corresponding sales figures.

Furthermore, IKEA maintained a standardized marketing mix during its entry into the Chinese market. Nonetheless, the efficacy of this approach was not as successful in comparison to its European counterparts 2023/7/16. IKEA encountered challenges in establishing pricing strategies for the Chinese market while striving to uphold its reputation as a reasonably priced brand. Despite its efforts, the company faced difficulties in competing with the prevailing low pricing standards in China. Hence, the competitive advantage that was conventionally attributed to IKEA did not hold true in the Chinese market. In the Chinese market, IKEA's design remained unchanged, yet it was perceived by consumers as innovative and luxurious. This resulted in a paradoxical situation where the consumer perception of the IKEA brand was incongruent with the company's intended positioning as an affordable brand.

IKEA modified its marketing strategy in China by adopting a polycentric approach and structuring its marketing initiatives around meeting the unique demands of the Chinese domestic market. IKEA has strategically shifted its target audience to middle-income Chinese consumers, with a particular emphasis on younger customers who are inclined towards foreign brands and are expected to be the future generation responsible for furnishing their own homes (Alzghool, 2020). In order to cater to the Chinese market, IKEA underwent a modification of its value network by transitioning from a centralized sourcing approach to a localized sourcing approach. In order to establish a stronger connection with its consumer base in China, IKEA implemented various marketing campaigns and adapted its store location strategy to enhance accessibility. Ultimately, IKEA was compelled to reassess its pricing tactics and modify its marketing blend to more effectively align with the Chinese market.

Macro Factors That Had Most Influence on Ikea’s Strategy in China

IKEA has effectively broadened its business activities in China by means of strategically aligning its operations with the macro-environmental factors present in the country. The stable political climate in China facilitated IKEA's entry into the market via joint ventures, which aligned with the prevailing regulatory framework in the country(Sahu and Purkayastha, 2018). In addition, the rising buying capacity of Chinese customers and their rate of urbanization present a significant opportunity for IKEA's furniture enterprise. IKEA encountered pricing obstacles as a result of the exchange rate and the propensity of Chinese consumers to save, prompting the company to reduce prices by procuring goods locally and deviating from their emphasis on environmental sustainability.

Apart from economic considerations, IKEA had to consider social and cultural factors while conducting business operations in China. The comprehension of the fundamental notion of self-service, a crucial aspect of IKEA's operations, posed a challenge for Chinese consumers. Consequently, IKEA provided domiciliary transportation and assembly amenities to Chinese clientele and endeavored to enlighten and instruct them on the notion of self-reliance(Sahu and Purkayastha, 2018). In addition, IKEA undertook a brand name translation initiative to cater to the Chinese market, capitalizing on the favorable phonetic resemblance of its name in Chinese, where the characters "Yi Jia" connote "appealing for domestic habitation" or "residential comfort."

IKEA prioritized the utilization of advanced technological means to engage with the Chinese consumer base, specifically targeting the urban youth through Chinese social media and micro-blogging platforms. Nonetheless, a noteworthy obstacle encountered by IKEA in China pertained to the lack of recognition among consumers regarding the significance of environmental concerns, which differed from the level of awareness observed in IKEA's European markets (Sahu and Purkayastha, 2018). The aforementioned circumstance had significant ramifications for the ecologically sustainable practices of IKEA, which serve as a fundamental aspect of the corporation's worldwide brand identity. The imposition of charges for plastic bags was met with dissatisfaction from consumers, while a number of suppliers were unable to comply with IKEA's customary environmentally sustainable benchmarks due to technological limitations. Hence, IKEA opted to make concessions on its environmentally sustainable strategy in China to maintain competitive pricing and prevent the attrition of cost-conscious customers.

Conclusion

In conclusion, IKEA bases its strategy for global marketing mostly on standardization, with a few modest adjustments made to meet local requirements. Due to the company's ethnocentric attitude, it is able to keep its pricing low and provide reasonably priced furniture to as many customers as possible. IKEA's marketing mix and advertising strategy are mostly conventional; however, the business occasionally modifies them to account for regional preferences and variations in typical home sizes. IKEA's approach has been successful, as seen by the company's international growth and standardization.

IKEA modified its marketing strategy in China by adopting a polycentric approach and structuring its marketing initiatives around meeting the unique demands of the Chinese domestic market. IKEA has strategically shifted its target audience to middle-income Chinese consumers, with a particular emphasis on younger customers who are inclined towards foreign brands and are expected to be the future generation responsible for furnishing their own homes. In order to cater to the Chinese market, IKEA underwent a modification of its value network by transitioning from a centralized sourcing approach to a localized sourcing approach.

The operations of IKEA in China were influenced by various macro-environmental factors such as the stable political climate of China, the rising purchasing power of Chinese consumers, and the rate of urbanization. IKEA had to consider social and cultural aspects, including the absence of do-it-yourself practices and linguistic obstacles, and modify its procedures correspondingly. Nonetheless, the primary obstacle encountered by IKEA pertained to the divergence in environmental outlooks and methodologies between China and its other worldwide markets. As a reaction, IKEA had to make concessions regarding its environmentally conscious strategy in China to maintain affordability and competitiveness. Through effective alignment of its operations with macro-environmental factors, IKEA has achieved success as a furniture retailer in the Chinese market.

Refences

Alzghool, M. (2020) ‘An evaluation of IKEA’s global position and marketing standing’, Research Gate, (November), pp. 1–42. Available at: https://www.researchgate.net/publication/346059671_An_evaluation_of_IKEA%27s_global_position_and_marketing_standing. 

Burt, S. and Fk, S. (2008) ‘Standardized marketing strategies IKEA in Sweden UK and China’, pp. 6–7.

Johansson, U. and Thelander, Å. (2009) ‘A standardised approach to the world? IKEA in China’, International Journal of Quality and Service Sciences, 1(2), pp. 199–219. doi:10.1108/17566690910971454.

Prange, C. (2016) Marketing Decisions in China: Positioning, Branding, Marketing Mix. doi:10.1007/978-3-319-29139-0_3.

Sahu, B. and Purkayastha, D. (2018) ‘IKEA ’ s International Marketing Strategy in China IKEA ’ s International Marketing Strategy in China’, 44(0), pp. 1–18.

Wu, Y. (2020) ‘The Marketing Strategies of IKEA in China Using Tools of PESTEL, Five Forces Model and SWOT Analysis’, 403(Iafsm 2019), pp. 348–355. doi:10.2991/assehr.k.200207.054.