Ikea Presentation Final

Article: IKEA HITS HOME IN CHINAArticle: IKEA HITS HOME IN CHINA

Presented by Group 1 - EMBA9B Presented by Group 1 - EMBA9B

1. Nguyen Thi Bich Ngoc1. Nguyen Thi Bich Ngoc2. Nguyen Thi Ngoc Oanh2. Nguyen Thi Ngoc Oanh3. Nguyen Minh Ha3. Nguyen Minh Ha

IKEA logo – the colors of the Swedish flagIKEA logo – the colors of the Swedish flag

Do you think families with low income can afford Do you think families with low income can afford such a comfortable kitchen like this?such a comfortable kitchen like this?

The answer is very simple with IKEA.The answer is very simple with IKEA.

YES!YES!

IKEA’s OVERVIEWIKEA’s OVERVIEW

VISIONVISION: To create a better everyday life for the many : To create a better everyday life for the many people.people.

BUSINESS IDEABUSINESS IDEA: To offer a wide range of well-: To offer a wide range of well-designed, functional home furnishing products with designed, functional home furnishing products with good quality and durability at prices so low that as many good quality and durability at prices so low that as many people as possible will be able to afford them.people as possible will be able to afford them.

PHILOSOPHY:PHILOSOPHY: “More from Less”. “More from Less”. PRODUCTSPRODUCTS: All IKEA home furnishing products must : All IKEA home furnishing products must

be safe from both a health & environment perspective. be safe from both a health & environment perspective. SUSTAINABILITYSUSTAINABILITY is an IKEA priority. IKEA has made is an IKEA priority. IKEA has made

all the improvements for people & the environment.all the improvements for people & the environment.

• IKEA has strong core values enabling it to maintain sustainable development in the context of global competition: “provide eye-catching designs; friendly products to the environment with surprisingly low prices and unique promotion campaigns”

• IKEA’s strategy is to continue its expansion into the world market, to dramatically control big market-shares of potential & promising markets like East Europe and East Asia…

→ It took IKEA long time to opt the right strategies for them.

IKEA Marketing Strategies in ChinaIKEA Marketing Strategies in China

IKEA integrates its global marketing strategies with culturally-based marketing activities.

Marketing strategy: a customer-centered marketing

THE 4 Ps MARKETING MIX THE 4 Ps MARKETING MIX OF IKEAOF IKEA

IKEA implements 4Ps model: It is the set of controllable tactical marketing tools—product, price, place, and promotion

It focus on Price (Low price)

1-PRICE1-PRICE

IKEA SLASHES PRICES IN CHINA TO THE LOWEST IN THE WORLD

IKEA will reduce prices each year by improving productivity in stores, increasing its China manufacturing facilities

PRICE (cont.)PRICE (cont.) By increasing China-made products, prices on some items as

low as 70% below prices in outlets outside China

LOW PRICE STRATEGYLOW PRICE STRATEGY

In reducing prices each year; Ikea improve productivity in In reducing prices each year; Ikea improve productivity in stores; increasing its China manufacturing facilities and stores; increasing its China manufacturing facilities and sticking to wholly owned stores (half of the products in Ikea’s sticking to wholly owned stores (half of the products in Ikea’s Chinese stores are made in China, compared with 23% in Ikea Chinese stores are made in China, compared with 23% in Ikea stores overall). This enabled the company to halve prices in stores overall). This enabled the company to halve prices in China over the past 4 years, even as Chinese consumer China over the past 4 years, even as Chinese consumer incomes have increase.incomes have increase.

IKEA treats pricing as a key strategic tool for creating and IKEA treats pricing as a key strategic tool for creating and capturing customer value. The company’s pricing policy is capturing customer value. The company’s pricing policy is cost oriented as well as customer-value orientedcost oriented as well as customer-value oriented

2-PRODUCTS2-PRODUCTS Ikea whose name in Chinese means comfortable home is Ikea whose name in Chinese means comfortable home is

anything but comfortable on weekends. Designs models with anything but comfortable on weekends. Designs models with different features. Variety: almost everything you need in their different features. Variety: almost everything you need in their homes and apartments.homes and apartments.

Most of IKEA products are DO – IT – YOURSELF; whose Most of IKEA products are DO – IT – YOURSELF; whose parts of the product were uninstalled and placed in small parts of the product were uninstalled and placed in small carton boxes for home- delivery. Parts can easily be assembled carton boxes for home- delivery. Parts can easily be assembled into finished products.into finished products.

3-PLACE3-PLACE Ikea’s new stor in Beijing: 42,000 square meters; close to the size of 8

football fields, the 2nd largest store in the world. Beijing store can serve large volumes. It’s expected to draw 6 million

visitors annually, compared to two million for Ikea outlets elsewhere To accommodate customers, its building aisles are half a meter wider

than normal. Planning: open a new store in the city of Chengdu (China’s secondary cities) late

of 2006 add about 2 stores yearly until about 2010

4-PROMOTION4-PROMOTION IKEA launched what could be the cheapest IKEA non-sale item in the

world: a scoop of vanilla ice cream in a cone for 12 cents. It offers a few products made just for Chinese stores, such as a 12-cent

red placemat with doggy figures, a nod to the Lunar Year of the Dog. IKEA is well known for not encouraging personal selling in general.

The customers make their own choices. Sell products at cheaper price when it is needed (IKEA in China sells

umbrellas 50% cheaper on rainy days than sunny days to build a positive image in the long term)

..........

OPPORTUNITIESOPPORTUNITIES

A huge surge in home-ownership; many apartments are typically empty shells sold without paint, lighting, flooring ... market for home furnishings has taken off. So huge demand for home furnishings.

Chinese authorities have removed the regulations requiring all foreign retailers to have a local partner. Ikea was able to open its first wholly owned store in Guangzhou, setting the trend for all future stores.

Do–IT–YOURSELF market in China including furniture, home-wares .. is growing 10% a year. In China’s home-wares segment alone, IKEA holds 43% market share

CONCLUSIONCONCLUSION

IKEA is very successful in its strategy of Overall Cost Leadership (or Cut-price strategy)

IKEA has changed the habits of Chinese (from using durable Chinese wooden furniture to renewing furniture every 3 or 4 years), getting the Chinese to buy more products from Western retailers in China

IKEA’s achievements in China are built on a well-designed, customer-centered marketing strategy. The success of IKEA in China conveys an important message to other multinational companies that the key to enter China market is the right market positioning and the right implementation of mix strategies orienting to customers.

THANK YOU!THANK YOU!