Seminar: IKEA in China: Try Before you Buy?
Topic Number:3
Industry Studies 1
Overview
IKEA is the most successful home furnishing businesses in the world, located in over 26 countries. Its vision “to create a better everyday life for the many people” encapsulates its desire to offer quality, relevant and affordable home furnishing solutions across the world.
One of IKEA’s core strategies is to grow by entering new markets such as China. However, in doing so they have come up against a number of hurdles where they have had to make considerable changes to their business model to adapt to local preferences. In this seminar, we will evaluate their approach as they went into the Chinese market. We will initially understand the global business model that they traditionally adopt and thereafter, we will critically evaluate the way they needed to adapt to be successful in China.
Thirdly, we will look at their success to date and finally make recommendations as they move into other markets.
3
• Develop and determine IKEA’s global business model and strategy
• Critically evaluate the changes they needed to make when entering the Chinese market
• Evaluate and describe the success they have had to date in China
• Be able to make recommendations on how they should grow sustainably
Learning outcomes of this seminar
Agenda for this seminar
Critically evaluate the changes they needed to make when entering the Chinese market
Evaluate and describe the success they have had to date in China
Explain their plans to grow internationally in a sustainable way
Present an overview of IKEA’s global operations and strategy
Structure for the session
You will have 15 minutes to
discuss each question
We will have a de-brief at the end of each 15 minutes to hear your thoughts on each area
Feel free to ask questions but please do not have separate conversations ‘we are all in
this together’!
A Man With Simple Tastes
I could regularly travel first class, but having money in abundance doesn’t seem like a good reason to waste it. Why should I choose first class? To be offered a glass of champagne from the air hostess? If it helped me arrive at my destination more quickly, then maybe.
Ingvar Kamprad
Consider the role of a founder on the companies culture and values…
Present an overview of
IKEA’s global operations and
strategy
Vision and business idea
“To create a better everyday life for the many people”, this is the IKEA vision. Our business idea 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”.We work hard to achieve quality at affordable prices for our customers through optimising our entire value chain, by building long-term supplier relationships, investing in highly automated production and producing large volumes. Our vision also goes beyond home furnishing. We want to create a better everyday for all people impacted by our business.
Source: IKEA, 2014
A company built on values
View video: https://www.youtube.com/watch?v=DaDD3uXpFgs#t=24
Company structure
Source: IKEA, 2014
Overview of operations
Source: IKEA, 2014
The Strategy of IKEA
View video: https://www.youtube.com/watch?v=MJ6YL3IekYs
Critically evaluate the changes they needed to make
when entering the Chinese market
Changing the way IKEA works in China
Source: IKEA, 2014
Ownership Changes
+
Source: IKEA, 2014
Adapting their approach
Source: IKEA, 2014
Chinese vs European Home
China Sweden
Source: IKEA, 2014
New product ranges added
Source: IKEA, 2014
More Aggressive with Pricing
Since 2000, IKEA has cut its prices by more than 60 per cent. For instance, the price of its "Lack" table has dropped to 39 yuan (less than five euros at current exchange rates) from 120 yuan when IKEA first came to the Chinese market. The company plans to reduce prices further, helped by mass production and trimming supply chain costs.
High prices were one of the biggest barriers in China for people to purchase IKEA products. IKEA's global branding that promises low prices did not work in China also because western products are seen as aspirational in Asian markets. In this regard, IKEA's low-price strategy seemed to create confusion among Chinese consumers.
Evaluate and describe the success they have had to
date in China
IKEA sees success in China (finally!)
Growth in stores and revenue
Source: IKEA, 2014
Explain their plans to grow
internationally in a sustainable
way
3 Growth Areas
Quality products at low prices
People & planet positive
When people grow, IKEA grows too
Source: IKEA, 2014
Overview
Source: IKEA, 2014
Quality Products at Low Prices
View video: https://www.youtube.com/watch?v=9jGphzyW9R8
Quality Products at Low Prices
Source: IKEA, 2014
People and Planet Positive
Source: IKEA, 2014
People and Planet Positive
View video: https://www.youtube.com/watch?v=gmlpwIRmuBY#t=15
Growing People
Source: IKEA, 2014
Growing People
Source: IKEA, 2014
Growing People
Source: IKEA, 2014
End of Seminar
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© Pearson College 2013