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IKEA's Global Presence

Question:

Discuss about the Marketing Mix strategy for IKEA in China.

IKEA is the famous name which represents the global furniture retailer. The main concept of this company is Swedish brand retailer which produces wide range of furniture having best quality and low prices. This company has established itself in the furniture market having modern design and architecture especially for home accessories and appliances. In present time, the company IKEA is operating globally. The company is operating in more than 40 countries and also has around 345 stores across the world. The vision of the company is to make and build the better life for the customers across the world. IKEA has established the idea of providing wide range of useful, low cost and designed home furnishing products to the customers.

This report focuses on the marketing operations of IKEA in a country. For the discussion, the country China has taken. The report describes the marketing mix of IKEA in the China market. By this, report is able to describe that how marketing is managed internally and externally by IKEA from different sectors. This report focuses on the value of theories, concepts and models to assess how IKEA manages service quality effectively. Further, the significance of environmental concerns is described that IKEA operates for sustainable marketing strategies in China Market.  For IKEA, it was difficult to gain market share in the China market due to its high prices. The standardization of the products of IKEA, the range of its products was relatively exclusive in China as compared to Europe and USA. So, to cut down these prices, IKEA had adopted local manufacturing of the products and enhanced the design and developed process in the China market (IKEA Group, 2011).  

The vision of the IKEA is to provide the products having good design and good functioned products with the low prices to the customers. The aim of the company is to provide quality products by using new ideas which are the driver of the change in the company for the internationalization. The company experiences ownership advantages including not only technology and creative concepts but also leadership, insight and approach to develop the business in the foreign market. The drivers of the change in the company impacts decision of expansion the business in terms of location, strategy and entry method of IKEA (Giunta, 2016). There are many supporting environments such as political, economic and social conditions in China which allow IKEA to experience advantage in the China market. There are some push and pull factors such as fast financial growth, enormous requirement in local market, scarcity of raw material and labors for furniture manufacturing, laws and regulations attracting foreign investment. These factors lead IKEA to enter and take competitive advantage in the China market. Along with this, the location advantage also attracts IKEA to expand in the China market. The company has basically asset-based advantage which is the key drive in the company to expand in the international market (Harapiak, 2013). In other words, IKEA has brand name and innovative future design which can be developed in the international market. Further, by entering in the China market, IKEA gets business lead to produce its products locally. So, IKEA can provide the products at the lower prices and can compete with the competitors in the China market. by entering in the China market, IKEA gains higher sales growth with the advantage by creation of supply centers and warehouses in China (Chu & Sood, 2013).

Overview of IKEA's Marketing Mix in China

The Culture of the country impacts on designing and implementing the marketing strategies for the Chinese market in the China market. The study shows that IKEA is the China market manages the business according to the consumers in the country. The company keeps the balance between local adaptation and global standardization. Chinese market is differing from other market in terms of cultural differences. So, the company has to bear extra expenses to deal with the culture of the country. For IKEA, company has to adopt strategic management to expand global so there is the need of marketing management be more specific for the chosen country to provide best services in the global strategic view. IKEA in the China market started to adopt the innovative marketing strategies to attract the local consumers in China. Now, the company always tries seeking for the best potential strategies for the great level processes and variation in the market. The marketing strategies adopted by IKEA in the China market can be analyzed by the marketing mix i.e. product, price, place and promotion (China business review, 2004).

Product is the key element of the marketing of any company. According to the IKEA’s website, there are around 7,900 products having 21 ranges provided by the company. In contrast with the traditional Chinese furniture, IKEA has designed lighter and simpler styles of furniture for the Chinese market. Simplicity is the feature of IKEA’s products and with this feature; IKEA can be supple while trying to fit in the China market. In past few years, IKEA released innovative series of products on the occasion of Chinese New Year. This move of IKEA has won many of the customers in the China market, especially for those customers who required changing the looks of their homes. Sometimes, the company was failed with some products in the Chinese market but company has more innovative ideas to attract the customers. The physical attributive of the IKEA’s products is packaging which includes designing and producing the container for the products. In China, there is the assumption among the customers that packaging must match the product inside. The effort of the company is to be environmental friendly while protecting, producing and transporting the products. The effort of the company is to attract Chinese customers with the brand. In China, the product policy of the company expresses an important message i.e. to adapt the products for different market is not dichotomous choice. Thus, marketer must have well sorter product policy to win the market (Jonsson, 2008).

Price is significant element for the social element between the seller and the buyer. It makes an agreement and shapes the relationship between them for the long term. For IKEA, reducing prices is the most efficient process for the company to attract the consumers in the China market. Cutting the prices of the products is the most effective strategy to increase the sales in the market. IKEA has become the middle-class trade name in the China market. Though, there is no shortage of well-off customers for the company but still the company has decided to cut down the prices for the Chinese customers to maintain the corporate image in the market. After the price reduction, the IKEA has aim to attract the Chinese families having monthly income of 3,350 RMB (Molin & Magnusson, 2016). In starting, most of the products of IKEA in China were imported in which import tax and transportation cost were included. To maintain the lesser prices of the products without giving up the superiority of the products, IKEA has adopted many cost-saving methods in the business. The most effective method for IKEA is to source locally. Now, 70% of the products of the company are produced in the China (South China Morning Post, 2013). It can be seen that IKEA uses the pricing methods as the key strategic tool to capture and create the customer value in China market. The pricing policy of IKEA is cost oriented and customer value oriented but it is not cultural based. The priority of the company lies in targeting more and more consumers at the lowest price which can be attained by sourcing locally.

Value of Theories and Concepts in Assessing Service Quality

The selection of place is one of the main essentials in the marketing mix of any country. The place or distribution is essential for providing the product to the customers. IKEA has done hard work to establish an economic and efficient network of distribution and logistics in the China market. The company has established its distribution systems and logistics centers in the main cities of the country. The first logistics center of the company was with the quality control center attached with it. Every logistics center can hold around 300,000 cubic meters of products. The well-established network of logistics is able to focus of the goods from suppliers to local shops. There are IKEA stores available everywhere in the China market which is convenient for the public. Apart from this, the distribution systems in China are scattered. Initially, IKEA had only four shops in Beijing, Shanghai, Chengdu and Guangzhou. From the above discussion, it is clear that IKEA is putting efforts in the improvements of distribution system to reduce the transportation cost. For the long term benefits and for getting better position in the China market, improvement in the distribution system is necessary (Ringstrom, 2013).

Promotion is the important part of the marketing mix. In the promotional mix of the company, there can be the combination of marketing, sales advertising, personal selling, public relations, and direct-marketing tools. The company basically exercises the combination of the tools to converse the customers to maintain the effective client relationship in the market. In case of IKEA, the company is famous for nit focusing on the personal selling of the products. The company wants to customers that they should be free to make their own choices (Hatton, 2013). If the customers want any kind of information then they can refer the label attached on the product of IKEA. Along with this, they can also go and ask the staff of the company. Further, for the promotion, cultural consideration is the essential part for the company. To attract more and more customers, advertising is very efficient way for the company. In China, IKEA does advertising in the local newspaper and on TV for its future deals and for other actions. Along with this, internet is the main resource of the promotional activities to attract the customers. The company also does the advertising occasionally such as Chinese New Year. The company gives importance to the culture of China in the promotion of the product. The culture relevance in the promotion makes sure those promotional messages are sent to the target market effectively. Hence, all the promotional activities done by IKEA shows that IKEA is suitable for the China market (Milne, 2013).

The main aim of IKEA is to attract the consumers in the China market based on their taste and preferences. For instance, the range of the products offered by the company in the China market must meet the preferences of the customers. The showrooms should be designed according to the Chinese styles which attract the customers. The policy of the company is to pay much consideration to the Chinese styles and add the set of products attributives effectively. Human resource in the IKEA can be identified by its people. There are front line employees who are directly connected with the Chinese customers. In front stage, IKEA has sales people who are helpful for the customers in selecting the furniture products. They provide relevant information about the products. Back stage staff is not connected with the customers but they produce the products (Connor, 2016).

Sustainable Marketing Strategies

In the selling process of the products, IKEA depends on the show rooms. Customers in the China market come to the show rooms and see the products. After that they select the furniture and payment for that. Company delivers the product to the customer residual by the delivery vehicle. Along with this, company also sells the products online. Customers have to go online and select the product. After that they do online payment for furniture and the product is delivered by the IKEA (Levin, 2016).

The company has unique designs for its products which attracts the customers. The company provides tangible evidence of services to the customers. IKEA does not expand its showrooms in all over the country. But the showrooms of the company are very attractive. The environment of the showrooms is family friendly and provides perfect nature of house. Along with this, IKEA provides safest play area for children. The market performance of IKEA in the China market shows that designing of marketing mix has integrated each factors effectively. These factors contribute to the effective marketing of the company. IKEA has faced complicated marketing environment while dealing with the customers having different cultures in the time of globalization (BBC News, 2016).

From the above discussion, it is observed that IKEA has adopted many strategies according to the Chinese market and the customers. But there are also many factors which impact the business of IKEA in the china market. There are the environmental factors which affect the business operations of the company and for this manner; company has to adopt innovative strategies for sustainable business in the country. In terms of environmental concerns in China market, the efforts of IKEA are to minimize the negative impact on the environment having innovative thinking in every step of the business operations. Cost-consciousness is the part of Chinese culture and it motivates the company to produce more from fewer resources and minimize the waste in every production. IKEA has the capability to contribute for developing a better environment. For instance, IKEA can help in reducing greenhouse gases emissions and minimize waste and water consumption in the society. The company is able to do this by offering the products to the customers which are helpful for the customers to live more sustainable life. There are some factors in the environmental concerns for which IKEA has adopted sustainable marketing strategies (IKEA, 2012).  

The efforts of IKEA is to reduce carbon dioxide  emissions from all the parts of its operations such as product manufacturing, raw material extraction, energy usage in IKEA building, transportation, use of products in customers’ home, and at the end of product life-cycle. This is the issue for the company but company is making growth in this way. The long term objective of IKEA is that all the IKEA buildings should be powered by using 100% renewable energy. The company works to improve overall energy efficiency. According to IKEA, renewable energy can be derived from those resources that are regenerated naturally. The company has decided now not to pay premium prices for grid electricity. The company invests in the alternative solutions such as wind turbines and solar panel systems to supply renewable electricity. Company has done investments in more sustainable energy solutions for significant cost-saving. IKEA in each and every market is responsible to reduce carbon dioxide emissions and for increasing renewable energy for business operations (Wadsworth, 2015).

Local Manufacturing and Product Design for the China Market

Further, IKEA has adopted innovative and efficient transport solutions for the products also. The company has aim of effective distribution of the goods and products from suppliers to customers. To achieve low prices and to minimize the environmental impact from transportation, effective distribution is the most important aspect for the company. The products of IKEA are purchased both globally as well as regionally due to high quality and low prices. So, the company always tries to avoid unnecessary transportation. For this way, company uses direct deliveries from suppliers to stores and tries to minimize the intermediate storage in the distribution centers.  IKEA chooses rail transportation where possible as this is the more environmentally adapted option. Along with this, smart packaging is also the most effective way to minimize environmental impact from the transportation of goods. Company has adopted packaging solution for this manner.

IKEA has the main business of furniture and for this business company needs woods. So, the company has adopted supplier code of conduct for the forestry requirements. Suppliers of the raw materials must follow the wood procurement plan to make sure that the company has minimum requirement. Wood is the valuable resource and it has great importance from environmental point of view and the cost perspective. IKEA is seeking for new techniques to get the best possible returns from every tree. The long term goal of IKEA is that the used wood in the production should be recycled. The wood supply function of the company works to support the wood suppliers in developing sustainable supply strategies. The aim of IKEA is to secure future price reduction and right to use competitive wood raw material. In China, IKEA is engaged in various projects with WWF to deal with the challenges of unsustainable forest management. For this, the company is focusing on its own resources by dedicating two-third of forestry specialists in the country (Forno & Graziano, 2014).

The issue of water is the most important issue in the environment. The IKEA stores and distribution centers in the country measure the use of water. Many stores of the country have implemented measures to reduce the water consumptions. There is the need of water in product designing and manufacturing but IKEA adopts number of techniques to reduce the consumption of water. For example, company uses printing techniques i.e. soft pigment printing reduce the consumption of water by 60% as compared to traditional printing techniques. The suppliers of IKEA follow the code of conduct to minimize the amount of water in the manufacturing process. The designers, technicians and product developers provide innovative ideas to minimize the water consumption. IKEA is enrolled in the climate-related project by focusing on reducing energy and water consumption while using the product of the company. Along with this, the company is focused on turning the waste in to resources and minimizing the negative impact on environment which are the serious challenges in the society. Company wants the lives of customers easy by recycling the products at the end of their life cycle. That is why company is engaged in the projects which seek the opportunities for full recyclability of materials (Chew, 2016).

Conclusion

This report discusses about the market strategy of IKEA in the china market. Form the above discussions; it is observed that the achievements if IKEA in China market are well designed. The company has customer centered marketing strategy. The market strategy of the company is the perfect combination of seven Ps.  Focusing on Chinese culture, the company IKEA is able to gain success in the China market. The IKEA in the china market give the significant message to many other companies and organizations in the other country that the key of victorious international marketing is to have proper knowledge of culture in the various markets.

References

BBC News, (2016), Ikea Shanghai frowns on elderly daters who occupy cafeteria, accessed on 30th March 2017 from https://www.bbc.com/news/world-asia-china-37686968

Chew, J., (2016), Ikea Is Facing Huge Problems in This Important Country, accessed on 30th March 2017 from https://fortune.com/2016/02/24/ikea-india-rules/

China business review, (2004), IKEA with Chinese Characteristics, accessed on 30th March 2017 from https://www.chinabusinessreview.com/ikea-with-chinese-characteristics/

Chu, V., & Sood, R., (2013), Couching tiger tames the dragon, accessed on 30th March 2017 from https://www.businesstoday.in/magazine/lbs-case-study/how-ikea-adapted-its-strategies-to-expand-in-china/story/196322.html

Connor, N., (2016), Ikea losing patience with elderly Chinese who assemble in store to find love, accessed on 30th March 2017 from https://news.nationalpost.com/news/world/ikea-losing-patience-with-elderly-chinese-who-assemble-in-store-to-find-love

Forno, F., & Graziano, P.R.,  (2014), Sustainable community movement organisations. Journal of Consumer Culture, 14, 139–157

Giunta, V., (2016), IKEA in China: A “Glocal” Marketing Strategy: Management for Professionals, accessed on 30th March 2017 from https://link.springer.com/chapter/10.1007/978-3-319-29139-0_8

Harapiak, C., (2013), ‘IKEA’s International Expansion’: International Journal of Busines Knowledge and Innovation in Practice (IJBKIP), 1(1), 25-51

Hatton, C., (2013), Ikea in China: Store or theme park, accessed on 30th March 2017 from https://www.bbc.com/news/world-asia-china-24769669

IKEA Group, (2011), Welcome inside: Yearly FY10, Sweden: Inter IKEA Systems Publishing

IKEA, (2012), The IKEA Group approach to sustainability, accessed on 30th March 2017 from https://www.ikea.com/ms/en_KW/pdf/sustainability_report/group_approach_sustainability_fy11.pdf

Jonsson, A., (2008), A transnational perspective on knowledge sharing: Lessons learned from IKEA’s entry into Russia, China, and Japan: The International Review of Retail, Distribution and Consumer Research, 18(1), p. 17-44

Levin, D., (2016), Shh. It’s Naptime at Ikea in China, accessed on 30th March 2017 from https://www.nytimes.com/2016/08/27/world/what-in-the-world/shh-its-naptime-at-ikea-in-china.html?_r=0

Milne, R., (2013), Ikea faces cultural challenge as flat-pack empire expands, accessed on 30th March 2017 from https://www.ft.com/content/83389238-5819-11e3-82fc-00144feabdc0

Molin, A., & Magnusson, N., (2016), Ikea Targets China, India Expansion to Meet Sales Growth Aim, accessed on 30th March 2017 from https://www.bloomberg.com/news/articles/2016-09-13/ikea-sales-rise-7-1-as-it-prepares-first-india-serbia-stores

Ringstrom, A., (2013), One size doesn't fit all: IKEA goes local for India, China, accessed on 30th March 2017 from https://in.reuters.com/article/ikea-expansion-india-china-idINDEE92603L20130307

South China Morning Post, (2013), Ikea at last cracks China market, but success has meant adapting to local ways, accessed on 30th March 2017 from https://www.scmp.com/news/china/article/1300942/ikea-last-cracks-china-market-success-has-meant-adapting-local-ways

Wadsworth, M., (2015), IKEA exposed over 'child Labour' and green issues, accessed on 30th March 2017 from https://www.the-latest.com/ikea-exposed-over-child-labour-and-green-issues
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