Ikea in China

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ABSTRACT

IKEA established in 1943, has been one of the largest household goods retailers in the world. Moreover, IKEA has always been keen on providing the mass majority with well designed, good quality and low price household furniture. Through analyzing its marketing strategy and marketing mix, we can find the reasons why IKEA can be so successful in the intense competition, which we learn from.

Key Words: IKEA, marketing, strategy, marketing mix
Chapter One Company Introduction

IKEA is one of the business miracles in the 20th century. From a small stationery delivering company in 1943, Ikea only used 60 years to achieve a great success, with more than 180 chain stores in 42 countries and over 70,000 employees. In 2001, IKEA got 11 billion euros income and over 1.1billion net revenue, making it the biggest retailer of household articles in the world. It ranks 44th in the TOP100 Interbrand list.

In 1998, IKEA opened the first store in Shanghai China. It started the second store in Beijing in the following year. Between the year 1999 and 2003, IKEA kept the pace of setting up one new store in China each year. When it began to hold an increasing market share, IKEA speeded up to open at least two stores each year in mainland China. By the year 2010, IKEA will have had 10 chain stores in China. Chapter Two Marketing Strategy

It is believed that the changing and innovative marketing strategy makes IKEA succeed. IKEA’s marketing strategy is to provide the mass majority with well designed, good quality and low price household furniture. It seems that there is always a dilemma between “good quality” and “low price”, but IKEA makes it united. IKEA also focuses on “experiential marketing + direct marketing + single-stop-type marketing”, which helps establish customer perceived value.

To achieve its marketing strategy, IKEA works on the following three aspects: market segmentation, target marketing and market positioning.

1. Market Segmentation

In the European countries, IKEA dominate the middle and lower income segment of the market. It caters furniture with good quality and reasonable price at the same time. Its fame and popularity is attributed to its proper segmentation of the market.

However, when IKEA comes into mainland China, it soon finds that this. Marketing segmentation does not work. The macro marketing environment is quite different in mainland China. IKEA discovers that the reasonable price in those developed countries seems to be a little bit expensive in China.

According to China’s low consumption level, IKEA adjusts its market segmentation. It aims at the affluent families in the big cities. IKEA’s market segmentation in China is “the white-collar workers who want the high-grade products without enough money”. The reasons why this segmentation works well in China should be concluded as follow:

1) IKEA meets white-collar workers’ social and psychological needs.

2) IKEA brings Swedish culture to China.

3) IKEA’s catalogs and instructions cater to customers’ pent up creativity.

IKEA knows its advantages well and makes full use of the brand’s popularity so it manages to choose its best market segmentation in China.

2. Target Marketing

Why IKEA chooses the affluent families in those big cities as its market segmentation in China? The analysis which IKEA has made about China’s potential market shows: 1) The affluent families in big cities have the same basic want to improve their living condition and home decoration. 2) They have special keen on foreign life, habits and culture, such as DIY. 3) They usually have cars so it is convenient for them to go to IKEA’s hall and to carry the furniture home. 4) They have enough money to afford the price.

5) These families usually have...
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