Location Strategy and Layout Strategy of Ikea

Topics: IKEA, Purchasing power parity, People's Republic of China Pages: 5 (1339 words) Published: August 22, 2012

The important chapters including Service Drivers and Productivity, Location Strategy, Layout Strategy and Human resources and Job Design are covered. However, in this paper, I will mention two of these issues: Location Strategy and Layout Strategy. Instead of giving many examples as those discussed in the previous paper, I will concentrate on China IKEA case to analysis Location Strategy and Layout Strategy deeply.

I. The Introduction of IKEA

IKEA is an internationally known home furnishing retailer. It has grown rapidly since it was founded in 1943. Today it is the world's largest furniture retailer, recognized for its Scandinavian style. There are 310 stores in 38 countries and regions of the whole world, of which 8 stores are in mainland of china. They are Guangzhou, Shenzhen, Beijing, Shanghai, Shenyang, Dalian, Chengduand Nanjing. II. The Location Strategy of IKEA

1. Political risk, economy and culture
a. The regime of politics and Government rules
The People's Republic of China is a single-party state governed by the Communist Party of China. Political stabilization in china enables to develop economy. b. Economic issues
Since the introduction of market-based economic reforms in 1978, China has become the world's fastest-growing major economy. As of 2012, it is the world's second-largest economy, after the United States, by both nominal GDP and purchasing power parity (PPP), and is also the world's largest exporter and second-largest importer of goods. On a per capita income basis, China ranked 90th by nominal GDP and 91st by GDP (PPP) in 2011, according to the IMF. 2. Labor talent, productivity, costs.

China is the world's most populous country, with a population of over 1.3 billion with 71% (482,439,115 males; 455,960,489 females) are between 15 and 64 years old – the working age. China has abundant qualified labor source. Labor cost is low. From these factors, most of companies all over the world set up factories in China to take advantage of the cheap labor. 3. Proximity to Markets

According to IKEA statistic figure, China is considered number one on the IKEA purchasing list. Today the majority of IKEA products (66 percent) are purchased from manufacturers in Europe. The largest single country for purchasing is, however, China. Proximity to target customers: According to China’s circumstance, IKEA’s target customers in China are those who have medium or high income, called as “white-collar” workers, mainly living in the major cities, especially the heart areas in the cities. IKEA is going to locate branches at commercial center in major cities in China. 4. Communications and transport

China Telecom and China Unicom, the country's two largest broadband providers, accounted for 20% of global broadband subscribers, whereas the world's ten largest broadband service providers combined accounted for 39% of the world's broadband customers. The massive rise in internet use in China continues to fuel rapid broadband growth, whereas the world's other major broadband ISPs operate in the mature markets of the developed world, with high levels of broadband penetration and rapidly slowing subscriber growth. IKEA stores in China are located closer to the city centre than stores in other parts of the world, which are usually located well outside city centers. A location a long way from the city would not be ideal in China, as consumers do not have access to cars like they do in Europe and the USA. In China, the stores have to be where public transportation can take people and where there is some kind of hub through which many people pass. A good example is the Shanghai store, which is very close to several bus lines and one of the city's metro lines. However, IKEA has still built 700 parking places under the Shanghai store, so there is obviously an expectation that Chinese shopping patterns will change in the future, with more customers coming by private car....
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