Sample International Trade Paper on IKEA Group

IKEA GROUP

            IKEA group is a company with a Swedish origin that deals with selling of low priced and high quality furniture. It was founded by Inguar Kamprad in 1943. The company operates throughout the value chain, does product development, produces on its own, and distributes to consumers through its retail stores. The company also owns manufacturing units, trading offices as well as customer distribution centers. IKEA thrives in positively impacting people’s lives by providing quality products at lower prices. It is present in 27 countries with a total of 315 stores.

Qn: Has IKEA taken a standardization (i.e., global) approach or an adaption (i.e.

multinational) approach in its markets around the world? Do you think the company’s approach is the right one for the future? Explain.

 Ans: IKEA’s strategy is an adaptive approach in China and USA markets in order to adapt to the locals needs, which seemed to differ from one market to another. An example is the USA market that needed more large sized furniture requirements that required larger stores and warehouses to operate efficiently. The Chinese apartments were on the contrary smaller where customers required modular and functional products. IKEA made modifications to its furniture to meet these needs as it maintained its original strategy of low prices on products (Ahlstrom & Bruton 25). The adaption approach taken is good because the company has plans to go to Indian market and it will need to adapt to the local market needs.

Qn: Briefly (2-3 sentences) the difference between a standardization/global approach and an Adaption/multi-national approach.

Ans: Standardization approach is one that uses one marketing strategy for all markets internationally. It assumes that consumer needs are the same across all cultures, and the globe as a whole. Adaption approach is one that uses unique marketing strategies for different markets internationally bearing in mind that every market has its different needs.

Qn: Please indicate which approach IKEA has taken. List 3 examples that support your choice.

Ans: IKEA has taken the adaption approach and the examples are changing its target market in China to young middle class in the population as opposed to the mass-market target in other countries. Secondly, they changed their marketing style of using catalogues to advertise to using social media and the web to avoid imitation of their products in China. Thirdly, the company changed location of their stores, which were located in the suburbs in other countries to places close to the city since most Chinese use public transport as opposed to other markets where people use personal cars.

Qn: Discuss whether you feel this is the correct approach

Ans: The approach is right because in upcoming markets, standardization of the brand may not be successful as doing business in these markets presents a different ball game. For IKEA, It had to conform to local needs in order to survive.

Qn: Which retailers are IKEA’s biggest competitors in the United States? Why?

Ans: IKEA entered the USA market in 1985 and its main competitors were Wal-mart, K-mart, Costco, High end furniture stores like Thomas ville, Jordan’s furniture and Ethan Allen. They were as well offering low priced high quality furniture.

Qn: For each competitor, name one (1) advantage you feel they have over IKEA.

Ans: Thomas Ville, Jordan’s furniture, and Ethan Allen were high end stores that were expensive but they had a competitive advantage over IKEA because they offered home delivery services and set up in customer homes for free or sometimes for a small fee. Another advantage is that the stores were making furniture only on order, and therefore they did not need to invest in large stores and ware houses for storage.

Qn: Make sure you briefly (1-2 sentences) why you feel this is a competitive advantage.

Ans: These are competitive advantages because on acquiring bigger stores, IKEA had to hike their prices to accommodate the costs associated. Lack of home delivery also meant less customers for IKEA.

Qn: When company founder Kamprad decided to expand into China, his decision was not based on market research but, rather, on his own intuition. How well is IKEA doing in China? Did Kamprad’s decision pay off?

Ans: Kamprad’s decision to venture into the Chinese market was a good one though it was met with many challenges that forced the company to adjust its strategies. China makes about 6% of the company’s total revenue.

Qn: First, discuss the pros/cons (2 each) of making a decision similar to Kamprad without the help of market research.

Ans:The advantages of making such decisions like in the case of Kamprad is that he got untapped market and had an  upper hand with no competition .Another advantage is that there was ready market in China because of its population. Disadvantages are the unforeseen challenges and the need to partner with a local company in order to be able to abide with local regulations, and this hindered its expansion in China until much later when they parted. (Ahlstrom & Bruton 16)

Qn: Using any/all of the links above, provide a summary of IKEA’s adventure into China.

Include ALL of the following:

Number of stores in China now (or most recent date).

Number of stores planned for China.

Three locations of current/planned stores in China.

Planned investment (in US dollars).

CHINA revenues for company fiscal year 2010 (in US dollars) and the percentage change from

the previous year.

Ans: IKEA fist ventured the Chinese market in 1998 where it entered into partnership first for the company to learn the local laws and understands the needs of the Chinese people. It

experienced many challenges that forced the marketing strategy of IKEA to change and adapt to the new market. It opened six stores in total, one in Beijing, another one in Shangai, Guangzhou and three in Hong Kong. The company had plans to invest 1.2 billion dollars in the Asian market as a whole with ten outlets by 2012.By the year 2010, revenue from China had grown by 2.4% up 7.7% from the previous year. Chinese population mostly used public transport and the stores had to be located near the city at metropolitan locations close to railway drop off stations in order to make it easily accessible to customers. IKEA is planning to open up nine locations to 17 stores by 2015 in order to meet the demand from the nation’s growing middle class, who are educated and are familiar with Western lifestyles at low and reasonable prices.

(Ahlstrom & Bruton 34)

Qn: Brief description of another reason to go to IKEA in China besides furniture (hint: WSJ

link).

Ans: It was in search for love that the 62-year-old Tang Yangzhou, a retired widow went to

IKEA. Having searched for men in bars, clubs or Karaoke joints, she opts to go to IKEA instead.

Qn: Offer your opinion on Kamprad’s decision (i.e., did it pay off?) in 3-4 sentences.

Ans: Kamprad’s decision payed off because finally he and the company were able to conquer China as the leading furniture provider.

Works Cited

Ahlstrom, D. & Bruton, G. International Management: Strategy and Culture in the Emerging World. Cengage Learning: USA, 2009. Print.