Professional Documents
Culture Documents
2006-06-07
ABSTRACT
DATE: LEVEL: AUTHORS:
2006-06-07 Bachelor Thesis in Business Administration Neelima Srivastava Bangatan 3D 72228 Vsters nsa02001@student.mdh.se Leif Sanner One Design Suits All -A Case Study of IKEA in Shanghai, China In todays time of globalization, for a company to be successful in foreign markets, it is important for a company to adapt itself to the local market preferences. However Ikea, the Swedish company sells a typically Swedish mix of homogeneous products worldwide and does not adapt to local market preferences. China is a culturally diverse market compared to that of Sweden. Ikea continues its standardization strategy in Shanghai, China. The aim of our thesis is to investigate the consumers perception towards Ikeas standardized marketing mix strategy, in Shanghai. We have used qualitative as well quantitative method in this thesis. The primary data (through questionnaire and telephone interview) and secondary data (from literature, articles, company reports and internet, have been gathered to get information on standardization strategy of Ikea, in Shanghai. We have found out that Ikea has succeeded quite well with its standardization strategy in Shanghai. Although there is no product specially designed for the local market, the typical Swedish designed products are highly appreciated by the consumers in Shanghai. The consumers acceptance towards this standardization strategy is rather positive. & Grace Fei Andersson Aspa 508 731097 Kping gan02003@student.mdh.se
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TABLE OF CONTENTS
INTRODUCTION ............................................................................................................. 1
1.1 1.2 1.3 1.4 1.5 1.6 Background .......................................................................................................................... 1 Statement of the problem .................................................................................................... 2 Statement of the purpose..................................................................................................... 3 Research questions............................................................................................................... 3 Delimitation .......................................................................................................................... 3 Structure of the report......................................................................................................... 5 Choice of topic ...................................................................................................................... 6 Choice of research method .................................................................................................. 6 Research Design ................................................................................................................... 7 Research approach to data collection................................................................................. 7
Primary data .................................................................................................................................... 7 Secondary data................................................................................................................................ 8
Questionnaire ....................................................................................................................... 8 Interview with Customer Service Ikea, Shanghai............................................................. 9 Target group......................................................................................................................... 9 Sampling ............................................................................................................................... 9 Case Study .......................................................................................................................... 10 Validity and Reliability...................................................................................................... 11 Marketing mix.................................................................................................................... 12
Product .......................................................................................................................................... 13 Price .............................................................................................................................................. 13 Promotion...................................................................................................................................... 13 Place .............................................................................................................................................. 13
THEORETICAL FRAMEWORK................................................................................... 12
3.1
3.1.1 3.1.2 3.1.3 3.1.4
3.2 3.3
3.3.1 3.3.2
3.4 3.5
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Facts and Figures........................................................................................................................... 21 Shanghai........................................................................................................................................ 22 Economy ....................................................................................................................................... 22 Housing conditions and real estates .............................................................................................. 23
REFERENCES ....................................................................................................................... 37
Appendix 1 ........................................................................................................................................... 40 Questions asked to Ikea customer service in Shanghai ............................................................... 40 Appendix 2 ........................................................................................................................................... 40 Questionnaire to Consumers in Shanghai..................................................................................... 40
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INTRODUCTION
This chapter presents a general view of the research subject, background and problem description. Furthermore, we gave a description of the aim of the study and also of delimitations. This chapter concludes with the structure of the report.
1.1
Background
In this era of globalization, companies are taking part in the emerging global economy and establishing themselves in foreign markets. Companies who want to do business on a global market and achieve success must understand that customer behaviour is dependent on cultural background. Global marketing does not necessarily mean providing the same product in all countries, but offering local adaptations around a standardised core.1 Ikeas international expansion began in 1974 and today Ikea has emerged as a global player in one of the most highly fragmented industries in the world.2 One-design-suits-all is one of Ikea's global strategies.3 Swedish company Ikea, one of the worlds largest furniture retailers, opened its first store in Shanghai, China in 1998. China, a dynamic market offers challenges as well as risks in terms of language barrier, varied cultural, demographic and market specific needs. China boasts the world's fastest-growing economy as millions join the ranks of the middle class. Furniture is a culture-bound product in China. We have conducted literature research and survey in order to gather information on Ikea, its standardized marketing mix strategy, its success and to contribute an understanding in managing culture difference in Shanghai. "When Ikea first entered China, the store was considered too expensive for its target consumers--young, professional couples--and the company lowered its prices,4 according to Ulf Smedberg, marketing manager of Ikea China. Ikea is now planning to open 2 stores annually in China up to 2010.
1 2
International retailing (MKT501C2) IKEA Managing Global Expansion Business Strategy Case Studies Collection 3 IKEAs Globalization Strategies and its Foray in China Business Strategy Case Studies Collection.htm 4 China Business Review, article IKEA with Chinese Characteristicsby Paula M. Miller
1.2
In todays time of globalization, for a company to be successful in foreign markets, it is important for a company to adjust the marketing mix elements to each target, bearing more costs but hoping for a larger market share and return, this is so called adapted marketing mix. The market concept holds that marketing programmes will be more effective if tailored to the unique needs of each targeted customer group. Consumers in different countries have widely varied cultural backgrounds, needs and wants, purchasing power, product preferences and shopping patterns. Because these differences are hard to change, the marketing strategy should then be tailored to fit the specific values and behaviours of the culture, thus most marketers adapt their products, prices, channels and promotions to fit consumer desires in each country.5 McDonalds, for example, has adapted to local cultural values and traditions rather than trying to implement a standard approach across the world. The company uses the same basic operating formula in its restaurants around the world but adapts its menu to local tastes.6 By modifying the marketing mix to make the product appeal to local cultures may result in increased costs, but in long-run, gain more market shares and return. The other extreme is standardised marketing mix, using basically the same product, advertising, distribution channels and other elements of the marketing mix in all the companys international markets.7 In other words, creating a world brand to serve the entire global. Companies deliver greater values to consumers by offering reliable, high quality products at lower prices. The advantages of standardization include keeping costs down and building global brand image. Many companies have tried to launch their world product. Gillette, for instance, according to the companys estimates, up to 1.2 billion people use at least one Gillette product daily. Geillette enjoys economies of scale by selling a few types of razor blades in every single market.8 However, standardization is a relative concept, even some standard global brands need some adjustments when local wants cannot be changed or avoided. Coca-Cola is sweeter or less carbonated in certain countries. 9 On the contrary, our research company Ikea, the Swedish home furnishing giant offers a wide range of products with 100 percent uniformity worldwide. However, Anders Dahlvig, Chief Executive, sees no need to tailor Ikea stores to local markets:
5 6
Philip Kotler, Veronica Wong, John Saunders, Gary Armstorng p.230 Philip Kotler, Veronica Wong, John Saunders, Gary Armstorng p.231 7 Philip Kotler,Veronica Wong, John Saunders, Gary Armstorng p.230 8 Philip Kotler p. 394 9 Philip Kotler p. 394
Whether we are in China, Russia, Manhattan or London, people buy the same things. We have the same range everywhere - we dont adapt to local markets. If we were to adapt we would just become another retailer in that region or city. The whole idea is to be unique uniquely Scandinavian and uniquely Ikea.10 China is a dynamic market with a completely different language and culture compared to that of Swedish culture. Chinese culture gives the Chinese people their basic identity. The unique value of Chinese culture is shaped by a tradition of four thousand years of history and the same language. Confucianism is undisputedly the most influential thought, which forms the foundation of the Chinese cultural tradition and still provides the basis for the norms of Chinese interpersonal behaviour.11 Furniture is a culture bound product, however Ikea sells a typically Swedish mix of products in every country in which it does business and does not adapt to local market preferences. China is a culturally diverse market compared to that of Sweden. Despite the need for culture sensitivity, Ikea continues its standardization strategy in Shanghai, China. We have tried to describe, identify and analyze Ikeas standardized marketing mix strategy in Shanghai.
1.5
Delimitation
The authors decided to make a case study on Ikeas standardization strategy of one design suits all. The study was restricted on Ikeas activities in the geographical business area in and around Shanghai due to lack of time and resources. No comparison with any other local furniture companies has been made in this paper.
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We have selected the newly redesigned, Ikea store in Shanghai that reopened in 2003 to investigate the problem questions.
Introduction
Research Methodology
Theoretical Framework
Empirical Findings
Analysis
Conclusions
Appendix
RESEARCH METHODOLOGY
We aimed to find an appropriate method to gather information about Ikea and its standardization strategy in Shanghai. The information gathered would help us in analyzing and drawing the conclusion about what has allowed Ikea to be successful with a highly standardized marketing mix in Shanghai.
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consumer preference of Ikeas products. The information gathered from both methods was used to reach a conclusion about the Ikea concept among consumers in Shanghai.
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Alan Bryman (2004) p .41 Alan Bryman (2004) pp. 26-27 16 Alan Bryman (2004) pp. 26-27
2.4.2 Secondary data Secondary data was already published data collected for purposes other than the specific research needs at hand.17 In secondary data, the information was collected through secondary information like, books, articles, newsletters, databases and internet sources. In this research, we gathered the secondary data for the theoretical framework. The theories from various areas were collected from documents, articles and books to create an analysis of the data obtained. Secondary data has also been collected by the use of databases such as ELIN, Emerald and ABI/Inform through the university webpage link. Other secondary information was gathered via Google Scholar too.
2.5 Questionnaire
A questionnaire is a formalized schedule for collecting data from respondents.18 With a selfcompletion questionnaire, respondents answer questions by completing the questionnaire themselves.19 In consistence to research questions authors have used a self-completion questionnaire to collect results (primary data). For convenience, we have chosen the close end form of questions, in which possible answers were provided for selection. We tried to find out people's opinions, preferences, feelings, likes and dislikes about Ikea, its products and services in Shanghai. We had prepared and organized the questionnaire in Mandarin language due to language problem. The questionnaire attached in Appendix section is only in English, as the Chinese characters could not be displayed on computers that do not contain Chinese language program. Ikea consumers within the age group of 20 to 45 had been taken into consideration. The questionnaire was sent by email to Mr. Chen Wengbing, a close contact of us. We chose this method because they considered questionnaire to be the best way to investigate this due to lack of time and resources. The questionnaire was conducted in Shanghai through Mr. Chen Wengbing, who is running a marketing research agency within car industry in Shanghai. Mr. Chen handed out the questionnaire to 110 customers who had been shopping at Ikea on Saturday in Ikea Store in Shanghai. Before handing out the questionnaire it was made sure
17 18
Thomas C.Kinnear and James R.Taylor, p. 143 Thomas C.Kinnear and James R.Taylor, p. 353 19 Alan Bryman, (2004) p. 132
by Mr. Chen that the consumers had done purchasing in Ikea and between 20 and 45 years old. We finally received response from 100 customers of Ikea, Shanghai. For each question the subjects were asked to fill in to what extent they agreed to a certain statement or question.
2.8 Sampling
Sampling is the act, process, or technique of selecting a suitable sample, or a representative part of a population for the purpose of determining parameters or characteristics of the whole population.20 There are three primary kinds of samples: the convenience, the judgment sample, and the random sample. They differ in the manner in which the elementary units are chosen.
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A convenience sample results when the more convenient elementary units are chosen from a population for observation. A judgment sample is obtained according to the discretion of someone who is familiar with the relevant characteristics of the population. This may be the most important type of sample. A random sample allows a known probability that each elementary unit will be chosen.21 The sample used for this case study consisted of people shopping at Ikea, Shanghai at least once. They were chosen to give us an understanding of the customers perception towards Ikeas standardized marketing mix strategy, in Shanghai. This can be done especially a case study the researcher selects the sample based on whom they find appropriate for the study. For our research work, Ikea consumers within the age group of 20 to 45 had been taken into consideration. This segment was then divided into age groups of 20-30, 31-35, 36-40 and 41-45. The questionnaire was conducted in Shanghai through Mr. Chen Wengbing, who is running a marketing research agency within car industry in Shanghai. For each question the subjects were asked to fill in to what extent they agreed to a certain statement or question. This helped us in analyzing the customers perception about Ikeas standardized marketing mix in Shanghai.
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THEORETICAL FRAMEWORK
In this chapter, we illuminate the most relevant theories that can help to enhance the understanding of the empirical data and later to analyze it in depth. This chapter starts with a general outlook on Marketing mix and then followed by description of standardization. Further follows the facts on culture and consumer behavior, describing the determinants of cultural influence on consumer behavior.
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3.1.1 Product A product is defined as anything that can be offered to satisfy a want or need. Products that are marketed include physical goods, services, experiences, events, places, persons, properties, organizations, information, and ideas, according to Philip Kotler.26 Product decisions include aspects such as product feature, quality, packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value. 3.1.2 Price
According to Philip Kotler, price is defined as The amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service.27 Price is the most important element of the marketing mix, since it is the only factor that generates revenue due to the fact that other three elements produce cost. Although prices are the easiest marketing mix element to adjust,28it is still challenging for international companies to set prices. 3.1.3 Promotion
Sales promotion, a key ingredient in marketing campaigns, consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.29 3.1.4 Place
Place decisions are those associated with channels of distribution that serves as the means for getting the product to the target customers. The distribution system performs transactional, logistical and facilitating functions. Distribution decisions include market coverage, channel member selection, logistics, and levels of service.30
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Philip Kotler (2003) P.15 Philip Kotler and G. Amstrong ( 1996) P.340 28 Philip Kotler (2003) P.470 29 Philip Kotler (2003) P.609 30 Marketing-Mix, Quick MBA
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3.2 Standardization
Expanding across borders has increased competition for international marketers. All though customer needs vary, customized products seem to be favorable to serve different target groups. Still, some global companies have tried to prove the opposite, using one standard range of products and services to serve the entire global. A companys decision to pursue a specific product strategy primarily depends on three factors: (1) whether the product function or the need satisfies is the same or different in a new market, (2) whether particular conditions surrounding product use can affect company strategy; and (3) whether target market customers are financially able to buy the product. These three factors greatly influence the product strategy chosen31, standardization or adaptation. The standarlization topic has been a source of considerable debate since early 1990s, surveys of international agency practioners confirmed overall optimism about the increasing expectations of standradized marketing . Since the beginning of the 1990s, Unilver, Mars, and P&G, among others, began to steamline their brand portfolios by seeking greater marketing effectiveness with fewer brands, moving away from complicated multinational portfolios toward what are called harmonized global brands32 Standardization means offering identical products worldwide at identical prices via identical distribution channels, supported by identical sales and promotion programs. Assumed homogenization of needs across borders is the most frequently mentioned reason for standardization.33 Standardization helps in creating a uniform worldwide corporate image, a world brand or global brand with a global image. Harvard Professor Theodore Levitt argues this view of focusing on similarites across world markets because of increased world travel and worldwide telecommunications capabilities, consumers the world over are thinking and shopping increasing alike. Tastes, preferences, and motivations of people in different cultures are becoming homogeneous.34 Theodore Levitt states, The world is becoming a common market-place in which people-no matter where they live-desire the same products and lifestyles.35 Companies that make their profits by following the trend of globally homogenizing needs and preferences achieve, as a result of standardization, economies of
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Jeannet & Hennessey (1995) p.363 Mihailovic & De Chernatony (1995) 33 Marieke de Mooij (1998) p. 25 34 Thomas J.Reynolds and Alyce Byrd Craddock (1988) pp.43-54 35 Theodore Levitt pp.92-102
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scale in procurement, logistics, production, and marketing, and also in the transfer of management expertise, all of which is eventually supposed to lead to lower prices. 36 Complete standarization of product design results in a substantial saving of production and research and development costs and will allow a company to take full advatage of economies of scale. Aside from these obvious advantages, a uniform brand image avoids confusion, universal guidelines and quality standards, better access to know-how and the experience of other countries37 are other factors that support standardization. Standardized products are more easily accepted in less affluent markets. Conditions in less affluent markets ( under-supply economies and less competitive markets) may make multinational companies less conscious of being ultra-competitive. Also, in less sophisticated markets, foreign products tend to be preceived as superior to local products.38 But affluence is increasing worldwide, and consumers are becoming more sofisticated and governments more protective of local values. This will result in decreased acceptace of products from other countries with values that are not appreciated by indigenous populations.39
Maslows hierarchy of needs is a theory in psychology that Abraham Maslow proposed in his 1943 paper A Theory of Human Motivation, which he subsequently extended.43 The five components of hierarchy of needs are self-actualization, esteem needs, social needs, safety
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Marieke de Mooij(1998) p.198 Marieke de Mooij (1998) p.198-224 38 James, W.L, & Hill, J.S (1991) pp.65-71 39 Marieke de Mooij (1998) p.30 40 Charles W.L. Hill ( 2005)p.91 41 Charles W.L. Hill ( 2005)p.91 42 Usunier, Jean-Claude p.15 43 Maslow's hierarchy of needs 2006
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needs, physiological needs, from top to botton hierarchical level.44 When a need is reached and satisfied, the next level need is in place to replace it. The level of economic development naturally has some influence: in a less developed economy people usually have more basic survival needs. However, dominant values may clash with the pragmatic idea that you have to be able to buy food before buying a refrigerator to keep the food fresh. The theory of hierarchy of needs is not actually true when different cultures get involved. Some cultures (for example, Hindu) encourage needs of selfactualization (the highest level), the satisfaction of which does not necessarily imply material consumption. The need for safety (shelter and basic personal protection) is not satisfied according to the same criteria in different cultures.45 3.3.2 Individualism and collectivism
The 5-Dimension model was developed by Geert Hofstede, who analyzed data collected by IBM to try to find an explanation for the fact that some concepts of motivation did not work in all countries in the same way. This model is based on 30 years of quantitative research. The original database was from an extensive IBM database between 1967 and 1973. Later, additional Chinese Value Survey was conducted in 23 countries by Michael Harris Bond.46 Among these five dimensions, we have only chosen individualism and collectivism, which we considered relevant to our study. The contrast individualism and collectivism can be defined as people looking after themselves and their immediate family only, versus people belonging to in-groups that look after them in exchange for loyalty. In individualistic cultures, ones identity is the person, people are I conscious, express private opinions, and self-actualization is important; individual decisions are valued more highly than group decisions. In an individualistic culture, people give priority to the task; in collectivistic cultures priority is given to relationship with people. In individualistic cultures, there is more explicit, verbal communication. In a collectivistic culture, people are we-conscious, their identity is based on the social system to which they belong and avoiding loss of face is important. In individualistic cultures the person is viewed as an independent, autonomous entity with a distinctive set of attributes (traits, abilities, motives and values). In collectivistic cultures
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Marieke de Mooij (1998) p.142 Usunier (1993), p.15 46 Marieke de Mooij (1998) p.75
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individuals are fundamentally dependent on each other. The self cannot be separated from others and the surrounding social context. Self-reflection is more common among individualists than collectivists because for the latter their relationships to others are more important than self-knowledge. 47 Sweden is viewed as individualist whereas Asian countries in general as collectivists. In the Collectivistic Chinese society (and in other Asiatic societies), the individual is not innerdirected at all but controlled by a need for not losing face. Face is lost when the individual, either through his action or that of people closely related to him, fails to meet essential requirement placed upon him by virtue of the social position he occupies.48
3.5 Familism
Among the five fundamental human relations, three of which relate to family relations are: Parent and child, husband and wife, and brother and sister, which clearly show the importance of family in Chinese society and account for its paternalism.52 A Chinese individual must always take into account all the members of the family when making a purchase decision, compared to an interactive decision-making process undertaken by husband and wife in the West where important household expenditure is concerned.
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Mreieke De Mooij (1998) p.75 Ho, D.Y.F. (1978) pp.41, 391-402 49 Pye, L.W China: An introduction 1972 Boston: Little Brown 50 Chen, C (1986). Neo-Confucian terms explained. New York, Columbia University Press. 51 Ying Fan A classicification of Chinese Culture 52 Ying Fan A classicification of Chinese Culture
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As the smallest unit in society, family plays a central roll in China. Family has huge impact on an individuals upbringing as well as its purchasing behavior. It is tradition for Chinese children to live at home until they get married.
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4.1.1
Ikea history
IKEA was founded in 1943 in lmhult, Sweden by Ingvar Kamprad. The name Ikea was formed from the founder's initials (I.K.) plus the first letters of Elmtaryd and Agunnaryd, the farm and village where he grew up.54 IKEA originally sold pens, wallets, picture frames, table runners, watches, jewelry and nylon stockingswhatever Ingvar found a need for that he could fill with a product at a reduced price. Furniture was first added to the Ikea product range in 1947 and, in 1955, Ikea began to design its own furniture.55 At first, Kamprad sold his goods out of his home and by mail order, but eventually a store was opened in the nearby town of lmhult. It was also the location for the first Ikea "warehouse" store which came to serve as a model for Ikea establishments elsewhere and on March 23, 1963, the first store outside Sweden was opened in Asker, a Norwegian municipality outside Oslo.56 4.1.2 Ikea in the world
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IKEA/our vision-a better everyday life IKEA/timeline-the full story 55 IKEA/timeline-the full story 56 IKEA/timeline-the full story
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The globalization strategy developed by Ikea, is a home-based strategy built around a Swedish concept calling for furniture that are clean, modern, efficient, functional, sustainable and competitive price wise. Ikea sells furniture and additional accessories for accommodations worldwide and the company has a reputation for selling inexpensive, selfassembled furniture. Ikea opened its first store abroad, in Oslo in 1963, then in Denmark in 1969, in Switzerland in 1973, Germany in 1974, Canada in 1976, Australia in 1977, the Netherlands in 1979, France in 1981, Belgium in 1984, United States in 1985, Italy in 1989, Hungary and Poland in 1990, Czech Republic United Arab Emirates in 1991. Ikea continued to expand its stores to Spain, China, Russia and Portugal between 1996 and 2004. There is a grand total of 231 Ikea stores in 33 countries/territories and earning $18,498,843,822 in revenues. The Ikea group has 90,000 co-workers and operates in 44 countries. Ikea has 28 distribution centers in 16 countries that supply goods to Ikea store. Ikeas mainland China stores belong to the Ikea Group and operate as joint ventures. 4.1.3 Ikeas vision Ikeas vision is to create a better everyday life for the many people and their business idea is to offer a wide range of home furnishings with good design and function at prices so low that as many people as possible will be able to afford them. Their business idea is to create value and partnership with the customer.57 In order to give the many people a better everyday life, Ikea asks the customer to work as a partner. The product range is child-friendly and covers the needs of the whole family, young and old. So together they can create a better everyday life for everyone. Sweden has an international reputation for safety and quality you can rely on, and Ikea retailers take pride in offering the right quality in all situations. In Ikea, quality is not compromised for the sake of cost. Many people associate Sweden with a fresh, healthy way of life. This Swedish lifestyle is reflected in the Ikea product range. The freshness of the open air is reflected in the colours and materials used and the sense of space they create: blond woods, natural textiles and untreated surfaces.58
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4.1.4
Sales 1995-2005
Fig 4: The IKEA Group Sales (1995- 2005) 59 We can see from the chart above that sales grew constantly from 1995 to 2005. Sales for the IKEA Group for the financial year 2005 (1September2004 31 August 2005) totaled 14.8 billion euros ($18,468,104,898 ).60
Fig 5: Sales and Purchasing by region61 The pie charts above show where sales and purchasing were generated in the year 2005. The biggest sales were achieved in Europe with 81%, followed by North America with 16% and Asia and Australia with only 3%. The biggest purchasing was achieved in Europe with 67%, followed by Asia with 30% and North America with only 3%.
59 60
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DFJ DragonFund China 2006-05-25 Article: Ikea Goes Even More Cut-Rate to Draw Chinese Shoppers by Mei Fong, Washington Post 64 Tim Ambler And Morgen Witzel Doing Business In China 65 Shanghai Daily----English Window to China News.htm 25 April, 2006
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4.2.3 Housing conditions and real estates The city has residential buildings of 257 million square meters, or 73.6% of the city total. By the end of 2004, more than 94.1% of local residents lived in new homes with garden or courtyard style apartment buildings and 92.5% of housing had all necessary amenities. In the urban districts, the average per capita living space reached 14.88 square meters 8.2 square meters more than the 1990 figure. Meanwhile, the average per capita use space reached 20.4 square meters. In rural areas, the average per capita living space reached 59.8 square meters and more houses were equipped with washrooms.66
Fig 6: New Housing and Urban Average per Capita Housing Space67
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Shanghai Daily----English Window to China News.htm Shanghai Daily----English Window to China News.htm
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5 EMPIRICAL FINDINGS
In this chapter presents the empirical findings about Ikea and its marketing mix in Shanghai that are acquired from primary information through customer service Ikea, Shanghai.
5.1 Product
According to customer service Shanghai Ikea in Shanghai offers more than 7,000 products for the home under one roof: sofas, beds, tables, chairs, textiles, kitchen utensils, flooring, rugs, kitchens, bathrooms, lamps, kids' soft toys and plants. No specific item is produced for the Chinese market. IKEA also features a 170m2 children's playground and a 500-seat restaurant. A well-designed product can create a distinct competitive advantage. Ikea products are modern and are functional enough for everyday use. Ikea sells the same products of Scandinavian design. All products that sold in Shanghai store are produced in China. Ikea continues its flat packaging strategy in Shanghai. At the check out reception, customers can show the receipt to get a local home delivery for a fee. Ikea also offers long-distance delivery to major cities in China by charging a fee, a fee-based assembly services. Ikea store in Shanghai is opened daily from 10.00 to 22.00, just like any other department stores in China.
5.2 Price
We were told when concerning price, Ikea did reduce prices when first entered China, the store was considered too expensive for its target consumers--young, professional couples, so the company lowered its prices. With the rapidly increasing wages in the Shanghai the store's prices are no-longer considered high-range store in Shanghai. A typical Ikea customer earns about Yen 3,000 ($400) per month.
5.3 Promotion
According to customer service, Ikea posts in-store instructions and design advice, publishes brochures and catalogues, and operates a detailed website to help Chinese customers understand the Ikea concept. People do not get catalogues delivered at home by Ikea. Ikea
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also advertises on the local Chinese newspaper in Shanghai, as the target group is generally information seeker and newspaper reader. Ikea is well known and successful in the western world for its DIY (do-it-yourself) principle but in Shanghai, China, where labor is cheap, the DIY notion had not taken hold in the beginning. We were told that Ikea tried to get the idea to the public that they can save money on do-it-yourself assembly without sacrificing style and quality. Ikea translated and transformed its brand name into Chinese character, YIJA, mentioned customer service. In China, YIJA means pleasant and comfortable home which can be easily associated with IKEA product categories. YIJA matches the desired symbol of the Chinese value of familism. According to customer service, Ikea offers discounts every month. Some items are selected and given a discount. The store's room settings are full of furnishing and decor ideas. Ikea also produces brief TV spots that show living areas before and after Ikeas magic touch. IKEA uses a variety of methods to obtain market data on Chinese customer knowledge. Ikea people have been conducting home visits, city visits, telephone surveys to identify what knowledge the customer has, how much money they have to spend, and what their needs are.
5.4 Place
Usually IKEA stores open relatively far out in the suburbs, but in Shanghai, Ikea is strategically located in the heart of Xu Jia Hui, No.126 CaoXi road, Shanghai, a booming residential and commercial hub of Shanghai. Customer service also mentioned that Ikea is situated at the crossroad of a major elevated highway and a light railway line. Ikea is also within walking distance from a public bus terminal. There is a huge basement car park and a basement taxi stand for customers. Ikea contracts out its taxi service exclusively to a local taxi company, Qiang Sheng Taxi so that customers enjoy prompt and premium taxi services. The Shanghai store has almost 1,000 parking places.
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travel more than the average Chinese. And, like most Ikea shops around the world, more than 50 percent of Ikea customers are women.
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In this survey, consumers within the age range of 20 to 45 had been taken into consideration. This segment was then divided into four age groups of 20-30, 31-35, 36-40 and 41-45. The total number within each age group then divides all figures collected for each category to obtain the percentage of consumers. We then put the data into Excel to obtain a staple diagram to illustrate the result.
Male 7 25 20 4
Female 5 22 12 5
Total 12 47 32 9
The consumers who answered the survey, within the age group 20-30, 58% were male and 42% female; within the age group 31-35, 53% were male and 47% female; within the age group 36-40, 63% were male and 37% female; within the age group 41-45, 44% were male and 56% female. 2. Which level of education do you have?
Age 20-30 31-35 36-40 41-45 High school 8 10 10 5
Education level of consumers
College University 2 10 5 0 2 27 17 4
Total 12 47 32 9
Consumers (in %)
When asked about their education level, within the age group 20-30, 66% had high school education, 17% college degree and 17% university degree; within the age group 31-35, 21% had high school education, 21% college degree and 58% university degree; within the age group 36-40, 31% had high school education, 16% college degree and 53% university degree;
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within the age group 41-45, 56% had high school education, 0% college degree and 44% university degree. 3. Specify your civil status.
Single live Single Married Married live with without with parents alone child child Total 8 1 1 2 12 5 6 25 11 47 1 5 20 6 32 0 0 7 2 9
Civil status of consumers 80% 60% 40% 20% 0% 20-30 31-35 36-40 41-45
Single live with parent
Single live alone
Married with child
Consumer (in %)
When asked about their civil status, within the age group 20-30, single live with parents were 68%, single live alone 8%, married with child 8% and married without child 16%; within the age group 31-35, single live with parents were 11%, single live alone 13%, married with child 53% and married without child 23%; within the age group 36-40, single live with parents were 3% single live alone 16%married with child 62% and married without child 19%; within the age group 41-45, single live with parents were 0%, single live alone 0%, married with child 78% and married without child 22%.
9 8 7 3
2 21 18 3
1 11 4 2
0 7 3 1
12 47 32 9
When asked about their income level, within the age group 20-30, annual income 10,00040,000 Yuan were 75%, 40,000-80,000 17%, 80,000-100,000 8%, above 100,000 0%; within the age group 31-35, annual income 10,000-40,000 Yuan were 17%, 40,000-80,000 45%, 80,000-100,000 23%, above 100,000 15%; within the age group 36-40, annual income 10,000-40,000 Yuan were 22%, 40,000-80,000 56%, 80,000-100,000 13%, above 100,000
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9%; within the age group 41-45, annual income 10,000-40,000 Yuan were 33%, 40,00080,000 33%, 80,000-100,000 22%, above 100,000 12%.
Seldom 5 12 10 2
Often 3 5 3 3
Total
Consumers (in %)
Frequency of Purchasing
70% 60% 50% 40% 30% 20% 10% 0%
12 47 32 9
When asked about frequency of shopping at Ikea, within the age group 20-30, 42% answered seldom, 33% few times, 25% often; within the age group 31-35, 26% answered seldom, 63% few times, 11% often; within the age group 36-40, 31% answered seldom, 60% few times, 9% often; within the age group 41-45, 31% answered seldom, 60% few times, 9% often. 6. What do you think of Ikeas shopping environment?
Age 20-30 31-35 36-40 41-45 Just okay 4 6 2 2 Good 6 16 22 3 Very good 2 25 8 4
Shopping environment
Total 12 47 32 9
Consumers (in %)
When asked about the shopping environment at Ikea, within the age group 20-30, 33% answered just okay, 50% good and 17% very good; within the age group 31-35, 13% answered just okay, 34% good and 53% very good; within the age group 36-40, 6% answered just okay, 69% good and 25% very good; within the age group 41-45, 22% answered just okay, 33% good and 45% very good.
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Total 12 47 32 9
consumers (in %)
When asked about prices of Ikea products, within the age group 20-30, 8% considered cheap, 8% acceptable, 84% expensive; within the age group 31-35, 26% considered cheap, 57% acceptable, 17% expensive; within the age group 36-40, 22% considered cheap, 53% acceptable, 25% expensive; within the age group 41-45, 22% considered cheap, 22% acceptable, 56% expensive.
Just okay 1 0 4 2
Good 5 18 15 6
Total 12 47 32 9
Consumers (in %)
70% 60% 50% 40% 30% 20% 10% 0% Just okay Good Very Good 20-30 31-35 36-40 41-45
When asked about Ikea product design, within the age group 20-30, 8% considered just okay, 42% good, and 50% very good; within the age group 31-35, 0% considered just okay, 38% good, and 62% very good; within the age group 36-40, 12% considered just okay, 47% good, and 41% very good; within the age group 41-45, 22% considered just okay, 67% good, and 11% very good.
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Self delivery 2 10 12 2
Total
Consumers (in %)
100% 80% 60% 40% 20% 0% 20-30 31-35 36-40 41-45 Self delivery Ikea delivery
12 47 32 9
When asked about Ikea delivery service, within the age group 20-30, 17% would use selfdelivery, 83% Ikea delivery; within the age group 31-35, 21% would use self-delivery, 79% Ikea delivery; within the age group 36-40, 37% would use self- delivery, 63% Ikea delivery; within the age group 41-45, 22% would use self delivery, 78% Ikea delivery.
Total
Assembly service
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Consumer( in %)
47 32 9
When asked about assembly service, within the age group 20-30, 42% would consider selfassembly, 58% Ikea assembly; within the age group 31-35, 43% would consider selfassembly, 57% Ikea assembly; within the age group 36-40, 37% would consider selfassembly, 63% Ikea assembly; within the age group 41-45, 33% would consider selfassembly, 67% Ikea assembly.
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Bad 1 5 3 1
Acceptable Good 5 12 10 2 4 25 14 5
Total 12 47 32 9
Consumers (in%)
Bad Acceptable Good Very Good 20-30 31-35 36-40 41-45 Age group of consumers
When asked about Ikea product quality, within the age group 20-30, 8% considered bad, 42% acceptable, 33% good and 17% very good; within the age group 31-35, 11% considered bad, 25% acceptable, 53% good and 11% very good; within the age group36-40, 9% considered bad, 31% acceptable, 44% good and 16% very good; within the age group41-45, 11% considered bad, 22% acceptable, 56% good and 11% very good.
Good 4 10 5 2
Very Good 8 37 27 7
Total 12
Consumers(in%) 100% 80% 60% 40% 20% 0% 20-30
Return Policy
47 32 9
When asked about Ikeas return policy, within the age group 20-30, 33% considered good, 67% very good; within the age group31-35, 21% considered good, 79% very good; within the age group 36-40, 16% considered good, 84% very good; within the age group 41-45, 22% considered good, 78% very good.
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Consumers Suggestions
Reduce Price 10 12 8 5
Total 12 47 32 9
100% Consumers(in%) 80% 60% 40% 20% 0% 20-30 31-35 36-40 41-45 Reduce Price Improve quality Reduce delivery cost
When asked about what Ikea should do in the future, within the age group 20-30, 83% thought Ikea should reduce price, 8% improve quality and 9% reduce delivery cost; within the age group 31-35, 26% thought Ikea should reduce price, 38% improve quality and 36% reduce delivery cost; within the age group 36-40, 25% thought Ikea should reduce price, 19% improve quality and 56% reduce delivery cost; within the age group41-45, 56% thought Ikea should reduce price, 11% improve quality and 33% reduce delivery cost.
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The DIY (do-it-yourself) notion is still not much popular among the consumers and the majority of consumers use the Ikea assembly service. Whereas, this DIY notion is popular among the youngest group of consumers aged 20-30 who want to try something new. As most of the consumers do not have cars, rely on Ikeas delivery service. Ikea should consider reducing it delivery cost more, as some consumers suggested in the survey. Return policy is something new to Chinese consumers and is very much appreciated by them. People in Shanghai also give good credits to Ikea shopping environment. Since the majority of consumers perception about Ikeas product is positive, Ikea has succeeded quite well in Shanghai.
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Ikea image highly depending on the standarlisation of marketing mix, keeps the products as homogenous as possible .The size and limited space in ordinary households in Shanghai have already set Ikea products into test. Standarlisation does not mean 100 percent uniformity. The solution can be either add some specific features to adjust to the local households, or to provide decoration advice to help consumers save space. When IKEAs expansion plan continues in China, standarlisation strategy may not work as good as in Shanghai. Since China is a diverse country, where regions are unequally developed. More and more local features should be considered to balance regional differences.
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REFERENCES Sources:
Alan Bryman (2004), Social Research Methods, 2nd Edition, New York Ambler, Tim(2004), Doing Business in China, 2nd Edition, New York Bjrk Stellan (1998), IKEA Charles W.L. Hill ( 2005), International Business , 5th Edition, New York Deresky, Helen (1997), International Management: Managing Across Borders and Cultures, 2nd Edition, Addison-Wesley Ho, D. Y. F. (1978), The concept of man in mao-tse-Tungs thought Psychiatry Jean-Pierre Jeannet & H. David Hennessey(1995), Global Marketing Strategies 3rd Edition Thomas C.Kinnear and James R.Taylor, Marketing Research, An Applied Approach 5th Edition Marieke de Mooij (1998), Global Marketing and Advertising , California Mreieke De Mooij (2002), Translating Advertising Painting the Tip of an Iceberg Mugo Fridah W(2000), Sampling in Research Mihailovic & De Chernatony (1995), The era of brand culling Philip Kotler, Veronica Wong, John Saunders, Gary Armstorng (2003), Principles of Marketing, 7th Edition , Essex Philip Kotler ( 2003), Marketing Management, 11th Edition , New Jersey Pye, L.W. (1972), China: An introduction. Boston: Little Brown. Philip Kotler and G. Amstrong (1996), Principles of marketing 7th Edition Usunier, Jean-Claude, International Marketing: a cultural approach
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James, W.L., & Hill, J. S.(1991, June/July), International advertising messages: To adapt or not to adapt ( that is the question). Journal of Advertising Research, pp65-71 Riera, Francesc, 1997, How a Firm Designs Marketing Mix Strategy in a New Foreign and in Home Country Salzer, Miriam, 1994, Identity across borders Theodore Levitt, The Globalization of Markets Ying Fan , A classicification of Chinese Culture, Journal: Cross Cultural Management: An International Journal ISSN: 1352-7606 Year: Jun 2000 Volume: 7 Issue: 2 Page: 3 - 10 Chen, C (1986), Neo-Confucian terms explained. New York, Columbia University Press Thomas J.Reynolds and Alyce Byrd Craddock, The Application of the MECCAS Model to the Development and Assessment of Advertising Strategy: A Case Study Journal of Advertising Research, April-May 1998, pp.43-54
Internet sources:
http://management.uta.edu/tpayne/MANA5321/ikea.pdf The logic of Chinese business strategy: East versus West: Part I by Usha C.V. Haley, George T. Haley, 2006 http://www.icmr.icfai.org/casestudies/catalogue/Business%20Strategy/BSTR173.htm Ikea Outlines Mainland Expansion Plan (China Daily April 6, 2004) http://www.china.org.cn/english/Life/92256.htm IKEA to open 10 stores on China's mainland in 6 years, 2004-08-31 http://en.ce.cn/subject/RetailinginChina/ChainStore/200409/29/t20040929_1955283.shtml Ikea to expand presence in China http://english.people.com.cn/200404/06/eng20040406_139576.shtml IKEAs Ulf Smedberg http://www.sinomedia.net/eurobiz/v200302/qa0302.html Shanghai Daily----English Window to China News.htm, 25 April, 2006 http://www.shanghaidaily.com/bf_13_urban%20life.php http://www.quickmba.com/marketing/mix/
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3. Specify your civil status? a) Single live with parents d) Married without child b) Single live alone c) Married with child
4. Which is your annual income level? a) 10,000-40,000 Yuan b) 40,000-80,000 Yuan c) 80,000-100,000 Yuan 40
d) Above 100,000 Yuan 5. How often do you shop at Ikea? a) Seldom b) Few times c) Often
6. What do you think of Ikeas shopping environment? a) Just okay b) Good c) Very good
7. What do you think of the prices of Ikea products? a) Cheap b) Acceptable c) Expensive
8. What do you think of the Ikea product design? a) Just okay b) Good c) Very good
9. If you brought an Ikea bookshelf, how would you take it home? a) Self delivery b) Ikea delivery
10. How would you like to assemble the bookshelf? a) Self-assembly b) Ikea-assembly
11. What is your own experience towards Ikea product quality? a) Bad b) Acceptable c) Good d) Very good
12. What do you think of Ikeas return policy? a) Good b) Very good
13. What do you think Ikea should do in the future? a) Reduce price b) Improve quality c) Reduce delivery cost
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List of Figures
Fig 1: Structure of the Report, Own Source. 5 Fig 2: Marketing Mix 12 Fig 3: Countries that have IKEA stores... 21 Fig 4: The IKEA Group Sales (1995- 2005) 21
Fig 5: Sales and Purchasing by region.18 Fig 6: New Housing and Urban Average per Capita Housing Space. 23
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