Marketing Strategy for IKEA Based on China and the UK Markets - Case Study Example

Name Class Unit Executive summary This international marketing report analysis global marketing strategy for IKEA based on China and UK markets. The report has analysed the company from its humble beginning to becoming one of the world largest furniture retailer. This is through focusing on the furniture segment of the company. The report analysis the shanghai market and the marketing strategies used in the market. This includes looking at the 4Ps of marketing mix. The report then analysis the UK market and the marketing strategies used. The report is able to establish that the success in both markets is based on excellent global marketing strategies. PESTLE analysis, targeting, segmentation and positioning for IKEA in the global market are analysed. The company has successfully placed themselves as global leader in low cost furniture of reasonable quality. The report then looks at the customer acquisition and retention techniques by IKEA. The company has been able to gain customer loyalty in the global market which has translated to high sales. The marketing plan concludes that the company is able to strike a balance between the global marketing strategies and local cultures. Table of Contents Executive summary 2 Table of Contents 3 Introduction 4 Marketing 4 IKEA global marketing mix 5 Marketing in Shanghai China 7 Marketing IKEA 9 Positioning, Segmentation and Targeting 10 Customer retention and acquisition activity on IKEA 11 Conclusion and recommendations 11 References 12 Appendix 13 Introduction IKEA is one of the companies that have been able to succeed in the global business scene. The company is the largest furniture retailer with operations in different markets globally. IKEA products include modern style furniture, décor products, and pet care and kitchen appliances (Edvardsson & Enquist, 2008). IKEA was established in 1943 in the southern Sweden and developed over time to become an international company. The company expansion has been aided by an aggressive marketing campaign. This has helped the company to enter into global markets in the era of globalisation (Edvardsson & Enquist, 2011). The aim of this report is to analyse the international marketing strategy for IKEA. The report analyses the furniture segment of its products portfolio and looks into the international marketing strategies used in countries such as China and Russia. Marketing Marketing is a very vital process among all business. In the modern business, marketing is about meeting and satisfying the customers’ needs. It is a process in which the customer value is created and a strong relationship between the firm and customers is build. IKEA development of international marketing strategies started aligns time ago (Edvardsson & Enquist, 2011). IKEA business can be traced back from the production concept. This is a concept that claims that consumers will favour products which are affordable and available. This made the company to be built around this concept where the products were availed to consumers at low price. Due to competition and hostility in the market, IKEA embarked on designing their own products and looked for cheap suppliers in other countries. At the moment, IKEA has been sacrificing quality in order to charge low prices. The company has been working hard to ensure quality assurance at low prices. Due to the rising competition in Poland, IKEA started using the marketing concept. This is through a well-researched market and focusing on the consumer needs through integrated marketing. The company also engages in societal marketing through ethics and social responsibility. This is through making collaboration with international bodies such as UNICEF (Edvardsson & Enquist, 2011). IKEA global marketing strategy is based on customer centred approach. Through a customer guided strategy, the company has been able to design a marketing mix which favours global consumers (Edvardsson & Enquist, 2008). IKEA global marketing mix Marketing strategy cannot succeed without an appropriate marketing mix. Marketing mix is a major component in modern marketing. Through use of the 4Ps, the company is able to come up with a systematic marketing plan. The marketing mix starts with a product strategy. This covers more than the physical goods being sold by the firm. This is good and service combination that is offered by the organisation. IKEA furniture segment is one of the most successful globally. The company designs their furniture with differing features. IKEA has positioned itself as a seller of affordable price and reasonable quality products (Edvardsson & Enquist, 2011). In order to reduce costs, IKEA wraps its products with environmental friendly materials. This is a societal marketing concept. In their services, IKEA always encourages their customers to do-it-yourself through they provide technical help where needed (Edvardsson & Enquist, 2011). Price is the amount of money that is required for a product or service. IKEA occasionally offers discounts and allowances to their customers. There are also efforts to reduce the prices of certain products which are popular with the consumers. This makes it possible for the consumers to make big orders and enjoy huge discounts. The company benefits from massive sales which allow them to enjoy higher profits. IKEA offers different payment methods to the consumers. This emphasizes on the consumer values where convenience is enhanced (Edvardsson & Enquist, 2008). Place includes the company activities and processes which makes it possible for the products to reach the customers (Edvardsson & Enquist, 2008). This includes locations, channels, transportation and logistics. IKEA has been able to establish an efficient delivery network over the years. The company have several delivery hubs all-over the world and products are transported to customers globally. The location of IKEA shops in the city’s suburbs helps a lot in reducing the costs (Edvardsson & Enquist, 2011). Promotion is a mix of tools used in marketing. It is also known as marketing communication mix. This includes different blends of advertising, public relations, direct marketing and personal selling. The company uses these tools to persuasively communicate with the customers and create a relationship (Edvardsson & Enquist, 2011). IKEA uses advertising, newspapers, TV and brochures. In addition, the company has been paying attention to environmental and ethical issues in their operations. The company cooperation with the non-governmental organisations has helped a lot in building a string corporate image. IKEA operates in different markets and face consumers from different backgrounds. To come up with an effective marketing mix, the company has understood the local traditions, culture and behaviours (Edvardsson & Enquist, 2008). Marketing in Shanghai China IKEA success in global marketing can be attributed to their international marketing strategy. IKEA Shanghai was the first store to be opened in China (Edvardsson & Enquist, 2002). The company operations in shanghai has been very successful. The building is painted blue and yellow which is used in all other stores globally. The store has showroom where the consumers can check and try furniture before making up their mind. Once a purchase is made, the customer chose to have it delivered by the company at a fee or delivery by themselves (Miller, 2004). The company has ensured that the furniture they offer in China fits the country context. This is through designing furniture that fits into Chinese context (Edvardsson & Enquist, 2002). The showrooms include furniture items for living room, storage, kitchen, dining room, offices bedrooms and bathrooms. This is aimed at showing consumers that IKEA design can fit into the Chinese home. The Chinese consumers are attracted by the light and simple coloured furniture. This has made it possible for them to consider trying different cultures (Miller, 2004). IKEA Shanghai has been making marketing strategies that fits the local market. The marketing mix is designed with an aim of addressing the Chinese market. IKEA localisation in China is meant to appeal the local market and consumers tastes. The furniture offered in Chinese market is meant to match its preferences (Edvardsson & Enquist, 2002). The showrooms are designed based on the Chinese styles. The company product policy pays a lot of attention to Chinese style. In contrast to the Chinese furniture, IKEA products are offered with fancy carvings. The products are lighter and simpler. Due to fact that IKEA designs all their products, the company has the ability to make products which fits Chinese market. Slight alterations of the furniture have been a major move that enabled the company fit in different markets. In China, the packaging materials used matches the goods inside. IKEA has been making major efforts to attract consumers with branding in China (Miller, 2004). Reducing prices has been one of the most effective methods in China. The company has been able to reduce their prices with an aim of Chinese families with low incomes as well as those with high incomes (Edvardsson & Enquist, 2008). The company has continuously lowered their prices while sacrificing the quality. The company treats pricing as a key strategic tool in capturing the customer value. The company aims at capturing the highest consumer value through the lowest costs. IKEA China has been able to create a network of logistics and distribution for their consumers. The company efforts in creating efficient distribution systems in China has made it possible to access large market share (Edvardsson & Enquist, 2002). The promotion mix used by the company is the most culture bound element. The promotion used by IKEA in China has to use local language for cultural reasons (Johansson & Thelander, 2009). The company uses the tools to build value and create customer relationship in the Chinese market. In China, the company is known for encouraging personal selling (Edvardsson & Enquist, 2002). Advertising in China has been very successful and effective. This is through use of local newspapers and TV. Internet has also offered a cheap and convenient way of promoting IKEA furniture in Chinese market. Cultural relevance messages in the company promotion have been able to target Chinese consumers more effectively. There is also use of public relations, brochures and catalogues (Miller, 2004). Marketing IKEA IKEA entry into UK was based on their global expansion plan. The company has been able to use effective marketing strategies in UK. This has given the company a competitive edge in the market. The company has adapted to the UK culture and come up with products which meet the market. The company marketing in UK is aimed at adapting to the local culture while at the same time retaining their Swedish heritage (Burt, Johansson & Thelander, 2011). Product formulation and packaging is core to IKEA marketing activities in UK. The company packages its furniture strategically to maintain its relevance to the UK customer needs. The company has been able to design furniture that is consistent with UK market needs. The product design is aimed at meeting the customer needs through taking value of their feedback. This is due to fact that IKEA understands the UK culture and needs more (Burt, Johansson & Thelander, 2011). IKEA in Britain relies heavily on television and billboard advertising. The company highlights quality and affordable prices in its advertisements. This has enabled the company to reach a large market in UK. The company has presented itself as an affordable brand with products cost that is within the market average (Edvardsson & Enquist, 2002). In distribution, IKEA has an extensive market distribution strategy in UK. This is through a network of local suppliers and its own logistics plans. The company global distribution network makes sure that the company is able to meet the consumer needs. Most of the products sold by the company are produced locally which helps in making them near the consumers. Consumers can be offered transport for their products at a fee or use other means of transportation (Burt, Johansson & Thelander, 2011). Price is a very vital aspect of the marketing mix. In UK, the company uses the right pricing mechanism to attract customers. The company has continuously adjusted their prices to meet consumers in the low segments. The company has been reducing their prices with an aim of attaining large customer base. The company pricing policy has been used as a strategic marketing tool. This is through capturing the customer value at the lowest cost possible (Burt, Johansson & Thelander, 2011). Positioning, Segmentation and Targeting the company global positioning is based on their statement” we do our part”. This is through their commitment to design, innovation and consumer value. Through use of low cost materials, the company is able to come up with products that are capable of meeting the consumer needs. The consumer is able to benefit from reduced prices and reasonable quality. This has positioned IKEA as low cost and affordable producers of furniture which is of reasonable quality. The company remains committed to consumer value globally (Hultman, Johnsen, Johnsen R., & Hertz, 2012). In segmentation, this is grouping the consumers based on a given criteria. IKEA global segmentation is based on demographics, geographical, social and psychographic segmentation. The company uses buying behaviours in a given country to determine its segmentation approach. This has helped a lot in coming up with market segments based on the country of operations (Ferrell & Hartline, 2012). Targeting includes selecting the right group to sell. IKEA target market is wide. This is through use of wide range of well-designed furniture products at reduced prices. The target market includes lower, middle and upper social class consumers of different sexes, geographical locations and preferences (Doole & Lowe, 2008). Customer retention and acquisition activity on IKEA IKEA has been able to acquire and retain consumers’ globally through their marketing strategies. Through their products, consumers’ loyalty is enhanced. This has led to consumers being in love with the company products. The do it yourself approach has been able to attract a lot of customers into IKEA. The company offers everything in one roof experience which enables the consumers to shop for other products apart from the furniture. The company has strong public relations which has helped them to create a strong brand image (Ferrell & Hartline, 2012). Through excellent services, the company has been able to retain customers globally. Customers ate able to receive value for their money at IKEA stores globally. Excellent customer service is a great way to enhance customer retention. The company also follows the changing customer trends. There is also high use of social media technology to reach the customers. This has helped in creating digital marketing and addressing customer complaints online (Doole & Lowe, 2008). Conclusion and recommendations To sum up, IKEA global marketing strategies has made it one of the largest furniture retailers worldwide. The company has been able to come up with a marketing mix that fits the country of operation. From the small company in Sweden, the firm has been able to expand globally and attain a large market share. The company success in Chinese and UK market are based on their marketing strategy. The designers of the marketing strategy have been able to blend the 4Ps in a great way. This is through striking a balance between local culture and global marketing plan. The company should continue paying attention to the culture as they expand. There is need to gaining a complete picture on the market and consumers. Despite this, IKEA must ensure that their cultural awareness in different countries does not undermine their global strategy. References Burt, S., Johansson, U., & Thelander, Å. 2011. “Standardized marketing strategies in retailing? IKEA’s marketing strategies in Sweden, the UK and China.” Journal of Retailing and Consumer Services, Vol.18, no.3, p.183-193. Doole, I., & Lowe, R. 2008. International marketing strategy: analysis, development and implementation. Cengage Learning EMEA. Edvardsson, B., & Enquist, B. 2002. “'The IKEA saga': how service culture drives service strategy.” Service Industries Journal, Vol.22, no.4, p.153-186. Edvardsson, B., & Enquist, B. 2008. Values-based service for sustainable business: lessons from IKEA. Routledge. Edvardsson, B., & Enquist, B. 2011. “The service excellence and innovation model: Lessons from IKEA and other service frontiers.” Total Quality Management & Business Excellence, Vol.22, no.5, p.535-551. Ferrell, O. C., & Hartline, M. 2012. Marketing strategy, text and cases. Cengage Learning. Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. 2012. “An interaction approach to global sourcing: A case study of IKEA.” Journal of purchasing and supply management, Vol.18, no.1, p.9-21. Miller, P. M.2004 “IKEA with Chinese characteristics”, The China Business Review, Vol.31, no.4, p.36-38. Johansson, U., & Thelander, Å. 2009. “A standardised approach to the world? IKEA in China.” International journal of quality and service sciences, Vol.1, no.2, p.199-219. Appendix Pestle Political Corporate tax and consumer taxation affects the company in their country of operation. Each of the country has their own taxation which the company has to follow. The company tax is subject to the regional taxation laws. Tariffs and trade barriers have a great impact on the business. Tariffs and trade barriers are imposed with an aim of protecting local industries, national security and ensure local employment. Due to reliance on the local suppliers, the company has been influenced very little by trade barriers and tariffs. Political stability has a great impact on business. This is due to the impact on the buyer seller relationship (Edvardsson & Enquist, 2002). Economic The economic growth of the markets has a great impact on business. Rapidly growing economies gives the consumers better living standards and high disposable incomes. This increases their purchasing powers hence the profits. Labour availability ensures business success. For example, China is popular with their low cost and skilled labour. This has the ability to give the company a wide margin. Inflation rates affect the consumer behaviour, market stability and availability of resources (Ferrell & Hartline, 2012). Social This includes factors such as modifications of demographic variables of varying countries. As the population age, their likelihood to buy the furniture decreases. Younger generation prefers to buy trendy furniture as opposed to the older generation. Change in demographics also influences the demand for furniture. Cultural factors, fashion trends and consumer behaviour are other social factors affecting IKEA operations (Burt, Johansson & Thelander, 2011). Technological Emergence of technologies such as RFID has been a major boost in the retail sector. There is also online shopping which has immensely benefited the company. RFID has been able to help the company in shrinking their inventory, labelling and checkout processes. The company has been using mobile payments and gift cards for their customers. There has been an increasing reliance on social media as a marketing channel. This has helped in increasing awareness to reach the target market (Ferrell & Hartline, 2012). Environmental This includes factors such as ethical business operations, community development and reduced carbon emissions. IKEA has been under scrutiny for their contribution towards carbon emissions, disposal of waste materials and recycling. The local governments have been working hard to ensure that businesses are able to meet standards required for the environment (Doole & Lowe, 2008). Legal Each country has legal mechanism to protect the consumers. Laws also determine what the business is expected to do in their operations. Businesses are expected to comply with the legal system in place in all their operations. Changing business practices, damaged business image and reputation are some of the additional cost IKEA has to meet in global legal environment. There are regulations such as employee protection, safety and remuneration which business has to comply with (Ferrell & Hartline, 2012). Read More