Ikea International Marketing Plan in Oman - Essay Example

International Marketing Plan - IKEA in Oman - Total Number of Words: 3,299 Table of Contents I. Introduction ……………………………………………………………….. 4 II. International Marketing Plan…………………….……………………… 5 a. International Marketing Objective(s) ………………………… 5 b. Market Situational Analysis …………………………………… 6 b.1 PEST Analysis ………….………………………………. 6 b.1.1 Political Factors …………………………….. 6 b.1.2 Economic Factors ………………………….. 7 b.1.3 Social or Socio-demographic Trend ……. 7 b.1.4 Technological Trend ………………………. 8 b.2 SWOT Analysis …………………………………………. 8 b.2.1 Strength ……………………………………… 8 b.2.2 Weaknesses ………………………………… 9 b.2.3 Opportunities ……………………………….. 9 b.2.4 Threats ………………………………………. 10 b.3 Marketing Mix (4/7P’s) ………………………………… 10 b.3.1 Product ……………………………………… 10 b.3.2 Place ………………………………………… 10 b.3.3 Price …………………………………………. 11 b.3.4 Promotion …………………………………… 12 c. Marketing Strategy …………………………………..………….. 12 c.1 Target Market ……………………………………………. 12 c.2 Market Segmentation ………………………………….. 13 c.2.1 Socio-Demographic Segmentation ……… 13 c.2.2 Lifestyle or Psychographics Segmentation 14 c.2.3 Geographic Segmentation ………………… 14 c.3 Product Positioning ……………………………………. 15 c.4 Ansoff Matrix ……………………………………………. 15 c.5 Market Entry Methods …………………………………. 16 d. Implementation and Control ………………………………….. 16 Table I – Market Segment of Rattan-Made Furniture Sold in Omani Market: Demographic ………………………………………… 18 Table II – Gantt Chart on Marketing / Business Activities of IKEA in Oman . 20 Figure I – Oman’s Geographical Map …………………………………………. 21 References …………………………………………………………………… 22 – 23 Introduction Back in the late 1940s, IKEA was established by Ingvar Kamrad in Southern Sweden. (IKEA, 2008a) Over the years, the concept of IKEA remained focus on developing attractive and well-designed low-price furniture items throughout the southern part of Sweden. With a total of 300 stores in more than 35 countries around the world (IKEA, 2008b), the company is considered as one of the biggest international retailers of affordable furniture products such as economically designed bed, tables, chairs, vase, plates, and wall shelves among others (IKEA, 2008d). As part of the company’s continuous global expansion strategy, IKEA successfully managed to set up a store outlet in Jeddah, Saudi Arabia and Kuala Lumpur, Malaysia back in 1983 and 1996 respectively (IKEA, 2008c). With the active assistance of International Al Futtain Group – Dubai-based business conglomerate of IKEA, the business is currently planning to open a store outlet within the jurisdiction of the Sultanate of Oman over the next three to four years from now (Business Intelligence Middle East, 2007). In general, Oman is well-known for its fishing and oil industry (Nations Encyclopedia, 2008a; U.S. Department of State, 2008). Since Malaysia is one of the world-class exporters of high quality rattan-made furniture including home décor items (One2furniure, 2008; Rinaat Cane, 2008), it is best on the part of IKEA to promote the selling of these furniture item throughout the entire market in Oman. With regards to IKEA’s expansion project in Oman, an international marketing plan which includes the international marketing objective(s), a thorough market situational analysis, a marketing strategy, implementation and control will be provided in this study as part of making the introduction of rattan-made furniture items in Oman successful. International Marketing Plan International Marketing Objective(s) The corporate objective is to be able to successfully penetrate the company’s target market in Oman by effectively promoting the benefits of using rattan-made furniture over the use of other alternative materials like glass, wood, plastic, and metal. As part of the company’s international marketing objective(s), IKEA should: 1. Effectively promote the importance and benefits of using rattan-made furniture items such as living room sets, dining room sets, bedroom sets, cabinets, and office furniture over the typical wooden, plastic, or metallic home products through the use of appropriate marketing communication techniques (i.e. environmental impact and the excellent craftsmanship in Malaysia); 2. Persuade its target consumers to purchase rattan-made furniture over other alternative furniture items; 3. Gradually increase the company’s monthly sales of rattan-made furniture between 5% - 10% as soon as the first IKEA store outlet has been officially inaugurated in Oman; 4. Accurately identify the company’s target market / target consumers of IKEA’s rattan-made furniture items; 5. Be able to properly position IKEA’s rattan-made furniture in Oman within the next six (6) months; 6. Expand the number of retail store outlets to reach out for the company’s target market; and 7. Increase IKEA’s market share in Oman by maximizing the use of the company’s official website. Market Situational Analysis PEST Analysis PEST1 framework is often used to define the macro-environmental aspects that could either directly or indirectly affect the market potential of IKEA’s rattan-made furniture and décor items in Omani market. Political Factors Under the political aspect, Omani government is currently undertaking lot of developmental projects that could lead to the modernization of its economic condition. To improve the standard of living of its people, the government of Oman strongly supports free trade within the global markets by becoming a member of the World Trade Organization (WTO) since October 2000 (U.S. Department of State, 2008). In line with liberalizing the market, Omani government was already decided to remove all restricting trade barriers on foreign investments and ownership of companies in Oman even before the country signed to contract with the WTO (OSEC, 2007, p. 1). The fact that Oman is open to foreign investors makes the business expansion of IKEA more feasible. However, IKEA as a foreign company will still have to pay higher taxes as compared to a 100% Omani businesses. For instance: Aside from having to pay 10% withholding tax from receiving income out of management contracts or royalties, a mixed corporate entity that has up to 90% foreign ownership is subjected to a tax range between 0% - 25% whereas a company that has more than 91% foreign ownership is subject to tax range between 0% - 50% (OSEC, 2007, p. 4). Economic Factors In general, IKEA has the right to set up an office in Oman under the “Foreign Business and Investment Law” (OSEC, 2007, p. 5). The exchange rate between Omani Rial and the US dollar has been fixed at OMR 0.348 = US$1 for many years (OSEC, 2007, p. 3). Therefore, it would be easier on the part of IKEA to do business in Oman since the company will be protected from the erratic changes in the global economic condition. Aside from the protection on currency changes, Oman acknowledges the existence of Trademark Law under a Royal Decree back in June 3, 2000 (OSEC, 2007, p. 3). In line with this matter, IKEA is more assured of being protected from “copycats” or any person or businesses that would illegally use or harm the consumer brand name IKEA. Social or Socio-demographic Trend Considering the population annual growth rate of 3.2%, the total population in Oman is roughly 3.2 million (U.S. Department of State, 2008). As a result of the government’s effort to increase the education of the people, the country manages to increase the adult literacy rate from 80% in 2003 up to 85% in 2005 (United Nations Development Programme, 2008). As of January 2008, Oman is experiencing 15% unemployment rate (Index Mundi, 2008). It means that IKEA will still be able to hire available competitive workforce to join the company. With regards to the availability of workforce, Omani government has been pursuing the policy called “Omanization” wherein the legalization of expatriate labors will be gradually cut down in exchange with the local Omani labors (Nations Encyclopedia, 2008b; OSEC, 2007, p. 1). Technological Trend Although there has been a significant increase with the use of mobile phone services from 2,500,000 up to 3,084,941 in 2007 and 2008 respectively (ITU, 2008), the progress with the use of the Internet remained very slow. During the past three years, the number of Internet users was reported to increase from 245,000 in 2005 up to 300,000 in 2008 (Internet World Stats, 2008). Even though attempts were made to hasten the development of Internet usage outside Muscat, little improvements have been noted with regards to the local people’s access to high-speed ADSL services (Open Arab, 2008). SWOT Analysis Strength Since 1940s, IKEA manages to successfully establish its brand for being able to innovate and offer unique furniture items at an affordable price. Having a globally known brand will make it easier for the company to penetrate its target market In Muscat, Oman. Another strength of IKEA lies behind the fact that the company has as much as 300 stores in more than 35 countries around the world. (IKEA, 2008b) This gives the company the privilege of economies-of-scale. By ordering bulk furniture items from its qualified suppliers, IKEA is able to purchase the finish items at a relatively much lower price. As a result, the company is capable to offer attractive retail prices to its target consumers. Weaknesses Since it will be the first time for IKEA to open a retail store outlet in Oman, majority of its senior executives are not very familiar with the cultural differences and values of its target consumers. To be able to narrow down the gap, marketing manager of IKEA will have to undergo careful marketing study with regards to the preferences and the cultural differences of its target consumers. Opportunities Given that IKEA is a globally known brand, it would be easier for the company to easily attract its target consumers to visit its first retail store outlet in Oman. Through the spread of word-of-mouth, the company will be able to invite millions of its prospective consumers throughout the close jurisdiction of Muscat, Oman. Since it will be the first time for IKEA to inaugurate a store outlet in Muscat, running the business in the country would take many years before IKEA could finally saturate the market. Threats Among the threats that IKEA will be facing lies behind the fact that the Omani government strongly supports the local furniture businesses that are registered with the Ministry of Commerce and Industry (MOCI). For several years, the government support comes in the form of extending soft loans, availability of cheaper land, rendering of good infrastructure, import duty exemptions, and government sponsored feasibility studies among others (OSEC, 2007, p. 2). Considering that registration with MOCI is limited only to 100% Omani owned companies, the strong financial and economic support that is being extended by the government to its local businessmen tightens the competition between the IKEA and the local manufacturers and retailers of similar furniture items since IKEA’s importation of rattan-made furniture items will be subjected to a 5% duty as implemented back in the 1st of January 2003 (OSEC, 2007, p. 2). Marketing Mix (4P’s) Product Aside from being a stylish and sophisticated, the selling of rattan-made furniture should highlight the strength and durability of the wide-range of furniture that can withstand the erratic changes of weather along the coastal plains of Oman. In general, teaching IKEA’s prospective consumers with regards to the uniqueness of furniture made with rattan could increase the interests of its target consumers to patronize the products. Place As part of the distribution channel, IKEA will have to establish its first retain store outlet in Muscat, Oman. Since the target consumers of IKEA would be those individuals who live close to nature or seaside area, the company would eventually expand its retail store outlets along the coastline of Oman. Aside from establishing a retail store outlet, the company would also promote the use of its e-commerce business. Promoting the use of web-based purchases would enable the company to minimize its fixed operational costs associated with the rental expenses, electricity, and human resources. Since the company has already gathered some prospective suppliers of rattan-made furniture and décor items back in Malaysia, the company could simply export these products into Oman. Price IKEA is globally known to offer reasonable prices. Therefore, it remains a challenge for the company to be able to keep the market prices of its retail items as low as possible. There are several ways wherein IKEA could enjoy the benefit of selling its products at the lowest price possible. First, the purchasing department could actively participate in maximizing the company’s economies-of-scale by carefully monitoring and ordering the fast moving items by bulk. Another strategic way is to maximize the use of its available resources. For instance, IKEA will have to invest on the development of real-time website to lessen unnecessary operational costs such as excessive use of manpower and paper. Promotion Considering that the number of individuals that are using the Internet service has been increasing over time, IKEA should make use of its official website as a way of reaching out its target consumers that are capable of using the said technology. By doing so, the company will be able to save a large sum of money from having to print a lot of catalogues. Given that IKEA is capable to offer low-price rattan-made furniture items, its loyal consumers will be the one to spread the news to other prospective clients. In other words, the product will be able to sell on its own. Marketing Strategy Target Market The target market of IKEA for rattan-made furniture items will be those individuals who are very particular with good quality, stylish and environmental-friendly furniture products. Since the use of rattan-made furniture items is effective in terms of delivering a sense of nature within the home environment of the buyers, the company should effectively capture the interests of Omani’s environmental-friendly activists. To enable IKEA to effectively capture its target market, the company should concentrate on selling these items to individuals and families who live along the coast line of Muscat (U.S. Department of State, 2008). Eventually, IKEA should gradually expand its store outlets in areas near the coastal plains like the Batinah which is located in the northwest of the capital city. (See Figure I – Oman’s Geographical Map on page 21) Market Segmentation Dividing the consumer into subgroups will make it easier for the marketing manager of IKEA to accurately identify the company’s target market for rattan-made furniture items. (Rogers 2005, p. 15) In line with dividing the target market into subgroups, the marketing manager should carefully identify and examine the specific market segement based on the consumer characteristics related to socio-demographic, lifestyle or psychographic, and geographic factors. (Kotler 2000, p. 8, 263) Socio-Demographic Segmentation Demographic segmentation is focused on determining the target consumers’ age, size of the family, family life cycle, annual income, occupational status, educational achievements, religion, race, nationality, and social class. (Kotler 2000, pp. 263 – 266; Rogers 2005, p. 19) In line with these variables, socio-economic factos related to family income, educational attainment and occupational status of its target market enables the marketing manager to determine the financial capability of IKEA’s target market for rattan-made furniture. (Rogers 2005, p. 22) Given that IKEA orders rattan-made furniture items from its prospective suppliers from Malaysia, the company is able to offer a more affordable market price to its target consumers. Based on demographic segmentation, the target market for the said product-lines include individuals 18 years old and above whose family annual family or individual income is more than 6,000 Omani Rial (OMR). Basically, rattan-made furniture products are not sensitive to variables related to gender, race, nationality nor religion. Instead, this particular product-line is highly dependent on the socio-economic class or status of its target consumers. (See Table I – Market Segment of Rattan-Made Furniture Sold in Omani Market: Demographic on page 18) Considering the annual growth rate of 3.2%, the total population of Oman has significantly increased up to 3.2 million including roughly 577,000 non-nationals (U.S. Department of State, 2008). Given that approximately 85% of Oman’s continuously growing population is educated (United Nations Development Programme, 2008), it would be easier for IKEA’s marketing manager to capture at least 15% of the furniture market share within its first year of business operation. Lifestyle or Psychographics Segmentation Psychographic segmentation is all about examining the lifestyle, personality and values of the IKEA’s prospective consumers. (Kotler 2000, pp. 266 – 267) Based on the psychographic segmentation, the target consumers of IKEA are expected to have a less active lifestyle that gives importance to home life and family relations. As part of the target consumers’ personality and values, these individuals are more likely to be concerned with the comfort and style they can get out of purchasing rattan-made furniture items depending on their individual interior home designs. Since IKEA is selling long-lasting furniture items, there is lesser chance that the company would attract compulsive buyers. (See Table I – Market Segment of Rattan-Made Furniture Sold in Omani Market: Psychographic on page 18) Geographic Segmentation In general, the application of geographic segmentation divides the company’s target market into: (1) nation; (2) states; (3) regions; (4) cities; and/or (5) communities. (Kotler 2000, p. 263; Rogers 2005, p. 24) Regardless of the metro size of each capital city or states and territories, it would be a lot easier for IKEA to sell rattan-made furniture and décor items in Muscat – the capital city of Oman way before the marketing manager develops a new marketing plan to effectively spread the product throughout the different places along the coastline of Oman. (See Table I – Market Segment of Rattan-Made Furniture Sold in Omani Market: Demographic on page 19) Product Positioning Upon entering Oman market, IKEA will maintain its current position as a global brand that offers economical and environmental-friendly furniture and décor among others. Through proper positioning of the brand, IKEA will easily capture the interest of its target consumers particularly those who are concern not only with the market prices of consumer products but also the quality of craftsmanship and newly innovated styles that will suite the individual needs of the buyers. Ansoff Matrix Upon using the ansoff matrix, IKEA’s marketing manager will be able to come up with a final decision concerning the company’s product and market growth strategy. Given that IKEA is serving a new market by offering its existing rattan-made furniture and décor items, it is crucial on the part of IKEA’s marketing manager to be able to develop an effective marketing plan as part of the company’s growth strategy. In general, the secret behind developing a successful marketing plan is to know the specific needs and wants of its target consumers. To enable the marketing manager to determine the type of furniture its target consumers prefer, the manager should keep a record and identify the company’s fast and non-moving items. Aside from determining the product preferences of its target buyers, the manager should carefully develop a plan to effectively arouse the interest of the local buyers. For instance, it is possible for IKEA to develop an attractive pricing policy to encourage different prospective consumers to visit the company’s store outlet upon inauguration. Market Entry Methods Given that a foreign company that owns more than 91% corporate shares will have to pay taxes of up to 50% (OSEC 2007, p. 4), it would be best for IKEA to enter Oman market with the option of either set up a joint venture or limited partnership with a local business person or entity depending on the management’s preferences. By entering into a business partnership with a competitive local company, IKEA will have a better guide on how to effectively run a business in Oman. Implementation and Control Assuming that the official inauguration of IKEA’s store outlet in Oman will be on January 2009, the corporate management should carefully scout for a competitive furniture wholesaler or retailer that is willing to enter into a partnership agreement with IKEA. By doing so, the company will be able to save a lot money from having to pay high amount of government taxes. Likewise, IKEA’s marketing manager should carefully study the legal processes of establishing a store outlet in Oman including the company’s need to import some furniture and décor items from Malaysia. Upon making the necessary arrangement with a prospective business partner, the marketing manager should be able to establish and monitor a group of marketing people that will be assigned to determine the company’s target population that are based in Muscat area aside from economic factors like the unemployment rate and income distribution of each employed individuals as well as the typical market prices of similar rattan-made furniture and décor items that are being sold in the local market. On the 9th month onwards, IKEA should conduct its pre-launching market activity such as news report aside from the use of television and print advertisement. Likewise, IKEA should conduct a market study on how the company will effectively distribute the product in the market. IKEA’s first store will open on December 2009 ready for Christmas season. A month prior to the launching date, top management of IKEA should start giving product and service orientation among its sales and customer service personnel. A month before the store inauguration, IKEA must actively promote the product on television, news prints, and on-line among others. On the 1st day of store opening, marketing managers should start keeping track on the number of rattan-made furniture and décor items sold including IKEA’s sales performance. (See Table II – Gantt Chart on Marketing / Business Activities of IKEA in Oman on page 20) Table I – Market Segment of Rattan-Made Furniture Sold in Omani Market: Demographic Market Segment of Rattan-Made Furniture Items Sold in Omani Market Demographic: Age Family Size Family Life Cycle Gender Income Occupation Educational Attainment Religion Generation Nationality Ethnic Group Social Class 18 years old and up 1 – 2; 3 – 4; 5+ Independent young & single individuals; young & married couples with or without children; old & single; old & married Male, female OMR 6,000 – 10,000; OMR 10,001 – 15,000; OMR 15,001 – 20,000; OMR 20,001 – 25,000; OMR 25,001 and up Professional and technical; managers, officials and proprietors; clerical, sales; craft people; forepersons; operatives; farmers; retired; students; homemakers. PhD graduate, grade school or less; some high school; high school graduate; some college; college graduates. Sunni or Shia Islam, Muslim, Ibadis, Indian Hindus and non-Omani Christians. (Arabic German Consulting, 2008) Baby boomers; Generation X and Y. Bangladeshi, Filipinos, Indians, Pakistanis, Sri Lankans; and other people from the Middle Eastern and South East Asian countries. (Country Profile - Oman, 2008) Arab, Baluchi (Indo-Iranian), South Asian (Indian, Pakistani, and Bangladeshi), and East African (Zanzabari). (Country Profile - Oman, 2008; U.S. Department of State, 2008) Upper lower; working class; middle class; upper middle; lower upper; upper-upper. Psychographic: Lifestyle Personality Values Less active lifestyle. Home buddy; give importance to family relations; conscious on color, design, price, and craftsmanship Positive attitude and buying behavior on comfortable and affordable rattan-made home and office furniture Demographic: Territory Capital City City or Metro Size Density Oman Muscat Under 4,999; 5,000 – 19,999; 20,000 – 49,999 up. Urban & suburban. Table II – Gantt Chart on Marketing / Business Activities of IKEA in Oman Marketing / Business Activities Month Scout for competitive furniture wholesaler or retailer willing to enter into a partnership agreement with IKEA Carefully study the legal processes of establishing a retail store outlet in Oman including the importation of furniture from Malaysia Conduct a market analysis (target population based on geographic market and other related economic factors such as unemployment rate and income distribution of each employed individual) Establish & monitor a group of marketing people to develop an accurate market study Conduct a pre-launching marketing activity (news report, television & print ads preparation and design) Conduct a study on market distribution Product & service orientation to sales and customer service personnel Active product promotion on television advertisement, news prints, banners, on-line advertisements, etc. Keep track on number of rattan-made furniture & décor sold in retail outlet; including IKEA’s sales performance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Note:(Assuming that the Launching Schedule of IKEA in Oman is January 2009. 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Retrieved December 22, 2008, from Rattan Furniture Suites: http://www.rinaatcane.com/catalog/Rattan-Furniture-Suites/ Rogers, E. (2005). Learners Resource: Certificate IV in Business (Marketing) Profile the Market. Melbourne: Australian Training Products Ltd. U.S. Department of State. (2008). Retrieved December 22, 2008, from Background Note: Oman: http://www.state.gov/r/pa/ei/bgn/35834.htm United Nations Development Programme. (2008). Retrieved December 22, 2008, from Oman: Adult Literacy Rate: http://www.pogar.org/countries/morestats.asp?cid=13&ind=129 Read More