Introduction
As a Swedish brand, IKEA conveys the Scandinavian design style with its do-it-yourself (DIY) feature. IKEA has successfully adapted to the era of globalization in its entry to overseas markets by finding a balance between globalization and localization. China is one the most significant overseas market for IKEA due to its large population and increased home ownership, leading to increased demand for home décor products. As a multinational company, IKEA must consider the entry method between following a standardized strategy in all markets or achieving a localized development. It is prudent for IKEA to consider adjusting its marketing strategy to adapt to the peculiarities of the Chinese market.
Standardization v. Localization
IKEA has accumulated innovative business advantages and thus should choose to enter the Chinese market through differentiated strategies that adapt to the characteristics of consumers in the host market. The brand should localize critical features such as low-cost price strategy, store ownership, the DIY experience, and location to achieve profitability. IKEA’s low-cost and high-quality brand equity has been used in nearly all overseas markets (Burt et al., 2020). However, in the Chinese culture, IKEA’s branding strategy can confuse consumers as they deem western products inspirational.
Chinese consumers purchase IKEA furniture to show status; thus, the company should overhaul the low pricing strategy. According to Chen (2021), IKEA’s low prices are not within the purchasing patterns of the Chinese upper classes, which are inclined to purchase western products as a status symbol instead of their functionality. The company should target the young middle-class population with relatively high incomes and is conscious of western branding styles such as IKEA’s low-cost and high-quality strategy.
Chinese trade policies major in protectionism, where the government protects local enterprises from foreign companies’ business tactics. IKEA, as a multinational enterprise in China, can face numerous operational risks in entering a market that is under increased government supervision. The company’s international expansion into the Chinese market should be based on joint ventures or wholly foreign-owned subsidiaries to limit operational risks (Chen, 2021). Domestic partners are crucial in entering the Chinese market as they offer protection against trade policies focused on local enterprise protection.
IKEA’s main value proposition feature is that every product comes in kit form, which requires assembly from a supplied visual manual. The IKEA do-it-yourself (DIY) concept can face hurdles in the Chinese market, where assembling furniture is depicted as being poor (Myerson, 2021). Additionally, the cheap labor in China will make it difficult for the company to market the DIY concept to the middle-class population. IKEA should partner with Chinese firms that provide furniture assembly services to offer consumers fee-based services and home delivery.
Store location in China should reflect its market conditions which are different from other international countries. Traditionally, IKEA stores are located in suburbs where consumers travel by car (Burt et al., 2020). However, car ownership is not high in China as most people use public transport. IKEA should situate its stores in central areas such as city shopping centers where many people shop and are connected by public transportation networks (Daxue Consulting, 2021). Additionally, the store layout should match the typical size of Chinese houses to reflect the product sizes in consumers’ homes.
Conclusion
As a multinational company, IKEA must be familiar with local market conditions before making any decisions toward expansion. China is one of the most important markets for IKEA due to its increasing demand for home décor products as home ownership increases. IKEA should promote localization strategies that adapt to Chinese consumer habits and expectations to improve profitability. These differentiation strategies include changing the low-cost price strategy, implementing joint venture ownership, eliminating the DIY experience, and shifting store location.
References
Burt, S., Dawson, J., Johansson, U., & Hultman, J. (2020). The changing marketing orientation within the business model of an international retailer – IKEA, in China over 10 years. The International Review of Retail, Distribution and Consumer Research, 31(2), 1–27. Web.
Chen, C. (2021). IKEA’s development path in China. International Journal of Frontiers in Sociology, 3(18), 1–6. Web.
Daxue Consulting. (2021). IKEA in China: Big furniture retail adapts to the Chinese market. Daxue consulting. Web.
Myerson, M. (2021). How a smart localization strategy helped IKEA to conquer the world. Oneskyapp. Web.