Founded raw materials or furniture to IKEA. Another problem

 

 Founded by Ingvar Kamprad in
1943, IKEA is a Swedish company. Mr. Kamprad started by selling door-to-door,
offering goods from stationeries to wallets, watches and etc. Mr. Kamprad then began
to sell cheap, affordable furniture, but there were challenges he had to face,
one of them being the fact that local suppliers were not allowed to supply raw
materials or furniture to IKEA. Another problem was that industry exhibitions
forbade IKEA from showcasing its furniture there. The solution to the problems
that Mr. Kamprad came up with includes designing IKEA’s own furniture, getting
the raw materials from Polish suppliers and also by hosting its own
exhibitions. Through innovation and determination, IKEA eventually became a
success in Sweden and that success led Mr. Kamprad to expand his company
worldwide, opening over three hundred stores around the world.

  However, IKEA faced much bigger
problems on its expansion to China. IKEA opened up in China through a joint venture
with the purpose of probing the market, establishing local needs as well as
finding a good strategy to do business in a new terrain. Soon enough, IKEA
realized that the strategies they have to come up with would be very different
from the ones that they had previously employed, considering the difference in
lifestyle and culture of different places.

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  For example, people in China
prefer a different style of furniture—mostly western—so IKEA would have to make
some modifications to its designs. Moreover, Chinese apartment sizes also
differ so the furniture built would have to be customized to fit according to
the apartment rooms. The location of IKEA stores also can no longer be in
suburbs like the European IKEA stores. Since the people in China mostly travel
by public transportation, such as trains, it would be a wise suggestion to have
IKEA stores built next to railway networks. Another strategy that IKEA should
change would be the target customers. Normally, IKEA would be targeting mass
markets, but in China, where people view western products as aspirational, it
is best for IKEA to target the younger, middle class citizens who would have a
higher income, a better education as well as knowledge on western style. The
normal “low” prices that IKEA sold its products for in European countries were
regarded as higher than the average prices in China, so IKEA had to be really
careful in setting the price of its products. I would suggest IKEA try to cut
down on the price of its raw materials in order to lower the prices to fit in
more with the affordable price range. Besides that, other competitors in the
Chinese market made it hard for IKEA to sell its products, considering that the
competitors were using IKEA’s catalogue—one of the best ways IKEA has used to
promote its furniture—to copy the design and sell it at a cheaper price. To that
problem, IKEA’s solution would be to promote their furniture through China’s
social media and “Weibo” instead, which proves to be rather effective in
promotion. One other problem IKEA said they faced was that due to most
consumers in China having a tendency of being price-sensitive and that the
suppliers don’t have the necessary technology, the charging of plastic bags and
making of green products would have difficulties in being implemented in China.
As such, due to extra costs necessary should IKEA provide the suppliers with
the needed technology, IKEA backed down from its standards just to stay in the
market at low prices. Based on careful research, these are the problems that
IKEA had faced when opening its stores in China as well as some of the
suggestions or actions that IKEA has actually done to overcome it.