...------------------------------------------------- IKEA Entering Russia Case Presentation Summary BMKT507 – Principles of International Marketing Seminar Tutor: Dr Nathan Subramanian By James Whelan, Emmanouil Siontas, Marta Okonska, Ligia Moreno Soares & Henning Meyer March 2012 Westminster Business School I. General Overview * Leading home furnishing company with more than 200 stores in 32 countries and a total of 84,000 employees. * Entered Russia in 1991 - first store did not open until 2000. * Move to Russia seen as a long-term investments by IKEA’s management * All stores are fully owned ventures by IKEA II. IKEA’s entry strategy in Russia – Adaption or Standardisation? * The company made the Russian consumer buy its products as a necessity * Long-term vision gave the flexibility required from IKEA to “invent” a market gap that was to be filled by them. * Adapted to the market they entered, something that would make the company limit the distance from the pulse of the Russian reality. III. How did IKEA change its market entry strategy to enter an emerging market? * No special market research was carried out before setting up the first store – Market research in emerging markets only gives a snapshot of the current market situation; Market and consumer behaviour as well as market structures can change rapidly in emerging markets * Since IKEA considered Russia a long-term investment, relatively high losses...
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...Lovisa Björcke 900313-‐0961 Cross-‐Cultural Management Summer Course Assignment 4: Case Study – IKEA: entering Russia Introduction This case study describes IKEA’s entrance on the Russian market and the many obstacles the company was faced with. As IKEA’s Russian country manager Lennart Dahlgren stated; everything that was not assumed to be a problem turned out to be a problem and everything that was assumed to be a problem was in fact not one. IKEA dealt with many problems relating to culture during the launch in Russia but dodged them all surprisingly well. I believe that the most important factor why IKEA could solve these problems was because of their smart way of adapting their concept to the Russian market and because of the company’s strong organizational culture. Below I will present the main problems I have identified and ...
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...ECONOMICAL perspective. This figure shows how Russia has grown and become more competitive in the last 5 years according to the World Economic Forum index, which is beneficial for IKEA. The Global Competitiveness index is composed of 12 pillars and some examples of these pillars are: Infrastructure, Macroeconomic Stability, Innovation, etc. Regarding the Russian’s GDP, as we can see on the Graph, it has decreased. This fact is beneficial for IKEA because lower income will lead the population towards companies that offer affordable prices such as IKEA’s. SOCIAL. People are savers not spenders: this means that generally Russians prefer affordable prices rather than high quality products that are too expensive. According to The Bank of Russia, these are the statistics of the share of money income in Russia. The total population of Russia is about 142 million people and according to this graph IKEA when targeting to middle class, can reach up to 85 million people and this chart shows us that 60% of the middle class in Russia has as much income as the top 20% (high class). Moving on the TECHNOLOGICAL aspects, Internet penetration has been growing rapidly in Russia during the past few years reaching now 59% of the adult population. Globally, Russia ranks ninth in total e-commerce turnover with more than 11 billions pounds sales in 2013 and is the number one emerging e-commerce country in Europe ahead of e.g. Spain and Italy. Moreover, in Russia Home items are the fourth product most...
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...article was downloaded by: [Hong Kong Polytechnic University] On: 3 June 2010 Access details: Access Details: [subscription number 738313287] Publisher Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 3741 Mortimer Street, London W1T 3JH, UK The International Review of Retail, Distribution and Consumer Research Publication details, including instructions for authors and subscription information: http://www.informaworld.com/smpp/title~content=t713735234 Knowledge and knowledge sharing in retail internationalization: IKEA's entry into Russia Anna Jonssona; Ulf Elga a Department of Business Administration, School of Economics and Management, Lund University, Sweden To cite this Article Jonsson, Anna and Elg, Ulf(2006) 'Knowledge and knowledge sharing in retail internationalization: IKEA's entry into Russia', The International Review of Retail, Distribution and Consumer Research, 16: 2, 239 — 256 To link to this Article: DOI: 10.1080/09593960600572316 URL: http://dx.doi.org/10.1080/09593960600572316 PLEASE SCROLL DOWN FOR ARTICLE Full terms and conditions of use: http://www.informaworld.com/terms-and-conditions-of-access.pdf This article may be used for research, teaching and private study purposes. Any substantial or systematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply or distribution in any form to anyone is expressly forbidden. The publisher does not give...
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...Is IKEA destined to succeed everywhere it cares to establish itself? Question 1 Using a standardized products strategy with universal assortment around the world was the key to IKEA's success. That is, it markets the same basic products in all of its stores; instead of tailoring furniture to regional tastes, it focuses on making furniture that is universally attractive (Rondcha, 2008). Some 90% of the product line is identical across more than two dozen countries. However, in order to adapt to certain countries such as America, IKEA needed to modify their concept whilst still maintaining their original formula. Modification was implemented as the European products conflicted with American tastes and preference (Tracy, 1986). Conflicts arose when it was found that most Americans keep a sofa longer than a car and change their spouse as often as their dining room table (about 1.5 times in a lifetime). America didn’t get IKEA; it was too unswervingly Swedish. (Lewis, 2005). Kamprad believes the word ‘impossible’ is absent from IKEA’s dictionary (Altomare, et al. 1999) and by sticking to this belief, adaption was made to America’s furniture. This included widening the chest drawers by an inch or two which led to an immediate increase in sales by 40%. Despite Kamprad’s belief, it is impossible that IKEA will succeed everywhere it establishes. In 1974, IKEA expanded into Japan as their first Asian market. It had to pull out in 1986 due to differences between culture, lifestyle and...
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...to maintain their integrity while being successful financially and in other business aspects. An example of a successful company that has had much favourable outcomes from incorporating ethical practices is IKEA. IKEA was founded in 1943, and since then has been striving to implement ethical conduct. IKEA has demonstrated ethical conduct by its efforts in striving to be environmentally friendly, remaining true to its ‘no bribes’ policy, and its strict rules on child labour. IKEA’s success can be a model by other businesses. Many companies involved with unethical conduct usually face the consequences of their actions in the future. Although the company may be fooled by immediate and positive results from their actions, many have failed because of immoral decisions. Some examples of these failures are bankruptcy, or decrease in customers. Ethical business practices can have a more positive and even long-term impact on a company than unethical business practices. As a company, IKEA prides in itself for delivering affordable, sustainable, and environmentally friendly goods. “The company is doing pretty much everything it can to make its products, and stores, as energy-efficient and sustainably produced as possible as part of its program of ‘never-ending improvements’.” IKEA has implemented many strategies to achieve this goal. The company uses lightweight designs to help reduce materials used in manufacturing products, which also reduces the amount of fuel used to transport the...
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...Friedemann Polzin International Business Strategy: IKEA IKEA – Overwiev Global business strategy Generic Strategy Organizational structure Operational strategy CSR Regional Strategy in CEE Swedwood New markets – sourcing and customers Local strategy in Slovakia 04/12/08 International Business Strategy: IKEA 2 IKEA – historic background IKEA Svenska AB (1943) → Ingvar Kamprad Entering the Scandinavian market (1963) Expansion into Europe and first steps overseas Switzerland and Germany in the 1970’s Fall of the Iron Curtain → full entry into CEE → Swedwood Entry to the British market → aquisition of Habitat Further expansion → China and Russia 04/12/08 International Business Strategy: IKEA 3 Facts & Figures The IKEA Group: 253 stores in 24 countries 41 trading service offices in 30 countries 27 distribution centres and 11 customer distribution centres in 16 countries 183 stores in Europe (the largest market) 46 in North America 11 in Russia 10 in China and Japan 3 in Australia 04/12/08 International Business Strategy: IKEA 4 Facts & Figures Products: wide range of products including approx. 9500 standarized models of flat pack furniture avialable in IKEA stores all over the world Houses & flats – BoKlok in Scandinavia & in the UK (since 1996) Family Mobile in the UK (since 2008) Product names special naming system developed by IKEA 04/12/08 International Business Strategy: IKEA 5 Facts & Figures Employees: Coworkers by region ...
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...analyzing IKEA’s supply chain, adopted strategy, the internal and external environment. Second, we investigate into IKEA’s logistics operations. At the last part, we discuss the problems of business and logistics aspect IKEA faces, and give our advices to solve them. IKEA’s Supply Chain Analysis For the IKEA’s supply chain, it includes suppliers, manufacturers, retailers and customers. Firstly, IKEA has thousand amounts of suppliers provide raw materials and components for the manufacturing acticities globally. It also has cooperation with a number of suppliers as joint owners or financiers in Poland, Slovakia, Russia and China such as Konakovo factory (Russia) providing four different items for IKEA’s Moscow store, Priozersk factory (Russia) providing five different chair models, RPOFIm (Poland) providing three different types of office chairs etc. This can ensure the continuous flow of manufacturing services and maintain a better customers service to keep existing customers. Secondly, for the design and manufacturing parts, IKEA owns its whole of the design part and outsources a part of manufacturing process to other companies to produce. Swedwood is one of the outsourcing company to manufacture wooden furniture and components for IKEA to sell. Thirdly, IKEA cooperates with third parties...
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...Burangi submitted to fulfill the requirements for an MSc in Information Systems particularly the International Marketing Module. The report reflects the success of IKEA in developing its brand internationally. The purpose of this assignment is to give one analysis of the marketing context in which IKEA operates and critical evaluation of its operational options. We would like to thank Fontys and Roehapmton that give us such a good opportunity to work as a group, and we also would like to thank our tutor, Mr. Wijckmans for his instruction. Executive Summary The report gives a detailed account of the IKEA brand development over the years using marketing principles. The first chapter looks at IKEA, the background, evolvement and current position. Chapter two looks at branding in terms of the marketing mix that is product, price, promotion and place. This is the followed by chapter three which looks how IKEA handles cultural differences when conducting business across the world. Chapter four explores the various methods used by IKEA when conducting market research world wide. Chapter five gives an account of the market entry strategy used by IKEA to introduce their brand in new areas. The next chapter then delves into the details of market segmentation, positioning and targeting strategies used by IKEA. The report concludes with a look into the future world trends and their effects on the...
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...competencies and end products of IKEA? How are they linked with each other? The most important core competencies for IKEA is that they design their own products to fit the customer criteria, they focus on low-price furniture, they also have an open-warehouse where their customers are able to choose their furniture and compare them to the competition. One of the end products of IKEA is that they provide ‘flat packaging’ furniture, so customers could easily transport the products in their own vehicles and assemble them later, and it is also easier for them. I believe end products and core competencies are linked because IKEA provides unique ways to treat their customer, and it is difficult for competitors to imitate. 2. How did IKEA diversify? IKEA diversified in many ways, they started to expand their variety of products, they started with products such as watches, jewelry and picture frames, then they started to focus only in furniture. They also started to focus more in serving all the needs for the children, they launched the IKEA for children, and they focused on the necessities of children. They continued expanding their product lines and started to upgraded their utility to kitchen appliances. They also expanded globally and they adapted to local circumstances. 3. How did IKEA expand internationally? How has the firm maintained a focus on core competencies while simultaneously adapting to local needs in host countries? IKEA started expanding first in the European...
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...KEA's Global Strategy Swedish company IKEA was the world's largest furniture retailer since the early 1990s. It sold inexpensive furniture of Scandinavian design. The company operated in 55 countries with a workforce of 76,000 (the company referred to its workforce as its 'co-workers'). IKEA offered nearly 12,000 items to the home furnishings market worldwide. It sold a wide range of products including furniture, accessories, bathrooms and kitchens at 186 retail stores in 30 countries across Europe, North America, Southeast Asia, Middle East and Australia. IKEA enjoyed high brand equity. | | In 2003, Manhattan US-based Interbrand, a marketing research and consultancy firm, valued the 'IKEA' brand at $6.92 billion and ranked IKEA 43rd on its list of the top 100 most valuable global brands, ahead of Nestle, Harley-Davidson, and Apple.3 | Analysts attributed IKEA's success to its skill in combining good product design and superior quality with an affordable price. IKEA's low-pricing strategy was aimed at young people. For several decades, IKEA had looked for international markets, which were culturally as close as possible to the Scandinavian market. The basic assumption behind IKEA's global strategy was 'one-design-suits-all.' Anders Dahlvig, the CEO of IKEA, had once said, "Whether we are in China, Russia, Manhattan, or London, people buy the same things. We don't adapt to local markets." | IKEA had, in fact, been quite successful with its 'one-design-suits-all' global...
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...entrepreneur and founder of the furniture chain IKEA. Ingvar founded IKEA in 1943 and the name stands for his initials and address. - Ingvar Kamprad, Elmtaryd, Agunnaryd. (Write up on whiteboard.) - Kamprad is currently ranked as one of the wealthiest people in the world. In July 2012, the time script Bloomberg estimated that his net worth was up to 42.6 billion dollars, which makes him the 5th richest person in the world. Kamprad was born in Pjätteryd, Sweden. He was raised on a farm called Elmtaryd near the small village of Agunnaryd in Ljungby municipality in the province of Småland. His grandfather was from Germany but moved to Sweden with his family. Kamprad is very well-known for his “cheapness.” He drives a 1993 Volvo 240, flies only economic class and encourages IKEA employees always to write on both sides of a piece of paper. Kamprad explains his social philosophy like this: “Testament of a Furniture Dealer”: “It is not only for cost reasons that we avoid the luxury hotels. We don’t need flashy cars, impressive titles, uniforms or other status symbols. We rely on our strength and our will!” Kamprad began to develop a business as a young boy, selling matches to neighbors from his bicycle. He found that he could buy matches in bulk very cheap from Stockholm, sell them himself and make a good profit. From matches, he started selling fish, Christmas tree decorations and seeds. And now I’m gonna talk about the history of IKEA. As I mentioned earlier, Kamprad started selling...
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...IKEA is one of the world’s most successful global retailers in terms of profitability. IKEA is a home-furnishings company from Sweden. In 2010, IKEA had more than 310 stores worldwide in 38 countries, employed around 127,000 people, and earned revenues of 32 billion euros (Rothaermel, 2013). IKEA has recently shifted from an international strategy to a global-standardization strategy. IKEA has many challenges, but the two that throw up the biggest threats are the ecological factors and rivalry among competitors. Ecological factors concern broad environmental issues such as the natural environment, global warming, and sustainable economic growth. Managers can no longer separate the natural and the business worlds because they are linked (Rothaermel, 2013). Wood is one of IKEA’s main input factors; however, consumers are becoming more sensitive to the issue of deforestation and its possible link to global warming. The issue is that IKEA needs to find low-cost replacement materials for wood. To address this challenge, I would make sure IKEA has a specific team working on finding wood substitutes. Perhaps the team can look into wheat straw sunflower hulls. These are two materials that companies are using to replace hardwood to fabricate cabinets and furniture. Also, particleboard, oriented-strand board (OSB), medium-density fiberboard (MDF), and other composites that were formerly made from wood are now manufactured from agricultural wastes. These new composites can...
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...• Week 2 Mini Case: IKEA List IKEA’s external and internal challenges. Looking at IKEA’s challenges, which ones do you think pose the greatest threat? Why? How would you address the challenges? IKEA’s external challenges are mainly Target and K-Mart. Target has recently recruited top designers and launched a wide range of low priced furnishings. On the other hand, K-Mart has done much of the same thing and enrolled Martha Stewart to help with the design of its home furnishings. IKEA’s main internal challenge is since the company’s inception (1943) no strategic decisions have been made without Mr. Ingvar Kamprad, the founder. Since he has stepped down in 2013, his three sons have taken over leadership of IKEA. Another internal challenge has been that IKEA is privately held through a complicated network of foundations which creates constraints in accessing large sums of capital that is needed for rapid global expansion. Walmart entered a period of difficulties after Sam Walton stepped down. Do you anticipate IKEA having the same leadership transition challenges? Why or why not? In my opinion, any company that’s founder is involved from inception until he/she is not physically/mentally capable any longer and then transitions to different leadership will be problematic. When Mr. Kamprad stepped down from IKEA in 2013, his three sons took over leadership. More than likely, they will never value and commit to the company like their father did. Hopefully Mr. Kamprad...
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...the global issue of deforestation. 2. How would you address the challenges you identified in Question 1? The problem lack of adequate supply of wood can be solved if the company can engage in environmental activities, which involve planting of trees. This will ensure that the company has the ability to access its own raw materials, as well as from other sources. Further, IKEA should partner in business and environmental activities with companies that produce wood. As such, it will become easy for IKEA to acquire raw materials. 3. Did it surprise you to learn that both a developed country (the United States) and also emerging economies (i.e., China and Russia) are the fastest- growing international markets for IKEA? Does this fact pose any challenges in the way that IKEA ought to compete across the globe? Why or why not It was a surprise. This poses a challenge to IKEA in terms of marketing strategies. This is because there are several other companies, which have identified the potential of the global markets that are competing for the existing customers. Hence, IKEA has to formulate a marketing strategy that is sensitive to cultural differences, which will enable it to thrive in the stiff...
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