1. Industry Studies 1
Seminar:
IKEA in China: Try Before you Buy?
Topic Number:3
2. Overview
IKEA is the most successful home furnishing businesses in the
world, located in over 26 countries. Its vision “to create a better
everyday life for the many people” encapsulates its desire to offer
quality, relevant and affordable home furnishing solutions across
the world.
One of IKEA’s core strategies is to grow by entering new markets
such as China. However, in doing so they have come up against a
number of hurdles where they have had to make considerable
changes to their business model to adapt to local preferences.
In this seminar, we will evaluate their approach as they went into
the Chinese market. We will initially understand the global
business model that they traditionally adopt and thereafter, we
will critically evaluate the way they needed to adapt to be
successful in China.
Thirdly, we will look at their success to date and finally make
recommendations as they move into other markets.
3. 3
Learning outcomes of this seminar
• Develop and determine IKEA’s global business model and
strategy
• Critically evaluate the changes they needed to make when
entering the Chinese market
• Evaluate and describe the success they have had to date in
China
• Be able to make recommendations on how they should
grow sustainably
4. Agenda for this seminar
Present an overview of IKEA’s global operations and strategy
Critically evaluate the changes they needed to make when entering
the Chinese market
Evaluate and describe the success they have had to date in China
Explain their plans to grow internationally in a sustainable way
5. Structure for the session
You will have
15 minutes to
discuss each
question
We will have a
de-brief at the
end of each 15
minutes to hear
your thoughts
on each area
Feel free to ask
questions but
please do not
have separate
conversations
‘we are all in
this together’!
6. A Man With Simple Tastes
I could regularly travel first
class, but having money in
abundance doesn’t seem like
a good reason to waste it.
Why should I choose first
class? To be offered a glass of
champagne from the air
hostess? If it helped me arrive
at my destination more
quickly, then maybe.
Ingvar Kamprad
9. Vision and business idea
“To create a better everyday life for
the many people”, this is the IKEA
vision. Our business idea is “to offer a
wide range of well-designed,
functional home furnishing products
at prices so low that as many people
as possible will be able to afford
them”.
We work hard to achieve quality at
affordable prices for our customers
through optimising our entire value
chain, by building long-term supplier
relationships, investing in highly
automated production and producing
large volumes. Our vision also goes
beyond home furnishing. We want to
create a better everyday for all
people impacted by our business.
Source: IKEA, 2014
10. A company built on values
View video: https://www.youtube.com/watch?v=DaDD3uXpFgs#t=24
20. More Aggressive with Pricing
Since 2000, IKEA has cut its prices by
more than 60 per cent. For instance,
the price of its "Lack" table has
dropped to 39 yuan (less than five
euros at current exchange rates) from
120 yuan when IKEA first came to the
Chinese market. The company plans to
reduce prices further, helped by mass
production and trimming supply chain
costs.
High prices were one of the biggest
barriers in China for people to purchase
IKEA products. IKEA's global branding
that promises low prices did not work
in China also because western products
are seen as aspirational in Asian
markets. In this regard, IKEA's low-price
strategy seemed to create
confusion among Chinese consumers.
