full version Ikea Essay

Ikea

Category: Business

Autor: jessica85 01 June 2010

Words: 1191 | Pages: 5

A. What are the cultural factors which make expansion abroad in retailing difficult? What has made it possible in IKEA's case?

Retailing expansions can be difficult, because of differences in culture in the global market. When entering a new market, corporations tend to do considerable studies catered towards local tastes. There are many factors to consider when expanding into a new area or culture, because culture can have a great impact on merchandising, and promotion of products. (Hibbert, Edgar 2000;)
The retailing difficulties are not only limited to merchandising and promotion but the cross-over of store brands and brand images. The social systems and social behavior also affects the corporation as different management styles and company cultures may be difficult for employees to adjust to and their maybe clashes which can make the whole process less effective and also less efficient. If there are major differences in the existing culture and language difficulties it may establish greater cultural barriers.
Culture also affects the four P’s in marketing the new product abroad, there can be difficulties and adjustments if the new market is price sensitive, has a high context culture and the corporation came from a country with a low context culture or vise-versa which can affect the promotion of the product. In another case study presented it was highlighted, that some cultures associate the price of a product with the quality of the product. (Hibbert, Edgar 2000;)The culture of the country also dictates if the target markets will be living in urban, rural or suburban areas and research must be done to show if they would be willing to travel out of their area to come to a different place to obtain the product.
In expanding to global markets retaining corporations will have to take into consideration the import, duties and taxes, and also government rules and regulations. The cost and availability of land, for example in when Toys �R’ Us moved to Japan, land in city areas were scare, limited and very expensive. (Hibbert, Edgar 2000;)
IKEA is an European store, more specifically, a Swedish furniture store. Expanding throughout Europe brought about less challenging difficulties because being an European store, there were many cultural similarities and cost advantages due to economies of scale. However, in there early expansion to the United States they faced many hurdles as they failed to adapt there strategies to the American culture and instead of imposed their own.
IKEA ultimately recognized their mistakes, for example Ikea tried to impose their European standard bed, which were longer and thinner, while selling American standardize bed sheets to the American customers. IKEA soon redesigned its American product range which immediately increased there sales. They also reduced their dependence on outside suppliers and recruited American suppliers. They also had their own people working alongside the manufactures to give technical tips and to find the better quality or lower cost materials. IKEA also had to change the way they did promotions, because the United States did not have a homogenous culture so the traditional forms of promotion would not have been as effective as elsewhere.


B. How does the TV advertising campaign initiated by IKEA overcome the entry barrier of high advertising expenditures?

IKEA could no longer use their strategy since America has a very diverse population with a variety of sub cultures and the “word of mouth” strategy would have been less effective than it was Europe and other countries. Because of the culturally diversity that exist in the United States, social norms and interpersonal communication are less reliable, foreign companies coming to the United States often find that corporate advertising done here far outstrips what they have used elsewhere. ” ( Johansson, Johny K. 2006; )
Therefore, IKEA came up with a new slogan and advertising message that would have the same effect and be consistent with previous marketing strategies used in countries with a more homogenous population. To implement this strategy IKEA’s advertising company created eight, thirty second ads that showed people in the different stages in their life. This focus allowed them to capitalize on reaching diverse markets at a fairly low cost.
IKEA’s TV advertising campaign overcame the entry barrier of high advertising by studying the American advertising, where they realized “in Europe you advertise to fain business; in the United States you advertise to stay in business The role of advertising in the United States is much greater than in other countries, according to statistics in 2004, the United States spent 242.5 billion in advertising, Canada 5.2 billion and Sweden 2.7 billion. In order to be on an even playing field IKEA found a strategy that was at the same time low cost and very effective. (Johansson, Johny K. 2006; )



C. Should IKEA expand further in the United States or focus on other countries? Be specific. What should they do and why?

As a marketing manager for IKEA, the suggestion of expanding further in the United States would be the best recommendation. As stated in the opening of the case the United States is potentially a very large market for IKEA which has not been taken advantage of, seeing that IKEA has been in the United States for twenty years and only has twenty stores. IKEA has not recognized its full potential in the United States; they need to build many smaller stores shifting away from its current strategy of a few large stores. They need to target communities to who they can cater to specifically.
The United States has many urban areas where IKEA products would be in high demand. IKEA products are user friendly in design, which includes furniture -in -a -box model and other low cost varieties of furniture. However, people in urban areas would not necessarily want to travel to suburban areas many miles from home to choose their furniture. Even with delivery, the locations of most of IKEA stores are inconvenient to people who do not have cars to get to the stores.
IKEA needs to be better promoted in the United States; commercials that may have worked with their original entrance cannot compete with new advertising aimed at several of their target markets. Retailers often redo their advertising every year, or have commercials made for specific targets. With low cost, packaged kits, IKEA should for example, have advertising to target college kids during the months of August and September, and advertising targeting new graduates during the months of May and June, young adults who are now starting off with their first homes.
In conclusion, IKEA products which are well designed and low-cost, suit very many consumers, however the locations maybe too out of the way to attract costumers who value convenience and ease over price. In addition to their huge warehouse stores IKEA needs to open smaller retail outlets in key urban areas where their product are needed, only then will they have taken advantage of the markets in the United States and can focus on expanding into other countries.


References
Hibbert, E. (2000). Globalisation in retailing -The impact of culture on market entry. Retrieved 12/8, 2007, from http://www.mubs.mdx.ac.uk/Research/Discussion_Papers/Marketing/dpap_mkt_no14.pdf
Johansson, J. K. (2006). Global marketing (4th edition ed.). New York: McGraw Hill Irwin.