Ikea

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;