Globalization of Ikea
Going Global: Assignment
Introduction
When we talk about globalization, you can easily call up the definition in the textbook, or you may look at those elegant decoration around you and found most of them are not locally made. Globalization benefits everyone’s daily life. And our report is about a company, which operate globally and generate sale revenue from its more than 300 stores worldwide. IKEA--the biggest furniture retail store in the world. Its product is well known by its good design and low price. In our report, we will talk about the factors obstacles and good to IKEA in global market. Also the effect and benefit globalization brought to this company.
Price
Globally, IKEA has been viewed as a low price, high quality alternative to other furniture stores. However, when IKEA entered the Chinese market, their prices were considerably higher than those of their 100,000 some competitors in the country. This means that Chinese citizens would not likely choose IKEA over its competitors as price plays a significant role when choosing where to shop. In order to be able to compete and to gain customers, it was necessary for IKEA to lower its prices. It was decided that IKEA would lower prices enough to “fit a family income of US$5000”, which is still considered quite well-off in China (Capdevielle, 2007). When they entered the Chinese market, they had low cost pressures, however after some time, they realized there was a lot of cost pressures. In addition to high pricing, Chinese citizens were used to getting their furniture delivered to them free of charge. IKEA does not work in this way in other countries as it charges a fee for delivery. To alleviate the negative feelings about this fee, IKEA ran a ten day promotion in which any purchase over a certain dollar amount would receive free delivery to the home of the customer. Some Chinese stores started keeping IKEA catalogues and telling their customers they could reproduce the product for a lower cost.
Introduction
When we talk about globalization, you can easily call up the definition in the textbook, or you may look at those elegant decoration around you and found most of them are not locally made. Globalization benefits everyone’s daily life. And our report is about a company, which operate globally and generate sale revenue from its more than 300 stores worldwide. IKEA--the biggest furniture retail store in the world. Its product is well known by its good design and low price. In our report, we will talk about the factors obstacles and good to IKEA in global market. Also the effect and benefit globalization brought to this company.
Price
Globally, IKEA has been viewed as a low price, high quality alternative to other furniture stores. However, when IKEA entered the Chinese market, their prices were considerably higher than those of their 100,000 some competitors in the country. This means that Chinese citizens would not likely choose IKEA over its competitors as price plays a significant role when choosing where to shop. In order to be able to compete and to gain customers, it was necessary for IKEA to lower its prices. It was decided that IKEA would lower prices enough to “fit a family income of US$5000”, which is still considered quite well-off in China (Capdevielle, 2007). When they entered the Chinese market, they had low cost pressures, however after some time, they realized there was a lot of cost pressures. In addition to high pricing, Chinese citizens were used to getting their furniture delivered to them free of charge. IKEA does not work in this way in other countries as it charges a fee for delivery. To alleviate the negative feelings about this fee, IKEA ran a ten day promotion in which any purchase over a certain dollar amount would receive free delivery to the home of the customer. Some Chinese stores started keeping IKEA catalogues and telling their customers they could reproduce the product for a lower cost.
References: IKEA. Media Release. IKEA.com . November 1, 2007. http://www.IKEA.com/ms/en_CA/about_IKEA/press_room/press_release/national/GST_NLP.html -------------------------------------------- [ 1 ]. Landry Capdevielle, Min Li, Paulina Nogal, “Dissertation in Marketing” (2007) University of Halmstad. (1-75) **link/URL** [ 2 ] [ 4 ]. Donald C. Hambrick, James W. Fredrickson. “Are You Sure You Have a Strategy?” The Academy of Management Executive (1993-2005), Vol. 19, No. 4, Classic Articles from AME (Nov., 2005), pp. 51-62 [ 5 ] [ 6 ]. M. Dupuis, J, Dawson.” European Cases in Retailing”. 1st ed., Wiley-Blackwell Pubslishers. 1999 [ 7 ] [ 8 ]. M. Dupuis, J, Dawson.” European Cases in Retailing”. 1st ed., Wiley-Blackwell Pubslishers. 1999 [ 9 ] [ 10 ]. Chaipornmetta, P. “The Evaluation of IKEA’s Market Opportunitiy in Thailand”. 2010 [ 11 ] [ 12 ]. A. Jonsson, T. Kalling. “Knowledge, organizational context and institutional forces: knowledge sharing in IKEA and SCA”. 2010 [ 13 ]