宜家中国本土化商务战略分析

IKEAINCHINA

IntroductiontoIKEA

historicalchainofIKEABRIEFINTRODUCTIONOFIKEAINCHINAIKEAenteredChinain1998throughajointventureandstarteditsfirstinShanghai.ThiswasfollowedastoreinBeijingin1999.Since1980s,severaleconomictradeandinvestmentreformshaveenabledthegrowthoffurnitureindustryinChinaby2004,Chinesefurnitureproductionwas$24billonanditsexportswere$7billion.Concept:Simplicityisbeauty.

YiJia-comfortablehomeQ1:WhatmakesChinaanattractivelocationforIKEAtoinvestin?Countrymarket&industryopportunitiesMarket:emergingmarket;smalltohighsizemarket;customerqualityislowbutshowsanincreasingtrendCompetition:intensityofrivalryisstrong;facingsomeentrybarriers;bargainingpowerishigh;along-termprofitablebusinessIncentives:decliningofthedutyrateResources:rawmaterialsfromChinaQ1:WhatmakesChinaanattractivelocationforIKEAtoinvestin?PoliticalThereformofChinasince1980’sEnteredthroughajointventureIn2005,firstwhollyownedstoreinGuangzhou.(ChinaenteredWTOin2001)Q1:WhatmakesChinaanattractivelocationforIKEAtoinvestin?EconomicalEmergingmarketBasicneedupdatedtosophisticatedwantsNewmarketspacefornewcomersCheaplabourcostWoodindustry(topsupplier)Q1:WhatmakesChinaanattractivelocationforIKEAtoinvestin?SocialUpdatingofthebasicneeds(urbanisation)LargenumbersofitstargetconsumersTechnologicalSupplychainMoremanufacturingfacilitiesEnvironmentalResourcesLand(buildfactories)Q1:ArethereanyunattractivefeaturesoflocatinginChina?Heavy-dutyratefromthegovernmentCompetitionfromB&QCompetitionfromthelocallow-costfurniturecompanies“Chinesereluctancetospendmoney”IKEAOPPORTUNITY/RISKTABLEINCHINAHIGHRISKHIGHRETURNHIGHATTRACTIVENESSLOWATTRACTIVENESSLOWRISKLOWRETURNHIGHLOWOPPORTUNITIESLOWHIGHRISKSIKEAQ1:IsthereamiddleclasseffectinChina?Ifso,towhatextenddoesitbenefitIKEA?YESMiddleclasseffectinemergingmarkets/countriesAccordingtoreportofNationalBureauofStatisticsofChinain2002,Chinahas30millionmiddleclasspeople.TheeffectismorevisibleinurbancitieslikeShanghai,BeijingorGuangzhou(hugeflowofforeigninvestment).Q1:IsthereamiddleclasseffectinChina?Ifso,towhatextenddoesitbenefitIKEA?+50%+110%Distribution%PoorMiddleClassRichVeryPoorGDP/CapIncreaseinGDP/CapIncreaseinMiddleClassQ1:IsthereamiddleclasseffectinChina?Ifso,towhatextenddoesitbenefitIKEA?WhenIKEAfirstenteredChina,itstargetconsumersareyoung,professionalcouples.Consideredmiddle-rangeofShanghai.WorkforceRepeatcustomers2)WhatarethecharacteristicsoftheindustryinwhichIkea(China)operates?CharacteristicsofChineseFurnitureMarketChinesefurnituremarketexpandsveryfastowingtotheeconomicreformationinChinafrom1978.In2000,“FurniturePriceCampaign”hasbeenspreadoverthemarket.In2005,itprovidesagreatoccasionforforeignmanufacturer,retailersandwholesalers.statussymbolsareimportantinChina.Scarcityofscientificmanagementandlowtechnicallevel1990-2005China'simporttariffreduction

Chinesefurnitureindustryexport1997:﹩959,138,0002005:﹩6,843,164,000(27.84%)import1997:﹩22,510,002005:﹩82,719,000(17.67%)ThecharacteristicsoftheindustryinwhichIkeaoperatesinChinaAtfirst,IKEAenteredChinathroughajointventure.Offeringawiderangeofwell-designed,functionalhomefurnishingstandardizedproducts.(IanDuffy).Later,itadapteditselftoChina’snational,economicandculturalconditions.23%ofitsfurnitureislocallymade.Considertheextentofcompetitionandtheavailabilityofinput.WouldyoudescribetheenvironmentasoverallfavorabletoIkea?competitionHeavyimporttaxesUK-basedB&QImitationinputRawmaterialsCheaplaborIncreasingthenumberofitsmanufacturingfacilitiestheenvironmentasoverallfavorabletoIkeaTheadjustmentoflawandregulationtoattractforeigninvestment,therapideconomicgrowth,thehugedemandindomesticmarketandabundantofrawmaterialsandlaborsforfurnituremanufacturingarepushandpullfactorsthatleadIKEAtoenterandexploitInternationalizationofIKEAinChinesemarkets.

Inaddition,theentryofIKEAtoChinesemarketgivesthecompanytransactionadvantagetoproduceitsproductslocally.Asaresult,IKEAcanofferlowerpricesandcompetewithothercompetitorsinChinesemarket(Johnson2008).ThecapabilityofthecompanytointernalizehasbeenimplicitlyshowedintheexecutionofIKEAtoenterChinaasthecompanynotonlygainhighersalesgrowth(Dawson2007)butalsoadvantagefromvolumebuyingresultingfromcreationofsupplycentersandwarehouseinChina(Carpel2006).WhatstrategiesdidIKEAadoptinChina?GloballystandardizedstrategyThemainreasonforthechoiceoftheaforementionedstrategyis;creationofconstantvaluequalitychainofproductsinallcountries.Toobserveaneconomicofscaleandeconomicofscope.Loyaltytosupplychainnetwork.WhatarethefactorsthatinducedIKEAtopursuesuchstrategies?ThefollowingpointsareveryappropriatestrategyfortheglobalizationofIKEAwhichmadeahugesuccessintheglobalmarket

Hugemarket(MiddleclassandQuasi-middleclass)MarketpositioningFacilitatethesupplyofrawmaterials(TimberIndustry)RawmaterialbaseThepurposeofenteringtheChinesemarketearly(SothatmorepeopleunderstandtheIKEAconceptandoperationofthebrandandmadecustomersinChinaadaptedIkea)DonotpayattentiontohowmuchprofitHasIKEApursuedalocallyadaptiveoragloballystandardizedstrategyinitsexpansionintoChina?IKEAPURSUEDALOCALLYADAPTIVESTRATEGYINITSEXPANSIONINTOCHINA.EXPLANATIONOFLOCALADAPTATIONINCHINARe-designandorganizationoftherelationshipwiththecustomer,notonlytoprovidecustomerswithlowprices,butalsoprovidesanewwayofdistributionoflabor.Ifthecustomeragreestodosomethingtraditionallydonebysuppliersandretailers,canprovidelowerprices.Underthenewneedsofbusinesscompetition,toprovideaconvenientoftheparticipationinvaluecreationforcustomers,makeself-selectionofcustomersinthebestenvironment.howtoAdapttoChinesemarketShiftfromtheoutskirtsofbustlingshopAroundtheworld,IKEAhasopenedhisownstoretothesuburbs,andwithaspaciouscarparkingandotheramenities.Asinmanydevelopedcountries,consumershaveaprivatecarincreases,thetrafficisnotaproblem,withpeopleeagertoreturntothepsychologicalnature,sotheychosethesuburbsasthebestplaceforleisureliving.However,Chineseconsumersgenerallydonothaveprivatecars,thetrafficrequirementsofconvenience.Furthermore,IKEAisnothightraffic.Inordertogetenoughtraffic,IKEAstoretobelocatedinconvenientdowntownarea,andhaveacertainscale.ThisisevidentfromthefirstIKEAstoresiteChinesestandardscanbeseensigns-inShanghaiopenedshopinthefirststandardinthebustlingXujiahuishoppingdistrictelectionnext.Insuchahighcostoflandlots,orinaccordancewiththeIKEAstoresinEurope,Americabuiltthesuburbsofuniformstandards,onlymadethetwo-tierstores.TheBeijingstoreislocatedinringedges,thesameiseasilyaccessibleareas.PurposeistogetenoughtrafficIncreaseinpersonnelservices

StrictcontrolofallaspectsinordertoreduceoperatingcostshasbeenIKEA'swinningformula.IntheUnitedStatesandEurope,IKEAstores,IKEAstoresbywayofchoicetoreducethestore'sservicepersonnel.Andthereisno"sales",only"service."Theyarenotallowedtopromoteaproducttocustomers,butbythecustomertodecideandexperience,unlessthecustomerneedstotheiradvice.Customersneedtogetyourselftoassemblefurniture,andIKEAdoesnotofferdelivery.Theshoppingisnotfacilitation,foreignconsumersareaccustomedto.BecauseIKEAinpracticalactiontotellthecustomer,theircustomers,"money."AndChineseconsumersarenotaccustomedtothelackofsupportandserviceprocess.Theyaremoreaccustomedtofurnituremanufacturersinthestore'shospitality,inthepurchaseoffurnitureandotherbulkywhenitisthefreeshippingservicetobeprovidedasamall.Difficultforthemtoaccepttheirownmoneyshippingfreightorhomepractice.IKEAinordertomeetconsumerhabitsinChina,butalsowithagreateramountofdeliveryvehicles,andconsumersclamoringtoreducetheshippingcosts.Increasedpublicityways

IKEApromotionwhichstartedtheuniqueskills-ProductCatalogManualisthemailadvertisinga"killer."Catalogsoffurniturehasbeenregardedastheworldtrendguide.ThecostoflockobjectsatIKEAcatalogsdistributedfreeofcharge,oneisworththebigpictureoftheworld,andsecond,thetrendofthetreeleader'sauthority.Thisgroupofpeople,farmoreinexpensiveandomnipresentadvertisingmuchmoreeffective.IKEAenteredChinainthebeginning,thisapproachisthesame,andachievedsomeresults.Withtheincreasingcomplexityofdomesticmarket,IKEArateofdevelopmentrequirements,ithadtoconsiderother,morepublicityfortheChinesemarket.September2002,called"IKEAbetterlife,"theTVmoviebroadcastsimultaneouslyinBeijingandShanghai,whichisIKEAintotheChinesemarketforthefirsttimeinfouryearstheuseoftelevisionmedia.ThisstepisIKEAmanagementmadeaftercarefulconsideration.Again,thisistheneedtoexpandmarketshareIKEA.HASIKEA‘SSTRATEGICAPPROACHWORKED? NO,IKEA’sstandardisedstrategicapproachdidnotworkinchina.WhenIanDuffy,thepresidentofIKEAbranchinchinafirstarrivedatShanghai,theIKEAstoreinchina,hewouldspendmostofthetimeatthecheckoutcentre,hopingtoseecustomersenteringthestoreonlytorealisethatpeoplecometothestoreeithertorelaxthemselvesinthecoolair-conditionedstoreusethetoiletortocopythedecorstyle.ManyofthecustomerscomplainedofthestandardisedstrategyIKEAwasusingandofthehighpricingofthefurniture.DuffyseeingthisdecidedtoreviewtheoperationsinIKEA.ThisstrategychangewasdonekeepinginmindChina’shugemarketpotentialandIKEAcostsavingeffort.DIDIKEAREVIEWITSOPERATIONS?IFSOWHATFACTORSINDUCEDTHECOMPANYTOREVIEWITSAPPROACH?YES,IKEAREVIEWEDITSOPERATIONS.FactorsthatinducedIKEAtoreviewitsapproachLowsales.Peopleweremoreinterestedintouringthestoreandusingtherestrooms.Imitationproblems(decorationideasandcopythedesigns).DIYproblems(Chinesewerewillingtopayforassemblefee).Transportationproblems.GLOBALPOSITIONINGOFIKEAINCHINAChinaexhibitagreatsizeintermsofemergingmarket.ChinahasahighfurnituregrowthRate.IKEA’scustomerinchinaaremoreconcernedwiththelowpricecost.ThelongerIKEAstaysintheCHINAmarketthemorecompetitiveitbecomesduetothevariousculturalchallenges,governmentpolicies,andattainsprofitinthelongrun.IKEAsourceformostofit’srawmaterialresourcesinCHINA.IKEAderivesaSourceofinspiration&learning,Marketing,ManagementandTechnologyinchina.STRATEGICIMPORTANCEOFACOUNTRYPROFITANDCOMPETITVENESSMARKETSRESOURCESLEARNINGWhenIKEAfirstenteredchina,itenteredbecauseitservedasanemergingcountrywithlotsofopportunitiesandalsoasamarketingsourcebutwhenitrevieweditsstrategyandadaptedtotheChinesemarket,Chinabecamebothoftheaforementionedandalsoasasourcecountry.StandardisedNicheDifferentiatedLowCostAdaptedBroadPlayerDifferentiatedLowCostIKEACOMPETITIVEPOSITIONINGBEFORESTRATEGICREVIEWSTANDARDISEDAFTERSTRATEGICREVIEWADAPTIVEIKEACOMPETITIVEPOSITIONINGAFTERSTRTEGICREVIEWSuperiorquality.InnovativeDesign.Betterfunctionality.Betterattachedservice.Onestopshopping.Brandimage(Simplicityisbeauty).Lowcostlabour.Economiesofscale.Customerbase.CostManagement.ProductivityManagement.DIFFERENTIATIONLOW-COSTIKEACOMPETITVEPOSITIONINGAFTERREVIEWINGSTRATEGY.LowCostStrategy.ChangeInThePositioningOfStoreArea.Transportationandservices.MiddleclassCustomerTarget.ADAPTIVEFOCUSEDPLAYERIKEA’SSOURCESOFGLOBALCOMPETITIVEAFVANTAGEInchinaIKEAhasaccesstolowlabourcost.Accesstonaturalresources.Accesssuppliersnetwork.Accesstoinformation.Image,brandsandreputation.Competenciesbuildovertime.LeverageeffectIKEASUSTAINABLEADVANTAGEINCHINAIKEA’SMODEOFADVANTAGEIKEA’SSOURCEOFSUSTAINABILITYIKEAtookadvantageofit’sglobalbrandtoinnovateanddifferentiateit’sproduct.IKEAusedexistingcoststrategytocutdowncostinChina.(Economiesofscale).Customersloyalty(lowcoststrategy)LEVERAGEADVANTAGE.(Takingadvantageoftheglobalnetwork)IKEASUSTAINABLECOMPETITIVEADVANTAGESTRATEGEYINCHINAAFTERREVIEWOFOPERATION

ExistenceofasawmillindustrialgroupknownastheSWEDWOODExploitglobalsource(throughnetworkofsupplychaininpolishandeasternEurope)LeverageR&Dtoinnovateanddifferentiate(flatpackage)UseexistingglobalcustomerbasetoexpandgloballyUseexperienceeffectfromglobaloperationstobeacostleaderatagloballevelLEVERAGEADVANTAGE(takingadvantageoftheglobalnetwork)AVAILABLEOPPORTUNITIES/RISKINCHINAFORIKEA

CUSTOMERSAREPRICECONSCIOUS FURNITUREMARKETISLARGE

ASSESSTOLOWLABOURCOST,AVAILABILITYOFLEARNINGANDINOVATION,AVAILABILITYOFINFRASTRUCTURE,AVAILABILITYOFRESOURCES LOWIMPORTDUTIES

RESOURCESCOMPETITIONINCENTIVESCHINAMARKETANDFURNITUREOPPORTUNITIESMARKETSHIGHRIVALRY,EASYACCESSTOSUPPLY,CONSUMERSHAVEHIGHBARGAININGPOWER,ENTRYBARRIER,PROFITINTHELONGRUN.IKEASALES%PoorMiddleClassRichVeryPoorMIDDLECLASSEFFECTGDP/Cap20406080CONCLUSIONCHINAalreadyhavingbeenasupplierofIKEA'ssincethe70s,andgenerallybelievedtobeahugeopeningmarket,IKEAopensitsfirststoreinShangha