Reference no: EM131850240

Problem: MARKETING THE IKEA FANTASY AROUND THE WORLD

Companies who market internationally often have to work hard to find an effective and profitable balance between standardizing their marketing strategies while still reflecting an understanding of the unique characteristics and consumer behavior present in those markets. IKEA, the Swedish furniture and furnishings company, is a good example of a retailer trying to find that sweet spot between standardization and adaptation. Its unique mission is to "create a better everyday life for the many people," in particular, helping consumers with "thin wallets," to be able to afford stylish furniture and home furnishings, as the store describes its niche. The company has 370 stores in 47 countries worldwide and a goal of 500 stores by 2020. To put its international footprint into perspective, IKEA has stores in more countries than Walmart and these are more profitable than Target and Lowe's. In Beth Kowitt's Fortune article "How IKEA Took Over the World," the company is recognized as having mastered one of the hardest retail challenges: selling high volumes of inventory at a consistently low price in vastly different marketplaces, languages, and cultures. How have they achieved a successful balance between standardization and adaptation in their international markets?

First of all, the company credits marketing research for much of its success. Mikael Ydholm, head of research, says "The more far away we go from our culture, the more we need to understand, learn, and adapt." At the same time it must look for points where cultures intersect. With a focus on volume production, IKEA does not want to have to adapt its products for each country market. But it has figured out how to show the same product working into the lifestyles of different locations around the world. By visiting the homes of consumers in different countries it has uncovered the similarities and differences in how consumers around the world use and interact with IKEA products. Through its research, IKEA pays special attention to the subtle differences that are so important in international marketing. It also takes its time to develop strategy. For instance, it's taken the company 6 years to move into South Korea, but even with that kind of lead time mistakes were still made; for instance a map mislabeled what South Koreans call the East Sea as the Sea of Japan. Much of IKEA's recent international growth has been built on the growing middle-class markets in emerging markets, which was a logical step for IKEA. It has always excelled at creating a sense of fantasy for customers who visit its stores. Tom Novak describes it as a creation of "domestic tableaux and scenes from a home life we imagine living."

In his Trend and Tonic post he describes how "these fantasies of new living are crucial for emerging global powers like China, India, and Brazil who all have rising middle classes." IKEA is carefully tracking the growth of the middle class in these markets and has opened stores in countries like Croatia, Indonesia, Thailand, and China. In fact China is the market where it is experiencing the fastest growth and which has eight of the largest stores. Novak argues that IKEA's minimalism translates well across cultures because its simple furniture is chic yet practical. He also suggests that Sweden as the "country of origin" for the IKEA concept may enjoy the unique ability to appeal politically or ideologically to other cultures. It may be seen as able to fill a void for international consumers who are drawn to the Western fantasy but who want to avoid Western controversy. In fact, products retain their Swedish names in markets around the world as a way to build on the positives of IKEA's brand identity. Although IKEA may work hard to keep a more universal product approach, when it comes to its catalogs it defers to adaptation of language and culture. The company prints 212 million catalogs a year. Kowitt reports that catalogs come in 32 languages and 67 versions, which enables the company to do a better job of reflecting local customers and customs.

Photo shoots for the catalogs are all done in a studio in Sweden where an employee is responsible for making sure that shots taken of each room set-up are appropriate and culturally sensitive for each of the different catalog versions being produced. For instance, they want to ensure that the Taiwanese catalog doesn't feature glass products from mainland China and that Israel's catalogs don't picture Persian rugs. The company admits that it has made cultural faux pas in the past with its catalog, like photoshopping women out of catalogs for Saudi Arabia and removing a lesbian couple from a version for Russia. IKEA Communications officer Kajsa Orvarson says, "We have done mistakes, but we are becoming more and more aware of how to improve and to share our values." IKEA has reexamined other aspects of its interational marketing strategy as well. For instance, the Chinese market required some interesting adaptations. IKEA redesigned in-store vignettes to more closely resemble Chinese rooms and kitchens, reconfigured the length of sofas to better fit the dimensions of Chinese apartments, located stores closer to city centers and public transportation, and lowered prices through local product sourcing. In addition, Chinese consumers are not used to assembling things themselves, so they typically hire cheap local labor to do it for them. IKEA has had to educate customers about assembling the furniture and persuade them that it is worth it in a market with low-cost competitors who typically include assembly in their price.

Discussion questions

1 Discuss how IKEA's approach has helped you to better understand the debate that exists between standardization compared with adaptation for international markets.

2 Compare and contrast two countries according to the Hofstede cultural model using the online tool. How might this tool help a company like IKEA do a better job of marketing in each country?

3 The text talks about the difference between low and high culture. Is IKEA trying to position its brand to be one or the other? Would this be different depending on the country location?