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... rest retailers of home furnishing. In its initial push to expand globally, IKEA largely ignored the retailing rule that international success involves tailoring product lines closely to national tastes and preferences. Instead, IKEA stuck with the vision, articulated by founder Kamprad that the company should sell a basic product range that is "typically Swedish" wherever it ventures in the world.
The company also remained primarily production oriented; that is, the Swedish management and design group decided what it was going to sell and then presented it to the worldwide public, often with very little research as to what the public actually wanted. Moreover, the company emphasized its Swedish roots in its international advertising, even going as far to insist on a "Swedish" blue and yellow color scheme for its stores. The top purchasing country of IKEA is China. It is the new big potential market for IKEA expanding globally. As living standards improve in China and the government opens up the property market. So interior decoration, design and DIY are becoming popular pastimes in certain key markets.
In line with the interest in home decoration and improvement has come a desire for better quality materials. In the 1990 s with the emergence of better public housing, improved incomes and raised expectations of households, the market has moved beyond the provision of shelter to the quest to provide pleasant homes tailored to the households needs. The result of this trend has been for the Chinese government to begin to sell-off state housing and create a class of homeowners, primarily in the larger cities but gradually throughout the country. With the future development of a secondary housing market, eventually it is envisaged that the Chinese housing market will come to resemble that seen in mature private property markets. Key Facts Home ownership has been the catalyst behind the home improvements market and has encouraged consumers to engage in DIY and home improvement/ decorating activities. Additionally, this growth in private housing is attracting domestic and foreign retailers such as IKEA to China.
The market had grown by 106. 4 % since 1994, with the opening up of the housing market, continuing rapid increases in average salaries and consumer spending power and the improved retail supply of goods all contributing to the strong growth. As the market opens, so China is becoming increasingly 'house-proud' while the home improvements industry is becoming an increasingly established part of the Chinese retailing and consumerist landscape. The Chinese translation of IKEA pronounces "Yijia", which literally means "suits home. " IKEA has a 4 prong strategy for China: setting up commercial offices, opening stores, establishing procurement centres and investing in setting up factories. It is reported that IKEA has invested US$ 60 million to build Asia's biggest furniture market in Shanghai (area 36, 000 square meters).
The company president is on record as saying the company also plans to set up 2 new stores every year in China. The coastal cities and developed inland cities will be its main focus. Currently the company's commercial office in Chengdu City, Sichuan Province plans to procure furniture valued at 4 million every year. The company also invested US$ 180 million to build an industrial area in Shanghai's Song Jiang and establish IKEA's production base in China. Today furniture companies in China have become IKEA's biggest trading partners and 30 % of IKEA's products are made in China. Most of the raw materials also come from China so that product prices are competitive.
The growing demand and strong sales for IKEA China has sold US$ 86 million in products through its own retail outlets by August 26, 2003. This is a new record for the company, and represents 24 percent growth over the same period last year. IKEA has been expanding its retail network, and sourcing more production in China. IKEA won the hearts of Chinese consumers, and the government, by announcing its expansion plans for China in May, during the SARS crisis, when many international businesses were re-examining what they would do. Just as China Business Strategy predicted at the time, China's economy and consumers have quickly bounced back from the SARS crisis. IKEA's new Shanghai store has set a record number of shoppers for one day, with 80, 000 visitors in one day.
Current estimates are that IKEA sources 15 percent of the products sold in its stores from China. IKEA's products have struck a chord with Chinese consumers who like European style furniture at prices they can afford. There are many furnishing stores in China, take OBI, Chengwaicheng as example. These furnishing stores are always good in design and function, or low prices.
For the most of middle class, they trend to choose the reasonable price and good quality. Chengwaicheng's business idea is honest and has the low price meanwhile have good quality. According to the expenditure level of middle class, common people build their home will consider Chengwaicheng furnishing store firstly. OBI furnishing store tends to be market niche, only the upper class can afford that price. Building a comfortable home is harder than a luxury one. Some of the products are not practical and have a short service life.
IKEA said it will maintain its low-price strategy and planned to open new stores in China in the new financial year. "Prices decreased by about 12 per cent in the past financial year, " said IKEA China manager Ian Duffy. "Low prices will remain in the coming year to make our products more affordable for IKEA's 8 million customers. " Duffy gave an example, a sofa priced at 2, 999 yuan (US$ 363) in 2004 is now sold at 995 yuan (US$ 121). "Our low price strategy is also a result of a survey conducted among local residents, " said Jerome Delhi, IKEA China sales manager. "After the survey, we decided we should aim at local families with monthly income of 3, 350 yuan (US$ 405) instead of people in higher income brackets. " IKEA will also maintain its aggressive growth strategy in the new financial year. The firm plans to open two new stores, one in Beijing and the other one possibly in South China's Guangdong Province. Linda Xu, public relations manager of IKEA China, said this could lead to a 50 percent growth in the company's customer base. "Our targeted consumers are those with lower incomes. IKEA said it plans to spend $ 600 million to open 10 new stores in China by 2010, a six fold increase of its China investments. It will expand beyond its current two outlets in Beijing and Shanghai, with a store in the southeast, most likely in Guangdong, and a second store in the capital. The opening of the firm's Shanghai store, its biggest in Asia, attracted a record 80, 000 visitors within one day.
Ikea China manager Ian Duffy said that the company had achieved double-digit growth in sales every year since opening in China in 1999. At the same time, the average price of Ikea's products will be reduced by 10 percent, as the company continues its aggressive strategy of targeting families with 3, 350 yuan (408 dollars) income per month. In conclusion, the world's largest home-furnishing retailer, Sweden's IKEA has been expanding sales all over the world by the national competitive advantage, especially in the increasingly wealthy China. IKEA China main to attract sales as the proportion of China's middle class grows. In the not so distant future the size of China's domestic furniture market will be as big as the whole Europe's.
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Research essay sample on Ikea The Leader In Home Furnishings Sales
