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Excerpts Contd...
IKEA in China
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The Chinese government allowed foreign investments in the real estate industry
in the mid 1990s. As the construction of commercial and residential
establishments increased, it also boosted the sales of home decoration and
furnishings companies. The demand for housing increased considerably over the
late 1990s and early 2000s. Increased home ownership further boosted the home
improvements and decoration market. People wanted better quality products. To
fill this need, many foreign home decoration and furnishings companies like B&Q
entered China during the 1990s. IKEA started its retailing operations in China
with the opening of its first store in Shanghai in 1998 (the store was
redesigned in 2003).
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In 2004, the Shanghai outlet was the second largest in Asia after the one in
Kuala Lumpur, Malaysia, and offered more than 7,000 products. The store was
33,000 m2 in size, and included a 170 m2 children's playground and a 500-seat
restaurant. In 1999, IKEA opened its second store in China at Beijing...
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The Challenges Ahead
IKEA faced many challenges in terms of culture and
business practices, as well as the socio-economic and political
conditions in China. According to Smedberg, the three challenges IKEA
was facing were -pricing, high duty rates and bureaucracy. In China,
IKEA's products continued to have the image of catering to high-end
consumers, unlike the perception as a 'good value' buy elsewhere in
world. The company found it difficult to price its products at a level
where it could attract larger numbers as well as keeping the company in
profit. China's high import taxes hit the company's profitability
significantly... |
Exhibits
Exhibit I: IKEA's Geographical Spread
Exhibit Ii: IKEA's Corporate Structure
Exhibit Iii: IKEA's Business Model
Exhibit Iv: IKEA - Geographical Spread of Stores (As on August 31, 2003)
Exhibit V: IKEA's Low-Price Strategy - How it Works?
Exhibit Vi: IKEA's Way of Wading through Cultures across the World
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