One of the greatest challenges for Chinese people to buy goods from IKEA was high prices. The company's universal branding that caters for lower prices was not functional in China since western supplies were considered motivating in Asian markets. In that capacity, their low-price policy seemed to create confusion among customers. IKEA noticed this and started targeting the middle-class people. This class of consumers has significantly higher income, is well learned and conversant with western tradition. Targeting this group aided the organization to view itself as an aspiring westernized brand. This was a huge adjustment in policy as the organization was targeting the international mass market.
IKEA has gone international in all its business aspects particularly in terms of purchasing. Currently, the company acquires production inputs as well as furniture designs from all over the world. This is because the procuring department is located all over the world working with dealers in more than fifty states (Kowitt, 2015).The dealers are educated by IKEA in order to maintain high levels of productivity and environmental awareness. This means they support their suppliers by improving working conditions and reducing undesirable environmental effect.
Supplier development speed has been very high for IKEA and thus they have introduced an IWAY standard-a supplier code of conduct. This code outlines what suppliers should expect from IKEA and specifies the requirements and working conditions. Other factors include prevention of child labour and responsible management of forestry. All dealers with whom IKEA is striving to better the working practices and employee quality of life show considerable developments in improved working and living conditions as well as healthier management of wastes. Furthermore, this area has numerous industries in which IKEA experts strive to better improved water treatment management.
IKEA is also involved in its supplier labour relations. In this regard, it is adamant that child labour is banned. The company has taken many strides in preventing its name from being tarnished and will not conduct business with anyone that fails to abide by their standards.
In future, IKEA is working on expanding its supplier base to take advantage of the production abilities of companies worldwide. One region IKEA is mainly looking to purchase more from is India. The firm plans to double the number of goods it buys from India in the next few years. Such dealings would become substantial in terms of comparative transactions IKEA has with other countries. However, the strategy is more viable since India is well known for their textile industry, particularly in terms of high-quality materials. IKEA operates by identifying an unmet consumer need, commission designers to compete for the best project then its industrial partners compete for the manufacturing rights. By doing this, they take advantage of the competitiveness of their global suppliers.
International wide supplier networks.
Suppliers compete for quality.
Many suppliers are iso-certified hence emphasizing the importance of the supplier relations.
The company holds regular check-up meetings with their suppliers.
Economies of scale allow for purchasing at lower price points.
The company should open more stores to give consumers access to goods, mandating that their purchasing quotas are increased to make up for the rises in demand.
Backwards integration for better quality control and lower costs of distribution.
The company outsourcing their design work.
Cases of theft and lost shipment.
Crashes in the commercial market.
In a bid to improve IKEA's purchasing process, there are some aspects to take into consideration: First, the company could acquire some of its most valuable suppliers in hopes to lower costs and ensure that the suppliers meet high production standards and labour requirements for its workers. By doing this, the suppliers could be ranked based on the consistency of purchased goods, existing business relations, price points, quality and efficiency of goods purchased. For instance, IKEA is greatly geared towards furniture production, thus it would be perfect to own the top producers of wood.
Second, the IWAY conduct requirements state that should a supplier fail to meet any of their demands, they immediately cease any form of business dealings with that partner. Regrettably, this approach is costly as any goods in the middle of production will not be purchased and this means it would take IKEA time and resources to find a replacement for the supplier. For that reason, instead of instantly cutting off their suppliers when they fail to meet their demands, the firm could introduce a warning system to warn suppliers that they must change their ways or else halt the business relationship is inevitable. In the long-run, the supplier is able to remedy their fault while maintaining a professional relationship and in case they fail for the second time, they could be cut off completely.
Third, IKEA's leading suppliers are China, Italy, Poland, Sweden, and Germany as outlined before. However, Germany and Sweden are some of the most expensive regions to produce particularly in terms of wage rate. The personnel is likely to be of the intellectual workforce, but it is possible that IKEA could buy products from suppliers outside of these costly areas, while still remaining in the geographical location of Sweden for final consolidation of the parts to packed and dispatched to the various warehouses and stores.
Overall, there is no success principle that fits all marketing techniques when an international company decides to venture into the new market, but absolute acceptance and receptiveness to modifications. The principal challenge is a constant adaptation. It is significant for effective marketing campaigns to consider the native approaches versus the universal aspiration for standardization. A steady international brand is a plus but what brings out the difference is to be bravery and readiness to try a new market and create a differentiating potential.
IKEA as a brand understands that to grow globally, it requires sacrifices and novelty from universal organizations. As such, they are always willing to listen, embrace the tactics and learn from the natives. Additionally, the company is ready to make all crucial changes to ensure there is no discrepancy in its growth ambitions and brand objectives. IKEA proves to be courageous to get the most pertinent changes by changing production, working with locals and overcoming legal requirements. Consequently, the actual change in the overall mindset is to know that local aspects versus international aspects can bring about optimal results.
Chu, V., Girdhar, A. & Sood, R., 2013. Couching tiger tames the dragon. [Online]
Available at: https://www.businesstoday.in/magazine/lbs-case-study/how-ikea-adapted-its-strategies-to-expand-in-china/story/196322.html
Foundation, I., n.d. History. [Online]
Available at: https://www.ikeafoundation.org/about-us-ikea-foundation/history/
Kowitt, B., 2015. How Ikea took over the world. [Online]
Available at: http://fortune.com/ikea-world-domination/
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