Fran Mendoza

09/08/2016
Global Marketing
IKEA Case Study
1. As discussed in this chapter, international marketing is a complex task, and highly
differentiated from domestic marketing, Using Table 1-1 as a guide, discussed the
international marketing strategic issues for IKEA as it expanded globally.
Identifying and understanding global consumer needs- IKEA markets to young of all ages,
mostly middle class families that are able to afford this product. Furniture was expensive and
bought in sets, a great opportunity for IKEA to enter the market with the option to buy one piece
of furniture at low cost. In the global market such the United States, they targeted students and
young professional populations because they were more attractive.
Satisfying customer needs- When they entered the market in the United States IKEA had to
adapt to the American style of furniture, they also had the same vision of selling their products at
a lower price so Americans of middle class could afford it. In Europe, their strategy made
everyone have the opportunity to buy furniture at a lower price with decorations and styles that
match the Scandinavian style.
Being better than the competition- The emphasis of low price furniture, priced 30 to 50 percent
below the competitions fully assemble furniture. As well as buying parts from manufactures all
around the world.
Coordinating marketing activities IKEA had a special organization structure dedicated to
smooth and speedy entry into foreign markets. This foreign-expansion group had several key
subunits: an European deco-manager, a manager of construction, and a first-year group whose
responsibility was to create and manage new overseas outlets during the first year. The
construction manager selects a site and supervise the creation of the new store, overseeing
inventories, installation of fixtures, communication networks, and so on.
Recognizing the constraining of the global environment- Entering to the United States market
they had to recognize the cultural differences. Differences such as specifying product dimension
in inches instead of the metric system, a big difference was the exchange rate appreciation
because its imported furniture could be imported more expensive and kills its marketing message
of selling affordable furniture. And a course, to match U.S. customer service expectations for
return policy.
2. What is the basis of IKEA success globally? They did a phenomenal marketing research on
the countries that they targeted. Their structure was well managing, mostly by satisfying
customer needs. They saw an opportunity to succeed in the foreign market knowing the risk,
cultural awareness, the global environment, government regulations, etc.

3. Discussed the issues IKEA faced when expanding into the United States. How did it
address these challenges? What evidence is there today that it continues to incorporate
these issues into its U.S. strategy?
IKEA first target of entry was California, however, California market had some obstacles. First,
California had a unique standard for upholstered furniture that would have raised costs by 15%.
Also, California unitary taxation was unpleasant for IKEAS shares worldwide income. Second
choice was Boston, unfortunately government regulations and lack of responsiveness of the part
of the state officials led the company to establish its warehouse and retail operation in a different
place.
This challenges made them to establish their operations in Philadelphia. They were welcome by
local government officials, they were introduced to bankers and real estate brokers, but mostly
they found what they wanted. Location has been critical to this company, their target was the
same, and their network helped them find space in a mall next to a turnpike. Another obstacle
was the cultural awareness, which they did really well. Evidence today seem to be the same with
taxation, high rates to corporate businesses. Regulations are the same when it comes to apply for
permits.
4. Of the international marketing trends discussed in this chapter, which are the issues
most likely to have an impact on IKEA as it continues its global growth? I feel that most
likely issue to have an impact on IKEA global growth is cultural awareness and government
regulations. Every country is different with different believes and their governments had a
different structure of corporate law.
5. IKEA expanded into China in the late 1990s. Research IKEAs effort in China. How has
the companys strategy been different from that in other countries? What have been its
challenges in China? IKEA understood early on that Chinese apartments were small and
customers required functional, modular solutions. The company made slight modifications to its
furniture to meet local needs. The store layouts reflected the typical sizes of apartments and also
included a balcony.
IKEA however faced some problems. Local stores in China were not profitable. One of the main
problems for IKEA was that its prices, considered low in Europe and North America, were
higher than the average in China. Prices of furniture made by local stores were lower as they had
access to cheaper labor and raw materials, and because their design costs were usually lower.
6. How does IKEAs experience in China illustrate issues in international marketing?
IKEAS experience in China illustrates that we also have to be aware of the local competition
and see what they do better that our company. That will help the company to research and made
important decision on how to reduce operational costs. Also, not all young people are middle
class, something that IKEA wasnt aware in China.