IKEA in China: Cheap for

Chinese?

2008-06-02

LYDIA LIU
CCS 2008 SPRING

 Business idea: IKEA offers a wide range of

well-designed, functional home furnishing
products at prices so low that as many
people as possible can afford them
Low prices are the cornerstone of the
IKEA vision, business idea and concept .
Source: IKEA groups website
(http://www.ikea-group.ikea.com/?ID=5)
2008-06-02

LYDIA LIU
CCS 2008 SPRING

IKEA stores in China

Beijing
Chengdu
Guangzhou
Shanghai
Shenzhen

2006
2006
2005
2003
2008

42,000
26,000
16,000
32,000 (1998, 8000)
34,000

Source: IKEA groups website

(http://www.ikea-group.ikea.com/?ID=96 )

2008-06-02

LYDIA LIU
CCS 2008 SPRING

Problem
IKEA seems to be a big success in China, but how does the
Swedish company fit with the cultural dimensions
and customer appeal in China?

Ikea became a luxury brand for Chinese when

IKEA entered into the Chinese market, which was
far from what IKEA stands for and their slogan
affordable solutions for better living.
IKEAs target group is middle class not low
income young people. IKEA furniture is becoming
cheaper and cheaper in China, but the mass in
China still dont have the purchasing power to
consume IKEA products.
2008-06-02

LYDIA LIU
CCS 2008 SPRING

Challenges
An important challenge for IKEA is the
need to understand the different
environments the company needs to
operate in.
Understanding different cultural,
economic, and political environments
becomes necessary for success.

2008-06-02

LYDIA LIU
CCS 2008 SPRING

Price- Cheap for Chinese?

Chinainin2007
2007stood
stoodas
asthe
thesecond-largest
second-largesteconomy
economyininthe
theworld
world
China
afterthe
theUS
USmeasured
measuredon
onaapurchasing
purchasingpower
powerparity
parity(PPP)
(PPP)basis,
basis,
after
althoughininper
percapita
capitaterms
termsthe
thecountry
countryisisstill
stilllower
lowermiddle-income.
middle-income.
although
Textiles 39RMB in China and
39SEK in Sweden
http://www.ikea.com/cn/zh/catalog/products/4009812
7

[1] http://www.ikea.com/cn/zh/catalog/products/30103172
[2] http://www.ikea.com/se/sv/catalog/categories/rooms/living_room/10687/

2008-06-02

a Swedish designed chair

named Stockholm sells 2495
RMB in China[1]
and 2295SEK in Sweden.[2]

LYDIA LIU
CCS 2008 SPRING

Income RMB of Urban

Households

Figure: 2003-2007 Income RMB of Urban Households[1]

Source: National Bureau of Statistic of China
[1] http://news.xinhuanet.com/newscenter/2008-02/28/content_7687416.htm

2008-06-02

LYDIA LIU
CCS 2008 SPRING

Hofstedes cultural dimensions

PDI
IDV
MAS
UAI
LTO

Power Distance Index

Individualism
Masculinity
Uncertainty Avoidance Index
Long-Term Orientation

Source: http://www.geert-hofstede.com/hofstede_china.shtml
2008-06-02
LYDIA LIU
CCS 2008 SPRING

The Chinese Culture

Confucianism and Taoism.
China is a culture with high power distance,
there is a large difference between peoples
social status, status symbols are important .
Being a collectivistic culture, family is very
important in China.
Long-term orientation. This indicates that
consumers are very concerned with the price of
products, because they want to save money .
2008-06-02

LYDIA LIU
CCS 2008 SPRING

DIY in China
IKEAs main argument for the flat
packaging and DIY is that they can
provide low prices for the customers.
DIY did not suit its exclusive image.
The middle class white color who buy
IKEA products, they prefer to buy
assuming service .

2008-06-02

LYDIA LIU
CCS 2008 SPRING

10

Low price remains

Being able to lower the prices during the past
years has increased the purchasing power of the
IKEA customers. Lowering the prices even more
would create a larger market potential.
The development and expansion of the Chinese
economy and raised income levels of the
Chinese people will make IKEA products
become affordable for potential consumers in
the future.
2008-06-02

LYDIA LIU
CCS 2008 SPRING

11

IKEA in China
IKEA did some changes to fit the Chinese
culture but IKEA has not given up any of the
core concepts or changed the style of their
products to accommodate local preferences.
Low price is the most important reason for
IKEAs success, but its still not cheap for the
Chinese.
IKEA has to continue lower the price in the
Chinese market while make more adaptations to
meet the Chinese customers needs.
2008-06-02

LYDIA LIU
CCS 2008 SPRING

12