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Strategy: Ikea’s Global Brand & Local Knowledge Drives Expansion into Emerging Markets

Jim Riley

22nd April 2013

A superb article here from Reuters which examines the challenges facing Ikea as it accelerates its expansion into key emerging markets, notably China and India.

On the one hand, Ikea aims to exploit its global brand by applying the core retailing concept (epitomized by the store racetrack layout, flatpack goods etc) and core values that have enabled to it to become the world's largest furniture retailer.

However, Ikea also needs to be sensitive to the specific customer needs and wants in each national market if it is to meet customer expectations and compete effectively.

The article has many useful insights and examples for students to use when considering the challenges of taking an established and successful brand in developed economies to faster-growing emerging markets.

One good comparison for students to make is how the market positioning must change depending on the target market. As the article points out:

"In developed markets, IKEA is positioned as a low-priced mass-market brand, but in emerging markets where low prices are the norm, it targets a growing middle class that aspires to international lifestyle products. For these customers, design and a comprehensive range under one roof are the attraction."

The implication is that price is a less important part of the marketing mix for Ikea in China than it is, for example, in the US or UK.

Ikea clearly believes in doing things right. For example, it is expected to take Ikea four or more years before its has everything in place (suppliers, locations, staff etc) to being trading in India.

India is a key target market for Ikea. But it seems that it is China where the biggest growth potential is seen.

This article from Bloomberg (April 2013) describes Ikea's growth objectives in China - and they seem pretty ambitious and significant.

Ikea plans to add five stores to the 11 it currently has in China and boost the total to 40 by about 2020. Ikea currently has around 340 stores worldwide.

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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