Ikea Case Study Business Review

Ikea Case Study Business Review-74
The store layouts reflected the typical sizes of apartments and also included a balcony.IKEA had faced similar problems previously when it entered the United States.

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While globally 30 per cent of IKEA's range comes from China, about 65 per cent of the volume sales in the country come from local sourcing.

These local factories resolved the problem of high import taxes in China.

High prices were one of the biggest barriers in China for people to purchase IKEA products.

IKEA's global branding that promises low prices did not work in China also because western products are seen as aspirational in Asian markets.

IKEA identified the strategic challenges and made attempts to overcome them.

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.In this regard, IKEA's low-price strategy seemed to create confusion among Chinese consumers.The company realised this and started targeting the young middle-class population.In 2004, for instance, its China revenue jumped 40 per cent from the year before.But there was a problem - its local stores were not profitable.He began by selling pens, wallets and watches by going door to door to his customers.When he started selling his low-priced furniture, his rivals did everything to stop him. It learnt how to design its own furniture, bought raw material from suppliers in Poland, and created its own exhibitions.This category of customers has relatively higher incomes, is better educated and is more aware of western styles.Targeting this segment helped IKEA project itself as an aspirational western brand.Prices of furniture made by local stores were lower as they had access to cheaper labour and raw materials, and because their design costs were usually nil.IKEA built a number of factories in China and increased local sourcing of materials.

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