The paper "International Marketing for IKEA" is a great example of a Marketing Case Study. IKEA is a Scandinavian multinational group of companies involved in the design and sale of home accessories, appliances, and furniture. Being a re-known furniture retailer since its establishment in 1948, it has expanded internationally to 36 countries in Europe, the Americas, Australia, and Asia. To understand the international marketing strategies used by IKEA, it is important to assess its external and internal environment using various tools. Some of the tools to be used include SWOT, Porter’ s five forces and PESTLE model.
The countries of concern, in this case, are the United Kingdom and Japan which has seen huge IKEA presence. Strategic management at IKEA must have considered a number of issues that are specific to the target country and critical to the organization before making an international expansion intention. The increase in income among the middle class and the continued demand for high-quality furniture products has increased the need for IKEA to capture and expand its market share. Moreover, host countries must present a favorable environment for investment with a feasible return on investment, the security of investment and high purchasing power among its consumers.
Furniture and other household appliances are some of the common commodities that are of high demand especially with the growth of the real estate business. Therefore, it is critical to understand the entry strategies and other valuable information that makes the UK and Japan key target markets for IKEA products. 1.1 Market entry strategy The joint venture is the most suitable strategy for IKEA abroad (Wijers-Hasegawa, 2006). This strategy is appropriate for the distance market that is often characterized by different cultures and languages.
Evans and Bridson (2005) argue that a joint venture is a fitting mode of entry due to psychic distance, for mass merchandise retailers. Being involved in a joint venture with a company in the host country reduces the financial risk and allows the retailer to obtain adequate research and planning before entry. A company may fail in the international market because of rush decisions or failure to understand the business and cultural differences that guide such decisions.
Retailers who adopt standardized approaches are more likely to fail compared to those who adapt to the local environment. It is also important to involve a hosting company that already understands the local competition and technique requirements, nationalistic sentiments, and consumer behavior and government regulations. However, most joint venture agreements involve a lot of legal work, cultural training, and management of conflicts arising language and nationality differences. 2.0 PESTEL Analysis 2.1 Japanese Market 2.1.1 Politico-legal dimension Political authorities in Japan introduced a corporate tax of 42 percent on business profits. Japan has one of the lowest tariff rates in the world at a mean of 1.8 percent with paper, furniture, and wood standing at 1.7 percent (The Heritage Foundation, 2016).
Any imported toys and furniture that are below 200,000 yen attract 3 percent tariffs exclusive of internal and consumption taxes. Consumption tax for all imported and locally manufactured goods in Japan stands at 8 percent. Japan has a number of trade agreements with a number of countries but Norway is not among them. All products manufactured or imported have to be standardized and certified for compliance based on non-mandatory voluntary standards and technical regulations.
Furniture products should comply with the Consumer Product Safety Law and Large-Scale Store laws. All goods should show measures and metric weights alongside shipping documents. Fortunately, the business model of IKEA is to make its furniture and other household goods locally which eliminates some of the trade restrictions and regulations related to imports.
Baraldi, E. (2008). Strategy in industrial networks: Experiences from IKEA. California Review Management, 50(4): 99-136.
Capell, K. (2006). IKEA’s New plan for Japan. Cited from (01.05.2009) http://www.businessweek.com/globalbiz/content/apr2006/gb20060426_821825.htm.
Collinson, P. (2013). UK standard of living rises to fourth highest in EU. Available: http://www.theguardian.com/money/2014/dec/11/uk-living-standards-eu. Last accessed 8th NOV 2015.
Dahlvig, A., Kling, K. & Goteman, I. (2003). Ikea CEO Anders Dahlvig on International Growth and Ikea’s Unique corporate culture and brand identity. The academy of management executive, 17(1): 31-37.
Evans, J. & Bridson, K. (2005). Explaining retail offer adaptation through psychic distance, International Journal of Retail & Distribution Management, 33(1): 69-78.
Harapiak, C. (2013). IKEA’s International Expansion. International Journal of Business Knowledge and Innovation in Practice, 1(1): 25-51.
IKEA Group Corporate sites n.d., IKEA Timeline. Retrieve April 29, 2008, from http://www.ikea-group.ikea.com/?ID=43.
IKEA Group. (2011). Welcome inside: Yearly FY10. Inter IKEA Systems Publishing. Sweden.
Kotler, P. & Keller, K. (2006). Marketing Management. ( 12th edition). United states of America: Pearson Prentice Hall.
Legg, J. (2015). FIRA's statistical overview of the UK furniture industry.Available: http://www.furnitureproduction.net/resources/articles/2015/02/1013896220-firas-statistical-overview-uk-furniture-industry. Last accessed 8th NOV 2015.
Lewis, E. (2005). Great brand stories. Great IKEA! A brand for all the people, Cyan Communications Limited 2005.
Madhogaria, R. & Chaudhuri, S. (2006). IKEA in Japan: The market entry strategies. IBS Case Development Center.
Sousa, C. & Bradley, F. (2006). Cultural Distance and Psychic Distance: Two Peas in a Pod? Journal of international marketing, 14(1): 49-70.
The Heritage Foundation (2016). 2016 Index of Economic Freedom in Japan. http://www.heritage.org/index/country/japan.
Trompenaars, F. & Woolliams, P. (2004). Marketing across cultures, Capstone Publishing Ltd, Chichester, England.
UK Government (2008). Unfair contract terms guidance. Available: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284426/oft311.pdf. Last accessed 8th NOV 2015.
UK Trade & Investment. (2015). Billions of pounds in UK-China business deals agreed at business summit. Available:https://www.gov.uk/government/news/billions-of-pounds-in-uk-china-business-deals-agreed-at-business-summit. Last accessed 8th NOV 2015.
Wijers-Hasegawa, Y. (2006). Sweden’s IKEA back in Japan after 20-year hiatus. Cited from ( 30.04.2009) http://search.japantimes.co.jp/cgi-bin/nb20060425a1.html.
World Bank. (2015). China overview . Available: http://www.worldbank.org/en/country/china/overview#1. Last accessed 8th NOV 2015.