IKEA Strategic Marketing Issue: Integrating Culture in Marketing and Channel Conflict - Case Study Example

IKEA Strategic Marketing Issue: Integrating Culture in Marketing and Channel Conflict Name Course Professor Institution Date Introduction Strategic marketing has been a fundamental managerial practice, which has not only been a source of competitive advantage, but also a key to the long term existence of a company. Its evolution over the past years can be viewed as a confluence of perspectives and theories from other related fields such as strategic management and marketing. Strategic marketing is a process that incorporates a set of activities aimed at communicating and delivering value-based information to customers and the society at large (Varadarajan, 2010, p.119). As a critical field in managerial practices, strategic marketing has been studied widely with many research evidence giving similar views on its role in organizational success. However, despite the gold-mining feature of strategic marketing, many UK organizations have had a challenge in meeting their strategic marketing goals for a myriad of reasons. Due to its significance contribution in gaining a competitive advantage, strategic marketing is an interesting area of concern in this paper, and we shall provide a critical insight into the strategic issue facing UK-based IKEA Company. The inability to effectively incorporate culture in strategic marketing practice has been the challenge that IKEA faces especially in its supply chain. The issue of culture, owing to the shift into a consumer-centric model of business demands, has necessitated the need to critically understand the market so as to create value. Culture itself, requires a conceptual understanding that may even help organizations to approach it in different way. The wake of globalization has even made it difficult to overcome the deterrent implications of culture in strategic marketing. Nonetheless, knowledge management can mediate the impact of organizational structure and strategy (Zheng, Yang and McLean, 2010, p.763). This implies that the right strategies can be developed if the organizational structure appropriate enough to create that suitable environment. Therefore, the effective integration of culture into strategic marketing is something that can be overcame provided there is an appropriate knowledge management system. However, different organizations can adopt varying approaches to achieving cultural integration into the marketing plan. It hugely depends with the nature of the business and the extent of interaction between the external and internal environment. The aim of this paper is to address a strategic issues that faces IKEA Company and provide recommendations of how such strategic marketing challenge can be overcome. The essay will start with an overview of IKEA, strategic challenge it faces, measures to help overcome the challenge and a summary of the main points of this essay. Business Overview of IKEA IKEA was founded by Igvar Kamprad, whose name’s initials are part of the name “IKEA”. This company is a furniture-producing entity and is known for making quality first-hand furniture products across UK. IKEA’S success to penetrate various markets, including the UK regions is because of its strategic model of combining quality, function, value and design. For the better part of its business model, IKEA has been trying to integrate culture in the mode as a value-based paradigm to penetrate markets. However, it has been successful in some markets and it is in fact, facing stiff competition from its rivals. The first IKEA was established in 1943 but it majorly dealt in selling merchandise. The introduction of furniture saw its way in the 1948 but as a general supplement to the growth of the business. The founder was consistent in in protecting his concept until 1980 when he opted to expand and operate at international level. One of the strategic move that he made was establishing relationship with other huge retail companies to franchise their product. In 1993, the inter-IKEA groups had already been formed and the inter-IKEA holding becomes their parent company. By the new millennia, the company had already opened many operational branches. In 2012, the Inter IKEA Systems B.V acquired the IKEA trademark so as to simplify the ownership of the IKEA trademark. The company has over 74 years since its establishment in 1943. It operates in major cities in Asia, Europe and Middle East. The largest part of its revenue is due to investment in franchising. In the UK, most of its retail stores are situated far from the metropolitan areas, thereby affecting its performance. The UK furniture manufacture industry over 10.6 billion euros. According to the British Furniture Manufactures, the UK market for all furniture increased by 3% and exports increased by 8% in 2014. In 2015, the UK manufacturers’ performance improved to 80% of the market share. Strategic Challenges facing IKE: SWOT analysis Channel Conflict The channel conflicts in organization is not a new phenomenon and its theoretical understanding is crucial in facilitating policy formulation to control the conflict. The SWOT analysis of IKEA’s business operation provides a clear picture of the strategic issues that it is facing, despite amassing various competitive achievements. SWOT analysis is an established method that is used to assess the formulation of strategy (Valentin, 2001, p.54). The analysis of IKEA strengths indicate that it has been able to take advantage in four key areas. Firstly, IKEA has a friendly store layout that makes the shopping experience of customers’ very interesting. Customers who shop in IIKEA’s stores always enjoy being at the store. It is for this reason that most people in fact, prefer shopping from stores rather than using their e-commerce platform. The IKEA e-commerce channel is conflicting with the traditional channels. The channels have largely contributed towards the growth for IKEA. However, there exist some outbound logistical issues that faces the company. The aim of the channels is to create a path through which the products will reach the customers. The delivery of items through online stores has created a conflict between physical and online stores (Tsay and Agrawal, 2004, p.557). While the company has sought to invest in online retailing, the move has affected the sales in the physical stores. Therefore, the slow growth of stores require strategic measures to ensure that they report positive revenues. Hence, the conflict arises in terms of revenue generation. IKEA also includes franchising in their distribution channel. Franchising is a strategic management practice that usually aimed at improving financial performance through minimizing operational expenses while maximizing sales. In order to achieve this, a company must have sufficient resources from a resource-based perspective. According to, the resource-based view provides a value-based proposition that can help to diversify the understanding of strategies development (Valentin, 2001, p.54). Therefore, sufficient economic resource that IKEA has enables it to implement franchising strategies. Nonetheless, franchising also creates channel conflict. The uniqueness of a business format that attributes to its successful franchising is the relationship between the franchisor and franchisee (Spinelli and Birley, 1996, p.329). The pricing strategies at the stores may differ from those of the franchise. This affects the strategic marketing practice of IKEA. This has been the case and especially where culture plays a role in determining the type and prices of their products. For instance, the company’s branches in Israel distributed catalogues that did not include any image of a woman so as to meet the specific needs of the ultra-orthodox community. Therefore, franchisers in other countries may be faced with cultural-based implications that may result into the diversion of IIKEA’s marketing strategies. Another channel conflict arises in the delivery of customer service through social media, call centres and customer care centres. Therefore, there may be conflicting outcome on the branch’s evaluation of customers’ feedback. Hence, a careful streamlining process that facilitates centralization of feedback may be very convenient and efficient in capturing and addressing customers’ feedbacks. Integrating culture into Marketing The SWOT Analysis of IKEA shows that culture is its major weakness that not only affects its marketing, but also its internal operational issues. The impact of culture has been studied widely by various researchers. Cultural factors have tremendous impact on cross-national communication and it is in this area of cross-cultural communication that most blunder in international marketing (Kale, 1991). Cultural values are strongly related to emotions, attitudes, behaviour and job performance (Taras, Kirkman and Steel, 2010). Hence, we can obtaining an understanding that integrating culture into marketing requires a more detailed assessment of the behaviour and attitude of the potential markets towards certain products. This requires ample research and development of the market. Companies that are international have a bigger problem than local ones. It is because they are operating in an environment that has diverse cultural values. Therefore, cross-cultural implications, is a critical factor if a multinational company wants to gain a worldwide competitive advantage. IKEA has had a service marketing saga due to its inability to meet cultural expectations of its market. Service culture plays a significant role in the aligning service strategies with organizational goals and objectives of development and growth (Edvardsson and Enquist, 2002, p.153). IKEA has faced criticism in many countries within which it operates. Apart from the firing of two CEOs in the France’s branch, IIKEA faced criticism when it airbrushed women outfit in its Saudi Arabian catalogue (Milne, 2013). Similarly, in the case mentioned before, the absence of women’s image in the catalogue that was based on the argument that it was meant for the ultra-orthodox Israeli community. The cross-cultural issues that faces IKEA is due to its inability to adapt flexibly to changes in the behaviour and attitudes of its customers. Adaptability is important as it keeps an organization ahead of its competitors. IKEA is in a position to adapt to unexpected changes because it has sufficient resources to employ technologies that would help them keep up to date with the market dynamics. For instance, the recession and economic turmoil that proceeded from the global financial crisis saw a change in the cultural set up of various markets and this affected multinational companies like Nissan and IKEA. Strategies to Overcome the Challenges Solutions to Channel Conflict Channel conflict is common in retail businesses. It can either be internal or external channel conflict. Internal conflicts are those that occur within the parameters of an entity. For instance, the channel conflict between ecommerce and traditional distribution. External channel conflict occurs between retailers, manufactures and consumers. Channel conflict is a source of creativity and innovation as well as something that could be destructive and harmful to channel relationship (Cunningham, 2013, p.79). The following are some of the solutions to minimize channel conflict: Better communication strategy: Communication is key towards harmonization of business activities. Communication can be viewed as a glue that holds together channels of distribution (Mohr and Nevin, 1990, p.36). It is through communication that persuasive information is transmitted, decision-making is facilitated and activities organized. Lack of communication is the cause of problems in the channel of distribution (Mohr and Nevin, 1990, p.36). Even though various research studies argue that effective communication is critical, there are no theoretical support on what it constitutes effective communication, and what strategies are regarded appropriate for an effective communication. Nevertheless, the bottom line is that so long as the communication strategy matches the channel conditions, the performance of the channel will improve (Mohr and Nevin, 1990, p.36). Clear goals and expectations: Another key source of conflict is setting unrealistic goals of the channels. Because each player in the distribution channel has their own goals, lack of harmony or re-alignment of gaols can lead to cannel conflict. IKEA should make sure that it set gaols that are smart and can be achieved. This can be achieved by reviewing their terms and conditions of engagement with the franchisor. Channel management, documentation of channel strategies and superordinate goals are key in minimizing channel conflict in the age of e-commerce (Webb, 2002, p.95). Therefore, easing the forces of their goals and objectives to ensure that they realign with the others may be helpful to IKEA. Institutionalized approach: Institutionalized approach is also another way of minimizing channel conflict. This approaches requires that a company describes the clearly the scope of policies regarding the channels involved (Bengtsson, 2007, p.22). The issue of clarity of channel policy is contentious but very critical in determining the direction that a channel distribution takes. Solutions to Integrate Culture in Marketing 4PS of Marketing: Culture is inevitable in the local and global market and according to, culture does not hold an ultimate status (Pan, 2007, p.20). Culture only influences the strategies and it is for this reason that the 4Ps may be relevant to IKEA in order to also be able to expand in other regions. IKEA should adopt this marketing mix of 4Ps for the sake of culture. These 4Ps are discussed below: a. Product: The products have to match the cultural values of people within which IIKEA operates. For instance, the Chinese market should match customers’ preferences in China (Pan, 2007, p.20). Similarly, what is offered in China should not be similar to that which is offered in UK. The product brand and the design of the showrooms plus the design of other deliverables such as the catalogue should match the values of the UK people. IIt should be noted that the catalogues and other items related to design are part of the product and working on them will ensure that the product meets the expectations of the UK people. b. Price Price is a significant element of communication and a decisive element in the social interaction between a buyer and a seller (Pan, 2007, p.24; Usunier, 200). In fact, according to Bolton, Keh and Alba (2010, p.564), price fairness is a function of culture. Through appropriate pricing strategies, IKEA Company can create a strong relationship with the customers, thereby increasing the chances of the company to understand better the cultural values of the UK people. c. Place The choice of channel of distribution also influences culturalpractices. IIKEA can use its strategies of channel distribution to incorporate culture as part of its international marketing plan. IKEA has been at the forefront in building its channel systems across various branches. The location of a company is important in meeting the cultural needs of its customers. Whilst the logistic takes care of the products and the design of the stores and showroom, it provides an interactive platform to see how culture can be understood and used in deigning marketing strategies. 4. Promotion Promotion must adopt to the cultural setting within which a company operates. IKEA failed in its efforts to distribute catalogues that did not meet the cultural requirements of the Israel and Arab markets. IKEA should use promotion elements, such as public relations, public relations, advertising and sales promotion to deliver clear, consistent and compelling messages to customers (Armstrong and Kotler 2006). The promotion should always be culture-centric since it will be based on the cultural values of the community concerned (Larkey and Hecht, 2010, p.114). Conclusion IKEA has been trying to be above its rivals in the market. Being a very competitive furniture and household company, it adopts a model which integrates culture, design, function and quality. This is based in their recent planned investment in a more consumer-centric model. Despite making successful strides, IKEA has faced two strategic issues. The first one is channel conflict. In order to minimize channel conflict, IIKEA can review its communication strategy, set clear goals and expectation and employ an institutionalized approaching their distribution channel. The second strategic issues is cultural integration in their marketing. We have suggested that if IKEA can adopt the 4Ps marketing mix appropriately, then it will be able to overcome the issue of culture as a deterrent to its marketing goals. 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