Essay Sample on IKEA: Unique Retail Business Model of the Most Internationally Successful Furniture Retailer

Introduction

IKEA is a home products company that is held privately and internationally, which works in designing and assembling furniture's including desks and beds, together with home accessories and appliances. It is one of the unique retail business in the world where this has been accomplished through innovation strategy. It is also the most internationally and successful furniture retailer's renowned business model, where the customer's proposition is uniquely valued. This might be the reason for IKEA's success where proposition value helps in setting up benchmarks that are unprecedented concerning the respect of implementing the design of the product, packing, and marketing innovation. This was the answer that the forerunners received from the industry's manufacturing of the product, marketing strategy, and distribution. The company was established by a young Swedish generation who are highly gainfully employed and burgeoning prospective homeowners who had a strong desire to embellishing their apartment and family home finishing in style. In reality, this desire turned out to be the most successful business of furniture retail under the vision of being innovative. The founder of the company being Ingvar Kamprad, where he guided and answered all the challenges that faced the business hence becoming a successful business.

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The Sources of IKEA's Triumphant Entry

Ingvar, the founder, entered the industry searching for ways of finding approaches that would make him step in the Swedish furniture. In his attempts, he wanted to impede efforts in acquiring, store and distributing his furniture according to the promises and burgeoning of the company. However, the avenue seized and utilized the alternative that set dynamics, which included moving away from traditional locations, which was brought by the collaboration of business cartels who were established and IKEA's founder. The new business dimension later added lesser knowledge of the original Swedish material. Suppliers from Poland helped Kampard strategically in positioning that combined cost of leadership, flexibility differentiation, which were much far from the traditional strategies.

Kamprad's vision of the business had its adaptations from the home country company, where it does not tend to have adjustments to the local countries. Production of standardized products at a low cost, and it's sound quality is one of the strategies that made the business grow, therefore opening more distributing warehouses in Stockholm (Sahu, 2004). Ethnocentric orientation is the strategy followed by IKEA in each of its internationalization. The company has been supported by the employee's unity, modesty, and the integrity of the company. Therefore marketing strategy that has been standardized is an approach that is slightly being adapted in us. The products have promoted the Swedish model.

Approaches as China

Ikea had a success story in China, but it was not that successful since the furniture from Swedish faced numerous challenges where china was different from the traditional markets. Therefore, it started small modifications where it had to adopt strategies that would suit the country. Procedures such as pricing, services offered, and promotion were considered its project is having aims of branding the products in western. The main problem that IKEA faced was setting a standard low price, which was deemed to be low in North America and Europe. These prices were higher than the china standards. Therefore, furniture prices locally in china were low; hence, the source of labor was also small. Also, those who supplied materials locally were banned from the supply of materials to IKEA Company, and consequently, IKEA became innovative and began to create its exhibitions.

After the various initial failure of branding, positioned the brand in China of the company was set to meet the citizen's needs, which created a positive image of the products. This was achieved by moving the furniture and stationery from door to door. They, therefore, set low price levels, which confused the Chinese consumers of which the local competitors copied their strategy. After that, china becomes the fast market for IKEA products where there was a significant growth of the company. It took five years for IKEA to conserve and take attention by setting the standard of the Chinese market.

IKEA has therefore moved to a new stage of becoming the host in the Chinese market in furniture marketing since 2011. It has become the most profitable job market in China. Chief executive of IKEA, Mikael, acknowledged that higher growth rates of the furniture sales. One of the reasons that made IKEA's rapid growth in China was their eagerness to learn new techniques from the west. Emphasizes have been made on the peculiarities and Chinese consumer's preferences. However, more adoptions are required in china since Do-It-Yourself models are not convenient exceptional of the cheap labor. Thus, the business is criticized because dealing too much with household types of furniture. It has also grown at a slower rate than other retail foreign companies such as Walmart (Capedevielle et al. 2007). Though it has attracted many consumers because of its price, some consumers remarked that they have not yet recognized IKEA Company. There should be a change in its adaptations, orientation, and standardization.

Sort adaptation of IKEA between Europe and China

Globally, IKEA is widely known for its cheap price well designed innovate furniture. However, how much it has raised and faced problems in china, it has adopted new strategies of expanding its business and hence becoming the most profitable company in china. This is because IKEA did not quite business despite the challenges. Besides, IKEA became more productive and innovative after venturing into a good market for creating their own innovated exhibitions. The example they used square tables to design their furniture instead of round ones.

All Chinese needs were met through, IKEA had first to venture into good platform of testing accordingly all what the market needs. Slight modifications were made to understand the local needs since the company had faced similar problems in the United States. However, the challenges were more significant from that one of the US. IKEA's strategy in china adaptations differed from the European IKEA's. The value of the proposition in Europe was of good quality, the furniture was stylish, and the prices were so low that everyone was able to afford them. This was contrary to China, where the quality was good, western-styled, but only the middle class could afford it. On the valued network in Europe, the products were stylish, home furnishing, and functional outcomes, while in China, there was a slight modification of the products so that they can be suitable in the local markets reflecting the apartment's sizes.

The price products in Europe were of low cost while in china, the prices were no DIY; hence, they were affordable. In terms of promotion, the main catalog was marketing in Europe, while in Chinese advertisements were done through social media, blogs, and websites Weibo, which was the most popular (Chu et al. 2013). In China, IKEA has built two factories that are in Shanghai, where raw materials used are locally produced in avoidance of taxes, while in Europe, the raw materials were shipped from the developing nations like Malaysia. The content is Europe was stored and located out of the city. This would ease the transportation through private car transport while in china the stores were closer to the city outskirts reason being that there was limited vehicle transport hence the traffic was through public vehicles.

Guidance of Macro-Environment Factors in China

The self-services that IKEA provided for themselves using their creativity and knowledge of the products, they did not succeed. DIY practices were also implemented, accompanied by cheap labor and low prices. All these practices were inconvenient compared to other countries that IKEA sold its products. In China, the hefty importation tax affected the company's profit and made the supply chain shift to china. Macro environment factors guided IKEA in its operation in china (Johnson et al. 2009). Some of the macro-environment factors include political, economic, social-cultural, technological, and legal considerations.

Political factors

Data cannot be retrieved about hoe political factors affected IKEA production in china, but it was anticipated that the Chinese government planned thorough supervision of the industry. There are government corporation departments that were involved in the control and managing process. There was a stable political situation from the political parties, and they respected agreements that were made between the government and the MNC's. This made IKEA's business environment a healthy one. After the fall of the government communist in Poland, political situation changed drastically, and the supplier's relationship and IKEA deteriorated. This is because there was a rise in prices of raw materials, contracts were torn up, and IKEA provided new technologies.

Economic factors

The most significant factor in the economy of IKEA was the financial recession. IKEA did not have a clear understanding of the floating effect rate of currencies in the cross-countries. This is because the Swedish who used to transport and sell raw materials to IKEA used a strong US dollar for importation. Hence this was becoming more expensive to IKEA. The target was also a middle class, whereby this brought a different substantial variation of income between the cities.

Social factors

There were differences cultures in Europe and the USA, which played an essential role in IKEA business strategy. This is seen where Europeans emphasized mostly on the design and perfect products while Americans, on the other hand, stresses the function of the product. However, there was a common practice in Sweden where people inherited the furniture from their forefathers because it lasted from generation to generation. Recently, the culture of inheritance has been changing, giving IKEA an opportunity of selling its product.

Technological factors

This is a factor that can lower entry barriers, minimum reduction of adequate levels of production, and outsourcing influence of decision. Technological include factors like automation, change in technology rate, and incentive technology. Unique features were developed by IKEA in their furniture industry, including self-assembly. This was one of the best features in the industry because it helped IKEA in the shipping of products in the flat packs; hence, product damage was reduced during transportation. Also, there was a quick growth and leveraging in the social media, microblogging, and e-commerce where it promoted its products.

IKEA's Marketing Mix Strategy in China

The social-culture of a country impacts the marketing strategy since it helps in implementing and designing of policies of a market. The IKEA Company in China was able to balance between global standardization and its local adaptation. This is the only market that differs in cultural differences. So, the company had to seek the best potentials and being innovative in ways that customers can be attracted to. Therefore, the four marketing mix strategy in china was developed. They included product, place, promotion, and price.

Product

This is a crucial element of any company's marketing strategy. IKEA's website states that around 7900 products are provided by the company, which are ranged 21 in total. Contrary to traditional Chinese furniture, IKEA has been able to design and make simple product styles of furniture in the Chinese market. Simplicity made IKEA's furniture to be accepted at the market. For e...