GITAM INSTITUTE OF INTERNATIONAL BUSINESSVISAKHAPATNAM-45

AssignmentTOPIC:

MARKET ENTRY STRATEGY: IKEA ENTRYING CHINA AND JAPAN

SubmittedTO

Prof. B.V. KUMARPrepared By

Pulkit Puri Dhaval Muchhala Gargi Ganguly Karan Singh Bagga MVPSS Ananth

INTRODUCTION

ABOUT THE COMPANY

IKEA is a privately held, international home products retailer that sells flat pack furniture,

accessories, and bathroom and kitchen items in their retail stores around the world.The

company, which pioneered flat-pack design furniture at affordable prices, is now the world's

largest furniture retailer.

IKEA was founded in 1943 by 17-year-old Ingvar Kamprad in Sweden. Currently, the

company is owned by a Dutch-registered foundation controlled by the Kamprad family.

IKEA is an acronym comprising the initials of the founder's name (Ingvar Kamprad), the

farm where he grew up (Elmtaryd), and his home parish (Agunnaryd, in Smaland, South

Sweden).

INGKA Holding B.V. is the parent company for all IKEA Group companies, including the

industrial group Swedwood, which commissions the manufacturing of IKEA furniture

coming from any manufacturer worldwide (outsourcing), the sales companies that run IKEA

stores, as well as purchasing and supply functions, and IKEA of Sweden, which is

responsible for the design and development of products in the IKEA range. INGKA Holding

B.V. is wholly owned by Stichting INGKA Foundation, which is a non-

profit foundation registered in Leiden, Netherlands. The logistics centre europe is located

in Dortmund, Germany.

Inter IKEA Systems B.V. in Delft, also in the Netherlands, owns the IKEA concept and

trademark, and there is a franchising agreement with every IKEA store in the world. The

IKEA Group is the biggest franchisee of Inter IKEA Systems B.V. Inter IKEA Systems B.V.

is not owned by INGKA Holding B.V., but by Inter IKEA Holding S.A. registered

in Luxembourg, which in turn is part of Inter IKEA Holding registered in the Netherlands

Antilles. The ownership of the holding companies has not been disclosed.

The company which was originated in Småland, Sweden , distributes its products through its

retail outlets. As of August 2009, the chain has 301 stores in 37 countries, most of them

in Europe, North America, Asia and Australia. 2006 saw the opening of 16 new stores. A

total of at least 12 openings or relocations are planned for 2009. IKEA is one of the few

chains to have locations both in Israel and in other Middle Eastern nations. As such, IKEA

brought action in the Supreme Court of British Columbia successfully preventing a

competitor in Victoria from using the name "Idea."

The IKEA Website contains about 12,000 products and is the closest representation of the

entire IKEA range. There were over 470 million visitors to the IKEA websites in the year

from Sep. 2007-Sep. 2008. IKEA is keen to show leadership in adopting

more environmentally friendly measures in its manufacturing processes. In 1990, IKEA

adopted The Natural Step framework as the basis for its environmental plan.

The first IKEA store was opened in Sweden in 1958. The first stores outside Sweden were

opened in Norway (1963) and Denmark (1969). The 1970s saw the spread of stores to other

parts of Europe, with the first store outside Scandinavia opening in Switzerland (1973),

followed by Germany (1974). During the same decade, stores were opened in other parts of

the world, including Japan (1974), Australia and Hong Kong (1975), Canada (1976), and

Singapore (1978). Ikea has expanded further in the 1980s, opening stores in such locations as

France (1981), the Canary Islands (1981), Belgium (1984), the United States of America

(1985), the United Kingdom (1987), and Italy (1989). IKEA has continued expansion into

more countries in the 1990s and 2000s. Germany, with 44 stores, is IKEA's biggest market,

followed by the United States, with 37. At the end of 2009 financial year IKEA group had

267 stores in 25 countries. The first IKEA store in Latin America opened on February 17,

2010 in Santo Domingo, Dominican Republic. However, the company has thus far not shown

much of a presence in the developing countries.

THE UNIQUE STORE FORMAT

Older IKEA stores are usually very large blue buildings with few windows and yellow

accents (the company's colors are also the national colors of Sweden). They are often

designed around a "one-way" layout which leads customers along "the long natural way.".

This layout is designed to encourage the customer to see the store in its entirety (as opposed

to a traditional retail store, which allows a consumer to go right to the section where the

goods and services needed are displayed) although there are often shortcuts to other parts of

the showroom. The sequence first involves going through furniture showrooms making note

of selected items. Then the customer collects a shopping cart and proceeds to an open-shelf

warehouse for smaller items (Market Hall). Then the customer visits the furniture warehouse

(Self Serve) where they collect previously noted showroom products in flat pack form.

Sometimes they are directed to collect products from an external warehouse on the same site

or at a site nearby. Finally they take their products to the cashier's station to make payment.

Newer IKEA stores, like the one in Mönchengladbach, Germany, make more use of glass,

both for aesthetic and functional reasons. Skylights are also now common in the Self-serve

warehouses. More natural light reduces energy costs, improves worker morale and gives a

better impression of the product. Whilst the original design involved the warehouse on the

lower level and the showroom and marketplace on the upper, today most stores globally have

the Showroom upstairs with the marketplace and warehouse downstairs. Additionally, some

stores are single level. Some stores maintain separate warehouses to allow more stock to be

kept on-site at any given time, although this occasionally results in challenges in finding the

items, as well as a perception of having to queue in line twice. Single-level stores are found

predominantly in areas where the cost of land would be less than the cost of building a 2-

level store – examples include the store in Saarlois, Germany and Haparanda, Sweden. Some

stores also have dual level warehouses and machine controlled silos which allow large

quantities of stock to be accessed throughout the selling day. Most IKEA stores offer an "as-

is" area at the end of the warehouse just prior to the cashiers. Returned, damaged and

formerly showcased products which are not in new condition or taken out of the IKEA

product range are displayed here, and sold with a significant discount, but also with a "no-

returns" policy. Most IKEA stores communicate the IKEA policy on environmental issues in

the "as-is." In the United Kingdom, this is referred to as "Bargain Corner." In Hong Kong,

where shop space is limited and costly, IKEA has opened three outlets across the city, which

are actually part of shopping malls. They are tiny compared to common "large blue box"

store design, but are huge by Hong Kong standard. Most of the outlets still have a "one-way"

layout. An exception is the newest outlet in Telford Plaza, where the three independent floors

can be accessed freely from each. However, following IKEA tradition, the cashiers are only

located on the lowest floor. The vast majority of IKEA stores are located outside of city

centres, primarily because of land cost and traffic access. Several smaller store formats have

been unsuccessfully tested in the past (the "midi" concept in the early 90s, which was tested

in Ottawa and Heerlen with 9,300 m2, or a "boutique" shop in Manhattan). A new format for

a full-size, city centre store was introduced with the opening of the Coventry (UK) store in

December 2007. This is in response to UK government restrictions blocking retail

establishment outside city centre and the format is expected to be used for future IKEA stores

in the UK. The Coventry store has 7 levels and therefore has a flow different from other

IKEA stores. Another feature of many stores are their long opening hours. Many IKEA stores

are in operation 24 hours a day with restocking and maintenance being carried out throughout

the night. However, public opening hours tend to be much longer than most other retailers,

with stores open well into the evening in many countries. In the UK for example, almost all

stores are open past 8pm with opening times often around 9-10am. IKEA Croydon has one of

the longest opening hours worldwide being open from 10am to 11pm Monday to Friday.

Many stores include restaurants serving traditional Swedish food such as potatoes

with Swedish meatballs, cream sauce and lingon berry, although there are variations. In

Kuala Lumpur, Malaysia the usual boiled potatoes have been switched to French fries.

Besides these Swedish staples, hot dogs and drinks are also sold, the latter for around

5 SEK (approx €0.50), along with a few varieties of the local cuisine, and beverages such

as lingon berry juice. Also items such as Prinsesstarta — Princess cake are sold as desserts.

IKEA stores in Saudi Arabia serve chicken shawarma at the exit instead of the traditional

IKEA hot dog. In many locations the IKEA restaurants open daily before the rest of the store

and serve an inexpensive breakfast. In Canada, this breakfast costs $1 and includes eggs,

sausage, and hashbrowns and various add-ons like bacon and pancakes at additional costs. In

the United States, the local variation serves scrambled eggs, bacon, country potatoes and

choice of Swedish pancakes or french toast sticks. In the Netherlands it costs €1 and consists

of a croissant, a small bread roll, butter or margarine, jam, a slice of cheese, a boiled egg,

and coffee or tea. In Australia it costs AU$2.95 - AU$3.5 and consists of hash brown, bacon,

scrambled eggs, a sausage and tomato, with a $2 vegetarian option with baked beans which

omits the sausage and bacon. In Germany this breakfast costs €1.95 and consists of two bread

rolls, one slice of smoked salmon, one slice of cheese, one slice of salami, two portions of

butter, one portion of jam, and coffee. IKEA Canada, for a limited time, served dim sum

alongside its original breakfast menu. Refills of coffee, tea, and soft drinks are free of charge,

even in countries where this is uncommon in other restaurants. Many stores also have a

Swedish Food Market selling Swedish-made, Swedish-style groceries, such as Swedish

meatballs, packages of gravy and various Scandinavian cookies and crackers, as well as

salmon and salmon roe. IKEA also sells lingonberry jam in a wide array of sizes, including

buckets. IKEA has extended its product range with the introduction the IKEA food label. The

new label has various different foods including, chocolates, meatballs, jams, pancakes,

salmon and various drinks.

Many stores have a play area, named Smaland (Swedish direct translation small land, can

mean a lot of things but here it means land for the small ones. Smaland is also the name of

the province of Sweden where Ingvar Kamprad was born). Parents drop off their children at a

gate to the playground, and pick them up after they arrive at another entrance. Parents are

also given free pagers by the on-site staff; the staff will set off these pagers should a child

need his or her parents sooner than expected.

IKEA has a wide range of products for offering. Much of IKEA's furniture is designed to

be assembled by the consumer rather than being sold pre-assembled. IKEA claims this

permits them to reduce costs and use of packaging by not shipping air; the volume of a

bookcase, for example, is considerably less if it is shipped unassembled rather than

assembled. This is also a practical point for many of the chain's European customers,

where public transport is commonly used; the flat-pack distribution methods allow for easier

transport via public transport from the store to a home assembly. IKEA contends that it has

been a pioneering force in sustainable approaches to mass consumer culture. Kamprad refers

to the concept as "democratic design," meaning that the company applies an integrated

approach to manufacturing and design. In response to the explosion of human population and

material expectations in the 20th and 21st century, the company implements economies of

scale, capturing material streams and creating manufacturing processes that hold costs and

resource use down, such as the extensive use of particle board. The intended result is flexible,

adaptable home furnishings, scalable both to smaller homes and dwellings as well as large

houses. Not all furniture is stocked at the store level. For example, while a particular color of

sofa model may be stocked and can be picked up at the store, another color of the same

model that is not available in the store will instead have to be shipped from a warehouse to

the customer's home for an additional delivery charge. Unlike with other retail stores, any

requests for a model to be shipped from the warehouse to the store for pickup would also

incur the same delivery charge to the customer. Delivery charges can easily add another 10%

to 25% to the purchase price.

The IKEA corporate structure is divided into two main parts: operations and franchising.

Most of IKEA's operations, including the management of the majority of its stores, the design

and manufacture of its furniture, and purchasing and supply functions are overseen by

INGKA Holding, a private, for-profit Dutch company. Of the IKEA stores in 36 countries,

235 are run by the INGKA Holding. The remaining 30 stores are run by franchisees outside

of the INGKA Holding. INGKA Holding is not an independent company, but is wholly

owned by the Stichting Ingka Foundation, which Kamprad established in 1982 in the

Netherlands as a tax-exempt, not-for-profit foundation. The Ingka Foundation is controlled

by a five-member executive committee that is chaired by Kamprad and includes his wife and

attorney. While most IKEA stores operate under the direct purview of Ingka Holding and the

Ingka Foundation, the IKEA trademark and concept is owned by an entirely separate Dutch

company, Inter IKEA Systems. Every IKEA store, including those run by Ingka Holding,

pays a franchise fee of 3% of the revenue to Inter IKEA Systems. The ownership of Inter

IKEA Systems is exceedingly complicated and, ultimately, uncertain. Inter IKEA Systems is

owned by Inter IKEA Holding, a company registered in Luxembourg. Inter IKEA Holding, in

turn, belongs to an identically named company in the former Netherlands Antilles that is run

by a trust company based in Curaçao. The owners of this trust company are unknown (IKEA

refuses to identify them) but are assumed to be members of the Kamprad family. In

Australia, IKEA is operated by two companies. Stores located on the East Coast

including Queensland, New South Wales, and Victoria are owned by INGKA Holding. Stores

elsewhere in the country including South Australia and Western Australia are owned by

Cebas Pty Ltd. Like elsewhere, all stores are operated under a franchise agreement with Inter

IKEA Systems.

VISION STATEMENT

Affordable solutions for better living

MISSION STATEMENT

Ikea's mission is to offer a wide range of home furnishing items of good design and function,

excellent quality and durability, at prices so low that the majority of people can afford to buy

them.

FINANCIAL DATA

The net profit of IKEA Group (which does not include Inter IKEA systems) in fiscal year

2009 (after paying franchise fees to Inter IKEA systems) was €2.538 billion on sales of

€21.846 billion. Because INGKA Holding is owned by the non-profit INGKA Foundation,

none of this profit is taxed. The foundation's non-profit status also means that the Kamprad

family cannot reap these profits directly, but the Kamprads do collect a portion of IKEA sales

profits through the franchising relationship between INGKA Holding and Inter IKEA

Systems. Inter IKEA Systems collected €631 million of franchise fees in 2004, but reported

pre-tax profits of only €225 million in 2004. One of the major pre-tax expenses that Inter

IKEA systems reported was €590 million of “other operating charges.” IKEA has refused to

explain these charges, but Inter IKEA Systems appears to make large payments to I.I.

Holding, another Luxembourg-registered group that, according to The Economist, “is almost

certain to be controlled by the Kamprad family.” I.I. Holding made a profit of €328 million in

2004. In 2004, the Inter IKEA group of companies and I.I. Holding reported combined profits

of €553m and paid €19m in taxes, or approximately 3.5 percent. The Berne Declaration, a

non-profit organization in Switzerland that promotes corporate responsibility, has formally

criticized IKEA for its tax avoidance strategies. In 2007, the Berne Declaration nominated

IKEA for one of its Public Eye “awards,” which highlight corporate irresponsibility and are

announced during the World Economic Forum in Davos, Switzerland.

A VIEW ON WORLD FURNITURE INDUSTRY

Furniture industry has changed over the years. It no longer restricts itself to a production of a

chair or a table or a bed but today it includes manufacturing of a range of furniture and home

furnishings and designed interiors which spell class and elegance. There is a boom time for

furniture industry. Every country sport a string of furniture showrooms of all kinds and sizes.

Changing lifestyle, disposable incomes, economy growth, increasing migration to urban areas

have all contributed to the demand for furniture and in turn the growth of the furniture

industry as whole. Furniture industry comprises not only the production of a wide range of

products related to office, living room, bedroom, kitchen , garden, school furniture but also

mattresses, furnishings, upholstery, parts of furniture etc. A wide variety of raw materials are

used in production of furniture like wood, rattan, plastic and metal and more recently silver.

Including various varieties of wood, wooden furniture is the major production and exports of

the furniture industry in almost every country.

Characteristics of the furniture industry

Furniture manufacturing worldwide forms a regionally centralized competition pattern

under the clustering effect.

The furniture industry is both a organized and a non-organized sector.

Utilization of skilled and unskilled workers.

Utilization of handcrafted tools, machines and CAD/CAM for manufacturing and

designing.

Source of employment for rural workers.

Employment is spread across many sectors showing the diverse nature of the industry

and a broad product range.

Consumer expectations and purchasing behaviors have marked regional variations.

INDUSTRY TRENDS

As the world economy is developing fast in the past 10 years, the furniture markets have

opened up more and the world furniture industry has been growing fast. Traditional furniture

making countries continue to firmly take up over 70% of the global market. This is possible

because of their their long established production capacity, advancement in science and

technology, solid funds and rich management experiences. Meanwhile, developing countries

and regions like China, Southeast Asia, Poland and Mexico, with China taking the lead, have

built upon their respective competitive advantages and gradually have covered almost 30% of

the world market. The furniture industry in such countries is developing strongly and

showing great potentials. The European Union furniture industry accounts for about half of

the world's furniture production. The production value of this industry in this region is around

€ 82 billion. Considered to be a labor-intensive industry it provides employment for around 1

million people. Among the European countries, Germany takes the lead as the largest

furniture producing country, accounting for about 27% of total EU production. This is

followed by Italy (21.6%), France (13.5%) and the UK (10.4%).The Canadian Furniture

Industry is the 5th largest exporter of furniture in the world. The major furniture producing

countries in South East Asia are Philippines, Indonesia, Malaysia, Singapore, Thailand,

Korea , Taiwan and India. In the context of global furniture trade, Asia shows healthy signs

of growth with respect to its other international competitors. Asian furniture have always

been popular in developed countries like USA, Europe and Australia. 

Over 20 years of fast growth, China has been able to bring unlimited business opportunities

and vitality to the global furniture industry. Now, China has today emerged as a furniture

production center, a circulation center as well as an exhibition center in the world. The rise of

China's furniture industry has brought about a new round of restructuring of the global

furniture industry and trade pattern. According to a recent estimate , the Indian furniture

industry is estimated at around Rs 350 billion . Eighty-five per cent of this falls into the

unorganized sector. According to a study by the World Bank, the organized furniture industry

is expected to grow by 20 per cent a year and India, Brazil and Russia will witness a boom. 

PORTER’S FIVE FORCES MODEL ANALYSIS FOR IKEA

Power of the Buyers - There is a little power because of the exiting low-price options.

Furniture and other small items have an alternative and consumers have limited alternative

choices that make the IKEA unique among its competitors. In addition, the low price strategy

is another way of the company to response in buyer’s needs.

Power of Supplier - IKEA has its thousands of suppliers that set standards in delivering the

materials. Once in a while, for some products, the IKEA bids for the contracts with multiple

companies to craft the same products. Most of the suppliers work in IKEA and compete with

other suppliers, and they have a little bargaining power. Because of the low-pricing, IKEA’s

profit margin also affects the prices in raw materials than by prices in labor.

Rivalry - The IKEA’s furniture competitors’ offers different styles and functionality. Conrin

targets a new low cost in terms of furniture line; Cratel & Barrel offers a furniture in a box

which is subject in higher prices; Ethan Allen aimed at a more upscale market; Wal-Mart is

equipped in a big box furniture that is categorized under the general store must-have-items,

but don’t have much of a style. IKEA is the most successful in delivering the complete

package for the customers that reflects on weak rivalries. 

Substitutes - There is no specific product that can be a substitute for the furniture but IKEA

at least, have to keep up with the latest trends, to avoid becoming out of style. Another

advantage is that, through their cutting and leading technology, IKEA could copy any new

style fairly and move each the product into its stores.

New Entrants - Another furniture company is rolling on a low-cost strategy and should

compete with the IKEA as the excellent company in delivering the furniture and house wares.

IKEA stores do not reach many small towns and this is an opportunity for the new

competitors to move into small and midsize cities with smaller stores and less selection. But

not easier in city because new entrants have to establish a vast supply chain and create a

unique brand name.

SWOT ANALYSIS OF IKEA

INTERNAL FACTORS

Strengths

IKEA’s flat packaging reduces its overall costs and makes it easier for customers to

transport it from one place to another.

The company culture matches its external image – pragmatic, cost-saving

sensibilities.

Product design which is sleek and minimalist design is popular in Europe and it

gained popularity in the U.S.

Strong in-store experience which is unique, experiential, “modern theme parks”

Brand reputation in America, Shanghai, people lined to get into newly opened stores.

Target customers “young people of all ages”, well educated, liberals, white collars

and those unconcerned with status symbol.

Stores are similar worldwide and stock a huge range of home furnishings within the

same area.

Weaknesses

Foreign company trying to sell to an American audience.

It’s difficult to understand different countries attitudes and tastes if you’re not from

the country.

Niche markets – the minimalist design doesn’t appeal to everyone.

Too strong of an emphasis on cost-saving could lead to cutting corners and negatively

affecting safety.

Limited manufacturing capabilities mean that IKEA has to depend on subcontracted

manufacturers.

Subcontractors can make their own range of products and compete with IKEA.

EXTERNAL FACTORS

Opportunities

The budget shopper market is growing, especially among college students and in

metropolitan areas.

In-store restaurants are popular, and even that is attracting lots of customers.

Now that product design has been tailored to American, Chinese preferences, where

they have an opportunity to add “bonus” services to increase customer service and

satisfaction.

IKEA concept of selling a lifestyle based on good design and value for money is a

major selling point.

Focus on differentiated products for the Asian market which have the fastest growth

with an affluent middle class.

IKEA commands only5 to 10% of the retail furnishing market in each of the country

it has outlets, and it has huge potential to increase its market share especially in a

large market such as in North American region.

Threats

Difficult to sustain good design quality products at low cost when the number of

competitors keep increasing, e.g. in US Kmart, Target Corp, Fly in France and Japan

Nitori company in Japan.

The furniture retail segment is highly fragmented and IKEA is flanked by competitors

in high-end specialty retailers and low-end discount retailers.

North American market poses a huge challenge because of major differences in size,

colour and lifestyle.

Discount retailers sell on the basis of price, bringing down margins and making it

difficult to stay profitable.

Major challenge to keep the core values alive especially when the company becomes

larger and more diverse.

IKEA in Japanese market

First round

Japan overview

After 1950s, Japan economy grew rapidly from less-developed to developed country. On

average, Japan's annual GDP growth was about 10 percent from the 1950s until the 1970s

and became the world second largest in 1986 behind United States. Japan possessed the

competitive strength in industries steadily. The economic growth still kept moving

successfully until in 1973, Middle East oil crisis also occurred, following with a second oil

crisis in 1979 that brought to the economic recession. Later in 1985, the value of yen rose

increasingly which was three times of its value in 1971 under fixed exchange rate system.

Corporate investment, stock prices, new equity turned to rise exceedingly. Finally,

government considered to tighten the value of asset, especially land, with monetary policies

while higher interest rates sent stock prices into a downward curved. Japan encountered

extensive speculation in the real-estate and domestic commodity markets which made Japan

suffering from double-digit inflation. By the end of 1990s, the recession known as the

collapse of the bubble economy occurred.

Characteristics of Japanese Furniture Market

For Japanese wood furniture market, it was reported that the furniture market in retail

furniture market value of $ 10 billion in 1982 and $ 6.7 billion for the wholesale level in

1984. The imports of wood into Japan were only a small part of total market which most of

them are shipped from East Asia such as Taiwan while most wood furniture from Europe and

United States is imported by specialty trading companies and specialty import furniture

stores. Demand for Western style furniture also grew during this period and Japan maintains

no regulatory barriers to import business furniture.

Japan is another major furniture market, second to the United States. Analysis of its furniture

trade trends generally reflects it as another net furniture importer. In 1989, only about 5% of

wood furniture consumption was imported and only about 2% of production was exported,

which reveals that its market was largely served by its domestic industry.

In 1993, the value of furniture imports into Japan was valued at 168,143 million Yen (U.S.

$1.68 billion at 100Yen/U.S. $1). This is a reduction of 7.2% from the previous year.

Japanese furniture imports from the United States decreased by 11% between 1992 and 1993

(Japan Furniture Trade, 1998). The decrease of furniture imports was primarily due to the

economic recession. In 1993, the largest importer of Japanese furniture was Taiwan, followed

by the United States.

U.S. furniture is popular in Japan due to the quality, value, and variety of products. Two

furniture products from the United States that are growing in popularity are ready-to-

assemble furniture, known as “kit furniture” and “home office furniture”. Kit furniture is very

attractive to housewives. Home office furniture is being promoted by the U.S. furniture

suppliers in association with the growing sophistication of communication systems that make

it possible for the Japanese to work from home.

Thailand, Indonesia, Korea, and Malaysia were the next largest furniture exporters into the

Japanese market after the United States.

. These Asian countries, except Korea, enjoyed an increasing value of furniture, reflecting the

popularity of their products, which combine quality and low cost to create value. Export of

Italian furniture into Japan market has been reduced considerably due to greater competition

from Asian furniture producers. China, which was the next largest country after Italy, has

shown tremendous performance as a furniture supplier into this market with a 35% increase

in value of imports between 1992 and 1993.

It is important to note that there is no tariff imposed on the majority of furniture products

imported into Japan. Only a few products, such as furniture using leather, have import duties

ranging from 3.87% to 4.6% and some wooden furniture products up to 5%. This is important

to Malaysia because it will reduce the import price of Malaysian furniture.

Japanese furniture manufacturers use primarily local species of wood. Imported species

include the popular of the U.S. furniture species such as alder and oak, as well as some

tropical species such as mahogany, teak and rubberwood. Japan's furniture industry is at a

poor competitive position in terms of production factors such as raw material and labor cost.

This furniture industry has made tremendous efforts to improve through manufacturing

technology by modernizing plants and subsequently decreasing cost. Its strategy is to produce

high quality furniture for the high-end domestic market and simultaneously to enhance the

competitiveness of Japanese furniture firms in international markets (Smith and West, 1992).

IKEA in Japan

In the mid 1970s, IKEA, Swedish home-furnishings giant company, decided to enter

Japanese market as the economic expansion in Asia emerged by launching a franchising deal

in 1974. However, IKEA have been through a rough time to survive in 1970s and they

eventually decided to pull out of Japanese market in 1986 (Lane, 2007). IKEA encountered

with failure as a result of rush jumping into Japanese market, the size of store as too small

and only few Japanese consumers were willing to assemble IKEA’s do-it-yourself kits. At

that moment, IKEA also needed to deal with strong local competition such as Mujirushi

Ryohin and Nitori.

It was believed that it was a big mistake for IKEA to be launched in Japanese market that

early but it was the appropriate decision to withdraw and wait until they are ready because he

claimed that one of problems occurred as they cannot provide a sufficient supply network.

Re-entry:

Japan- overview

In 1990s, Japanese government tried to keep inflation in low rate and restructured the

financial sector in 1996 by producing “Big Bang” reform measures. Later, Asian financial

crisis emerged and was considered as external economic factor of downturn.

Therefore, Japanese economy was recovered with sluggish growth in April 1999 but it was

considered as a temporary phenomenon since investment in factories was weak and Japanese

economy also major relied on foreign demand and communication technologies. During this

period, barriers to foreign consumer goods have been removed but some restriction still

limited the flow of imports.

However, Japanese economy entered into an economic recession over again as an effect of

terrorist attacks in September 11, 2001. Japan encountered long run stagnation of Japanese

economy along with the problem of non-performing loan and economic recession that

hamper economic growth while economic structure was inflexible for economic environment.

Nevertheless, in 2002, Japanese economy moved to a recovery phase though the war in Iraq

had impacted on them. After ending the war in mid 2003, investment in plant and equipment

were increased. Services sector such as financial, retail and tourism is growing continually.

Still, Japan is the world's second largest economic power and the second most

technologically advanced economy after the United States.

Characteristics of Japanese Furniture Market

During this period, Japan’s home furnishings sector has expanding and growing rapidly. This

expansion also gives the opportunity for not only Japanese company but also foreign

company to grasp the chance since in 2001, Japanese government acted the deregulation of

Japanese Large Scale Retail Store Law in order to encourage and enhance the investment in

Japan. This enactment leads to spreading out of Furniture market over again. For customer

side, consumer has changed the way they thought of products in household by encouraged to

search for home management solutions.

Home furnishing stores are emerged enormously and willing to offer the different styles such

as modern style, natural styles and ethnics style that integrates earthy and hand-made

elements to different styles of customers.

IKEA in Japan

Since IKEA are not successful from the first time they entered in Asia, IKEA has planned for

five years in order to return to Japan carefully as “Japan is the second biggest economy and

retail market in the world”, Tommy Kullberg, Last President and CEO of IKEA Japan K.K,

stated (Wijers-Hasegawa, 2006) as Dahlvig estimated that though Japanese market is tough

for entering, Japan is much more open and can lead IKEA to catch a pivotal role as a stronger

company in Japanese market.

Moreover, Lars Petersson, replaced Kullberg and responsible for IKEA Japan K.K. since

September 2005, also believes that the reentering for the second time is possible to achieve

even if the Japanese market is more difficult for companies to establish stores than other

markets in North America or Europe. He also claimed that their failure in Japanese market

has been overstated since there are also some difficulties in some other markets, for instance,

Russia market and Poland market.

Furthermore, IKEA is not the only the company that struggled through Japanese market at

the first time but some other foreign retailers namely Carrefour and Sephora. Carrefour is the

French supermarket while Sephora is a French cosmetic retailer. However, both of them have

all come and gone.

IKEA finally re-entered the Japanese market again in 2001 due to the deregulation of

Japanese Large Scale Retail Store Law which is beneficial for large retailer to enter. This

time it was confirmed is the right time for IKEA to step down in Japan

The new ideal concept of IKEA in Japanese market this time is "making an ideal home”

Go home in time to see your children. That is the concept Ikea inspired in people there. The

center of its new strategy is “small space living” since children in Japan, a country of more

than 127 million, usually live together with parents at home before marriage and also share

pace with grandparents or in-laws.

IKEA believes that Japanese and Swedish designs are similar as both of them focus on clean,

simple design made of wood and natural materials as well as living comfortably in small

spaces.

In addition, IKEA did marketing survey by visiting more than one hundred homes in order to

figure out how Japanese take a bath, how they cook, how they sleep and how they store

things and what they think of packaging so as to adapt their furniture to Japanese taste since

they live in small and crowed home. Even though size is considered a matter, IKEA has not

changed the size of their products but has selected 7,500 items out of its 10,000 products that

suited to Japanese lifestyle instead (Wijers-Hasegawa, 2006) such as offering two seater

sofas, space-saving storage boxes and sofa beds for studio apartments.

As we know that the prominent style of IKEA is the "flat packs" which disassembled

furniture packed into flat boxes for easy transport and self-assembly by customers since they

think that assembling on their own can bring enjoyment to customers.

However, IKEA provides home delivery and assembly for an extra charge while offer low

price products with Japanese standards. For example, tables start at 1,500 yen, an entire living

room consisting of television, stand, sofa, bookshelf, rocking chair and coffee table total costs

only 85,000 yen which is quite a low price.

Besides, IKEA choose to create supply centers and warehouses in Asia instead of shipping

from Europe which one-third of the 10,000 items in IKEA are made in Asia. Due to saving

transportation cost and avoiding delayed stock, they ship the rest to distribution centers in

Kuala Lumpur and Shanghai before sending them to Japan.

Nowadays, IKEA is directly owned the three new mega-stores in Japan, Funabachi, Kohoku

and Port Island.

IKEA in Japanese market

According to patterns of Internationalization in Uppsala model, there are two patterns of

investment. Firms may invest by starting from nearby countries or invest in specific country

by learning psychic distance in new markets. (Johanson and Vahlne, 1990)

IKEA, the biggest home-furnishing retailer, expand internationally from their nearest

countries such as Norway, Denmark and so on Later, they decided to invest in distance

country in Asia, Japan. Internationalization of IKEA in Japan was shaped by environmental

condition as economic and regulation. In 1950s, Japan economic growth was attractive for

foreigner to invest as the growth of economy expanded rapidly and turns to be the second

largest market in the world as well as the demand of import furniture is higher. Uttermost, the

main support comes from Japanese government who helps by reducing the regulatory barriers

for import furniture companies. IKEA considered that they could gain opportunity and

decided to enter Japan in 1970s.

However, the instability of Asian economic growth in this period impacted investor such as

IKEA because of inflation and the collapse of the bubble economy by the end of 1990s. This

situation brought IKEA into risk as Anders Dahlvig, IKEA group president and chief

executive, stated that IKEA was launch in Japan too early (News Gate NY, n.d.). Therefore,

IKEA chose to withdraw stores out of Japanese market in 1986.

Brown and Burt (1992) described that asset-based advantage is a retail brand and unique

image on their products across borders which IKEA process this advantage since they are

both well-known in flat packs products and an affordable price brand. Asset-based advantage

and the deregulation of Japanese Large Scale Retail Store Law are the driving forces which

treat as Commitment decision for IKEA to expand in Japan directly as well as Japan open

widely and demand of consumer increased. These lead to second try to reenter Japanese

market in 2002 by establishing IKEA Japan K.K. with the assistance of JETRO.

In addition, it is a great challenge for IKEA to overcome differences and maintain their

advantages while using their experiences in the past to conquer lack of foreign market

knowledge.

Influencing factors of IKEA in Japanese market

Since IKEA expanded successfully in European countries and made a decision to enter

Japanese’s market as the first country in Asia, six key effects on what IKEA needs to face as

entering Japanese market at the first round and how they develop to reenter in the second

round are discussed.

1. Psychic distance and learning

The first determinant of IKEA to fail in Japanese market is psychic distance or cultural

distance that impacts lifestyle, size of products in household and behavior of consumers.

Although IKEA, an enormous furniture retailer, intended to overcome this Asian market in

the first round, they encountered the cultural difficulties such as the differences in lifestyle,

the way Japanese live and manage their houses. First, IKEA are well-known in offering self-

assemble kit or “flat packs” while Japanese do not familiar with do it yourself kit that

customers need to assemble from compact box themselves at home. Second, Japan is an

island with limited area. Then, people in this country have to live in small spacein order to

make use of limited area while IKEA offers furniture in the same size with other countries.

As a result, IKEA faced with failure and needed to remove the store out of Japan.

Though IKEA encountered failure because of psychic distance in the first round, it seems to

be successful for the second round since IKEA learnt from their mistakes by gathering market

knowledge (Johanson and Vahlne, 1990), especially marketingspecific knowledge, such as

doing survey in order to understand customers and cultural pattern of Japanese. IKEA finally

provides home delivery with extra charge and still maintains the prominent style “flat packs”

for customers. In this second round, IKEA considers Japanese lifestyle and the size of

furniture in Japanese household by choosing appropriate size of 7,500 items out of its 10,000

Internationalization of IKEA in the products to offer instead such as providing two-seater

sofas or space-saving storage boxes and create the concept as “small space living”. Though,

IKEA sees the cultural difference between Swedish and Japanese, both of these two countries

still agree in the same clean and simple common design.

Besides, psychic distance also influences the behavior of Japanese customers since Japanese

believes in quality oriented products (Wijers-Hasegawa, 2006) while IKEA offers low price

product. However, behavior of Japanese in furniture market tends to change and willing to

accept affordable price product of IKEA increasingly.

Strategic decision making process

Since IKEA acquired too limited information of Japanese market, this impacted the strategic

process of the organization. Strategic decision making process is considered as a factor that

leads to failure of IKEA in Japanese market because of inappropriate planning and poor

understanding in foreign market. For the first time that IKEA entered Japan, they lacked of

research but IKEA perceived the opportunity by using the experiential learning (Forsgren,

2002) that they obtain from doing business in other countries around the world, especially in

European countries, to reduce perceived uncertainty and invest in Japan since they realized

that risk of not investment is much more. By that time, IKEA wanted to gain advantage as a

leader in Japanese furniture market but carelessly rushing into new market cause them to

withdraw the store at last.

Although, strategic decision making process is a factor of failure in the first round, IKEA also

improved their knowledge by entering in the second round. In this second time, IKEA creates

its own Absorptive capacity. IKEA builds the dyadic relationship between IKEA and

Japanese customers by visiting customers in order to decrease lack of knowledge and it took

five years for IKEA to collect all data to reenter Japan over again.

Degree of adaptation of retail offer

Degree of adaptation of retail offer is one of determinants that effects investment in overseas

market of IKEA. Although, IKEA offered commodities quality, fashion, level of services,

price and image as they offered in other countries, they perceived that degree of adaptation is

significant since they were not success in introducing self-assemble in Japanese market from

inception. The low degree of adaptation to the new environment brought IKEA into

disappointment.

Therefore in the second round, IKEA learnt to adapt the level of service by providing home

delivery and service to assemble at home if customer wants but they still maintain their

prominent style, flat packs as they still keep educating Japanese consumers that flat packs can

bring joy, fun and it is quite easy to assemble that furniture. In addition, IKEA also adapt to

the new environment by selecting the appropriate furniture for Japanese consumers and

proposing the new ways of decorating houses in order to suit Japanese taste even they needed

to encounter strong competitors as Muji and Nitori in 1970s and competed with other large

shops in the same area as well as 100 yen stores later on. However, not only do IKEA adapt

the level of service and offer the appropriate products but they also consider the necessary of

understanding by adapting products to local things such as packaging, displays or advertising

in order to learn and adapt to this new market.

Entry strategy

In 1974, IKEA expanded into Japanese market by using franchising as a mode of entry in

order to reduce financial risk in overseas markets (Evan et al, 2000). Nevertheless, IKEA

failed to adjust with this psychic distance country and reentered over again later in second

round by using directly own as a strategy to enter.

Characteristics of organization

Size of company or store is a significant factor in Characteristic of organization. Although,

IKEA is a mass retailer, they opened only a small size of store in Japan in mid 1970s since

Japanese are familiar with small shops. However, they gained too little attention from

Japanese customers. After IKEA accumulated market knowledge of the Japanese behavior

from the first round, they recognized that size of store is matter in selling furniture to

Japanese. Therefore, success or failure also depends on the size of store.

To attract the attention in the second round, IKEA improved the stores by opening the first

new-mega store, 40,000-square-meters (43,000 square feet), in Funabashi for example. They

invited customer in grand opening and displayed a museum with showrooms in Japanese mat

size to appeal Japanese taste. IKEA provided a variety of products in wide range since they

can acquire resources from their suppliers. They offered different kinds of room such as

kitchen room, bedroom, and living room in different styles to suit shoppers and convince that

they understand the style of living in small scale. This outdoor exhibition attracts a lot of

Japanese attention as well. Moreover, a largest home furnishing retailer, IKEA, also support

this mega stores as they offer restaurants, children’s playroom, Swedish food markets and

large area of parking lot in less-expensive location. In addition, Timing entry also influences

on success and failure in entering market which IKEA convince that though they encountered

obstacles in Japanese market.

Management characteristics

Though IKEA possesses a unique design as flat packs and offers products at low prices,

IKEA cannot gain Japanese’s attention since the customers are not familiar with self-

assemble kits and IKEA also encountered the strong competitors such as Muji.

Therefore, IKEA have learned through their international experience that managing suppliers

also play the vital role in business as well since IKEA was lack of connection in providing

products and faced with insufficient suppliers which was difficult for them to lower the price

since they shipped products from European countries at first. To correct their mistake, IKEA

turned to provide supply centers and warehouse in Asia as a Market commitment by

establishing a commitment in raw material such as Kuala Lumpur and Shanghai in order to

send furniture to Japan in low cost and avoid delayed stock in stead of shipping from Europe

and avoid from suffering in lack of supplier. This relationship between IKEA and suppliers

creates the Dyadic absorptive capacity which is the characteristic of IKEA that they learn by

doing in order to develop their knowledge in their past directly.

IKEA in China

IKEA opened its first store of China in Beijing in 1998. Although the company's global

strategy had worked well in the past in most of the markets it had entered, it quickly learnt

that success in the Chinese market required a different strategy in the areas of Marketing and

HR.

IKEA also had to alter two of the most important aspects of its time-tested and proven global

strategy when it came to China; while elsewhere in the world, IKEA had always located its

stores in less expensive areas and sold its furniture on the do-it-yourself (DIY) principle,

these elements had to be changed in China. IKEA claimed that it had decentralized most of

its functions including HR and stores management in China, but despite this, there was

criticism that IKEA was far too bureaucratic with many of its operations being globally

controlled and systematized.

But Presently, A new store in Beijing was reconstruction in mid-2004 as the appearance in

term of looks and size was not a ‘real’ IKEA store. The re-opened of IKEA store in Beijing in

2006 made IKEA store in Beijing is the second largest in the world which cover 43,000

square meters.

IKEA opened the next store in Guangzhou in October 2005 and plan to open more than 5

new stores within 6 years. Turnover of IKEA in China in 2004 grew by 40%. The president

of IKEA in China, who is Ian Duffy, claimed that China is becoming important for IKEA in

the future because of fast economic development and increasing people’s living standard. It is

estimated that China will become IKEA’s largest market in 10 to 15 years.

Until 2007 there are four stores in China which are Beijing, Shanghai, Chengdu and

Guangzhou. IKEA prepares to open up to 10 stores in China by 2010. The expansion will

focus on eastern China at the beginning.

IKEA enters China by adopting joint venture with Chinese companies. This is due to the

policy of Chinese government to achieve the principal of equality and mutual benefit.

Therefore, IKEA’s store in mainland of China belongs to IKEA group and operates as joint

venture. Firstly, the customers saw IKEA as an expensive western brand. This happened

during the open of IKEA’s first store in Shanghai. Low price was the major challenges of

IKEA in China as the high import duty tax at the beginning. Furthermore, it was difficult to

reach a large people since the income level is relatively low. Another challenge of IKEA

China is the violent competition with others imitates firms and products. IKEA chooses to

produce their product locally so that it can offer a large volume of products with low price

which enable IKEA to compete with other competitors in the Chinese market.

At present, IKEA has manufacturing factories and some material suppliers in China.

Therefore, IKEA reduced prices by 10% resulting in increasing sales by 50% in the first

quarter of 2004.

In addition, home interior competence which is the key competitive advantage of IKEA in

China has been chosen and promoted to strength the position of IKEA in Chinese market. On

the contrary, there are few furniture firms in China that choosing this positioning strategy.

A survey in China was conducted in 2003 and families earning around US$5,000 a year

became a target of the company.

The strategy of IKEA in introducing their products with Swedish culture everywhere they go

has brought about some problems for the company in China.

Language barrier is one of the challenges that most of western companies faced when they

enter Chinese market. IKEA has used the strategy of pronounce-oriented names by

translating their name to Chinese.

The IKEA’s Chinese name consists of two characters which means comfortable and family

and represents their product and corporate identity.

Family is an important word which connects to collectivist culture of China. Thus, the

character is important as Chinese customers depend more on visual representations.

PESTEL analysis for China

Outlined below is the PESTEL analysis for China as a whole.

1) Political Factors

i. Constitutional System

China or People’s Republic of China adopts socialist system or communism in

their political system in their decision-making processes in governing the country.

The country’s sole political party in power is known as the Communist Party of

China. The government have the sole power to control all activities done by their

citizen as what have been describe in how communism system worked in

governing a country. In other words, the purposes of working in China are to

contribute to the nation and also to the government as the government control on

all activities in the country.

ii. Stability of Government

The stability of the China government is quite moderate and stable because the

administration of the government are not publicize to the public either through the

press or on the internet. So, the degree of the citizen involvement in the politics is

low because of the heavy restrictions impose by the government. However, the

policies impose and the law regulations are quite effective in terms of economy

where China is one of the leading countries in the world. In the recent years (2001),

China has joined the World Trade Organization and results rapid growth in

industrial and manufacturing sectors because of the cheap labor in China. But still

problems such as managing environmental degradation, demographic pressure and

the extreme immigration from rural to urban area must be faced by the

government.

iii. Business Freedom

The business freedom in China is quite tight because of the regulation impose by

the government where they restrict businesses from other countries coming in. But

recently, China government open their gate to the outside world to set up business

in their country. It takes 37 days to start anew business in China compared to the

world average 38 days. While it takes 1.7 years from the filling for insolvency in

court until the resolution of distressed assets. Examples of business freedom in

China are supermarketization and opening market to foreign multinationals

company because of the entry of China into WTO. Supermarketization is where the

government shuts down the traditional “wet market” and transform them into

supermarket.

iv. Trade Freedom

In the past few decades, China loosen their trade policy to the outside world in

their trading, export and import industry. China’s weighted average tariff rate was

3.9 percent in 2008 based from the web (heritage.org). Factors that affect the cost

of trade freedoms are import and export bans and restrictions, import and export

licensing, non-transparent tariff classifications, complex regulations and standards,

subsidies, state trading in certain goods, services market restrictions, issues

involving the protection of intellectual property rights, and inconsistent and

corruption-prone customs administration add to the cost of trade. So, China’s trade

freedom score to account for non-tariff barriers deducted about twenty points.

v. Tax Policies

Below are the economic data for China.

Tariff Rate 3.9

Income Tax Rate 45.0

Corporate Tax Rate 25.0

GDP (billion) 7900

GDP per Capita 5962

Unemployment Rate 4.2

Inflation Rate 5.9

FDI Inflow (millions) 108300

Tax Burden % GDP 18.3

Government Expenditure % GDP 19.9

Population (billions) 1300

Based on the rates and statistic given, we can see that China has moderate

Corporate Tax Rate and high Income Tax rate. The government encourages more

new-technology business in the market besides allowing foreign institution enters

the nation financial institution in providing foreign currency. Because of lower

corporate tax rate, many MNC started to open their business in China and the

numbers of FDI have increased rapidly. Furthermore, on October 2008, new

policies impose where individual income tax is no longer paid on interest on bank

deposits. The overall tax revenue as a percentage of GDP was 18.3 based on what

recorded in the recent years.

2) Economic Factors

Economic Freedom Score – 51.0

Population - 1.3 billion

GDP (PPP) -

$7.9 trillion

9.0% growth

11.0% 5-year compound annual growth

$5962 per capita

Tariff Rate 3.9

Income Tax Rate 45.0

Corporate Tax Rate 25.0

GDP (billion) 7900

GDP per Capita 5962

FDI Inflow (millions) 108300

Tax Burden % GDP 18.3

Government Expenditure % GDP 19.9

Unemployment - 4.2%

Inflation (CPI) - 5.9%

FDI Inflow - $108.3 billion

i. Disposable income of buyers

ii. Credit accessibility

The government has directly and indirectly controls their banks and financial

institution. Investment done in China are also control and regulated because of

their judicial system is very vulnerable to the political issues and influence

iii. Unemployment rates

Labor force - 812.7 million

Labor force by occupation -

a) agriculture (39.5%)

b) industry (27.2%)

c) services (33.2%)

Unemployment rate - 4.2% (2008 est.)

*Official data from urban area only.

*Including migrants may boost total unemployment to 9%.

*Substantial unemployment and underemployment in rural areas.

iv. Fiscal Freedom

China has moderate Corporate Tax Rate and high Income Tax rate. The

government encourages more new-technology business in the market besides

allowing foreign institution enters the nation financial institution in providing

foreign currency. Because of lower corporate tax rate, many MNC started to open

their business in China and the numbers of FDI have increased rapidly.

Furthermore, on October 2008, new policies impose where individual income tax is

no longer paid on interest on bank deposits. The overall tax revenue as a

percentage of GDP was 18.3 based on what recorded in the recent years.

v. Monitory Freedom

From 2006 until 2008, the inflation rate is around 5.2% where it is consider

moderate for that particular percentage. As what mention where China economic

freedom score is around 51 from the full score 100. So, we can see that the

economic is a mixture of free market and control market. The price of product sold

can be determined by the quantity demanded of the product. But still the

government intervenes on certain goods and products to maintain stability of the

prices. The government also gives subsidies to small business and industry to

compete with foreign goods where they can sell at lower prices.

vi. Investment Freedom

China’s Foreign Investment Catalogue describe that different foreign investment

are group under different types such as encouraged, prohibited, restricted and

permitted China laws and regulatory are non-transparency, complex and

inconsistently enforced laws and regulations, weak protection of intellectual

property rights, corruption, industrial policies protecting local firms, and a legal

system that cannot guarantee the sanctity of contracts where these must be face by

the foreign investor. Financial transactions are also tightly regulated.

vii. Financial Freedom

The financial systems in China are control directly to the government and it is

tightly controlled. In China, there are supervised roughly 5,600 financial

institutions in 2008 and China has only two private banks while there are four

state-owned banks account for over 50 percent of total assets. This financial system

is control and supervised by The China Banking Regulatory Commission.

viii. Interest rates

Central bank discount rate - 2.79%

Commercial prime lending rate - 5.31%

ix. Inflation

Inflation rate - 5.9% (2008 est.) and -0.7% (2009 est.)

Inflation rate declined vastly from 2008 until 2009 because of the stable currency of China.

3) Technological Factors

i. Science and Technology

Through the period, the achievement of science and technology in China are

remarkable where they manage to achieve many discoveries in the science field.

The major achievements are the discovery of the Daqing Oilfield, building the first

atomic reactor, successful testing of atom and hydrogen bombs, synthesis of

crystalline insulin, positron and negatron electronic collider, nuclear power

stations, carrier rockets, and satellite launching technology. Rapid improvement in

science and technology also create more jobs in the manufacturing industry and

also make the quality of life better and easier.

ii. Research and Development

The government design many plans and strategies in developing the R&D industry.

Many programs to enhance R&D industry are launched such as the “Torch

Program” and the “ Scaling Heights Program”

4) Environmental Factors

i. Environmental Protection Laws

The government takes serious matter on protecting the environment where they

impose many regulations and laws in protecting, preventing and controlling

industrial pollution and improving urban environment. The government also

collaborate with many NGO’s in order to maintain the mother nature.

5) Legal Factors

i. Employment Regulations

China’s labor regulations hinder overall employment and productivity growth.

The non-salary cost of employing a worker is high. Dismissing an employee may

require prior consultation with the local labor bureau and labor union.

6) Socio Culture Environment :

a. Social Factors

Population : 1.34 billion (2009 est.)

Population growth rate : 0.66% (2009 est.)

Population below Poverty Line : 2.00% (2009 est.)

Infant mortality rate : 20.25 deaths per 1,000 live births (2009 est.)

Life expectancy at birth :

total population: 71.44 years

male: 69.71 years 

female: 73.26 years

Total fertility rate : 1.79 children per woman (2009 est.)

Ethnic groups : Han Chinese 91.5%, Zhuang, Manchu, Hui,

Miao, Uyghur, Tujia, Yi, Mongol, Tibetan, Buyi, Dong, Yao, Korean, and other nationalities

8.5% (2000 census)

Nationality: noun: Chinese (singular and plural) adjective: Chinese

Religions: Daoist (Taoist), Buddhist, Christian 3%-4%, Muslim 1%-2% note: officially

atheist (2002 est.)

Languages: Standard Chinese or Mandarin (Putonghua, based on the Beijing dialect), Yue

(Cantonese), Wu (Shanghainese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang,

Gan, Hakka dialects, minority languages (see Ethnic groups entry)

Literacy: Total population: 90.92 %  male: 95.14 % female: 86.53 %

 

Distribution of Wealth

Distribution of income or consumption by percentage share :

Lowest 10% : 1.80% 

Lowest 20% : 4.66% 

Second 20% : 9.00% 

Third 20% : 14.22% 

Fourth 20% : 22.13% 

Highest 10% : 33.06% 

Highest 20% : 49.99% 

China has an extreme gap between the lowest 20% and the highest 20% after 60

years China change their system in their economy.

i. Changes in lifestyles and trends

Lifestyles and trends in China change in many ways such as the level of

consumption, attitude towards new product especially from the west, changes in

the quality of life, and also changing from quantity satisfaction to quality

satisfaction. Besides that, changes in trends can be seen from the degree of fashion

sense where citizen tend to buy more colourful and striking colours compare dull-

coloured clothes.

ii. Educational levels

The literacy rate for China is around 91.0% was able to read and write at a

specified age. While the average years of schooling is 11.2 year. Education

expenditures in China is about 1.9% of the GDP.

iii. Labor Freedom Ranks

China’s labor regulations hinder overall employment and productivity growth. The

non-salary cost of employing a worker is high. Dismissing an employee may

require prior consultation with the local labor bureau and labor union.

iv. Freedom of corruption

Corruption is perceived as widespread. China ranks 72nd out of 179 countries in

Transparency International’s Corruption Perceptions Index for 2008. Corruption

affects banking, finance, government procurement, and construction most severely,

and there is a lack of independent investigative bodies and courts.

v. Property Rights

China’s judicial system is weak, and many companies resort to arbitration. Local

officials can ignore court decision with impunity. All land is state-owned, but

individuals and firms may own and transfer long-term leases (subject to many

restrictions) as well as structures and personal property. Intellectual property rights

are not enforced effectively. Copyrights, patents, brand names, trademarks, and

trade secrets are routinely stolen.

b. Culture

Culture plays a significant role in influencing consumer’s perception, which in turn

influences their preference and purchase. A marketing mix is effective as long as it is

relevant to their culture. According to culture a company must modified their product.

Great wall, Grand Canal, Karez irrigation system is the symbol of rich culture

which build 2000 years ago.

Culture is socially shared : In china culture is socially shared.

o Girl children must have small feet: The preference of wanting their girl

children to have small feet. Large feet viewed as lower class people. So

that parents from upper class bound daughter’s feet tightly.

Lack of shared common culture common values :

In china due to lack of shared common cultural values, standardized

advertisement may have difficulty in communicating with customers. So due to

that advertising and sales promotion require special attention.

Culture is enduring :

In most Asian countries also in china culture is enduring. Culture is shared and passed

along from generation to generation. Old habits are hard to break. People tend to

maintain their own heritage. That’s why India and China are overcrowding. In past china

views large family are blessing and assume that children will take care of parents when

grown. Old but modern Chinese government make compulsory of one child per family.

It’s result in numerous death of first born daughter.

Language:

Language is a important part of culture and communication is impossible without it.

Mandarin is national language:

In china mandarin language is uniform; there are hundreds of local dialects. Mandarin is

the national language.

Written language uniform and number if dialects: In china written language is uniform

and numbers are dialects.

Chinese pay more attention to visual information processing as well as the writing of a

name:

Marketer should understand the how customer process linguistic information. East Asian

pays more attention to visual information processing as well as writing of name. As far

as brand name is Concern Company must use visually distinct brand name meaning for

communication or calligraphy and logo design.

Chinese read from right to left:

Writing and reading rules are different in different countries. China read from right to

left and in America they read and write from left to right. This difference usually requires

a product to be adjusted to some contest. For example computer maker must take care

and change their system according to countries. so that computer can produce a printout

reading from right to left.

Chinese are strict punctuality for social occasions & business appointment:

Latin American people are usually late, Asian people are tend to be punctual but the

Chinese observe struck punctuality for social occasion and business appointment. For

Chinese people time is money.

Language of Friendship

China has the unique characteristics of being friendly. They believe that let’s make friend

first and than see if we can conduct a business. General motors’ have learned that in

china. The Chinese meet together first before taking about business.

Language of Religion:

Religion affects people in many ways including work habits. Islamic Indians are seems

as a sign of person’s lack of faith in religion in Buddhism. The emphasis is on the

elimination of desire. Because desire is the cause that worrying marketer must pay

attention to religion activities. The entire month of Ramzan is a religious holiday for

Muslim who fast from down to desk each day during the month. Therefore worker must

use part of normal sleeping time for them so that work production can be affected. Also

Muslim pray five time a day and they stop all work to do so attitude and religion shape

the text and visual image that appear in print advertisement. (Christian, Muslim,

Buddhist, Buddhism, Taoism, Catholicism and Protestantism)

Language of Color

In china red is lucky a color. It is compulsory for all company to put money in red

envelope as gift for employee and children on special occasion. Special on Chinese new

year day. marketing manager should be careful in using certain color with the product

because using wrong color can make or break the deal for example parkers white pen did

not farewell in china where white is color of sorrow and sadness.

Language of Gift

Business people must understand the customer gift giving. It is wise to avoid giving

anything or any item with four in the name to the Chinese because it means death.

Likewise clocks are a choice of gift in china.

Subculture provides an effective basis for market segmentation.

2 & 4 number are known as “Easy” & Death” respectively

For example one marketer offered one discount coupon of $24with each purchases to

Chinese people. But unfortunately 2 & 4 number in Chinese communities are known

towards, Easy and Death so many consumers do not want to go for the discount coupon.

In china Green baseball caps were offered to the Chinese people as it is a sign of

premium things to be offered.

Surname comes first (for e.g. Huang Zhirong addressed as Mr. Huang

Chinese Opera Performance

The working days are from Monday to Friday. Most people do not work on weekend.

Official hours are from 8:00 am to 17:00pm with one hour for lunch.

Behaviour of Chinese People

Chinese consumer gives more emphasis on convenience of location, Sales

person’s manner and less emphasis on stores return policy. It is also possible to

identify the personality traits that vary from one region to another within the

same country.

Each region has different language, heroes, local capital, and different behavioral

traits and tastes, So due to that marketer may want to match the traits of the

product with the audience’s positive traits.

THEMES USED FOR SALE THE PRODUCT IN DIFFERENT STATES OF CHINA

Gavi Nations, Northern, southern, North-western, south-western mandarin nation

Simple, old-fashioned - Frugal themes

Wu & Eastern Mandarin nations - Luxury themes

Hakka - Independence

Northern Mandarin - Gentle humble image

Minan - Adventure

Yu, Wu, Minnan, Hakka - Hardworking, innovative, aggressive

Characteristics of Chinese Furniture Market

The furniture market in China has significant progress and the country is becoming a vital

export base and location for locating furniture factories. Chinese furniture market expands

very fast owing to the economic reformation in China from 1978. However,

Chinese furniture market is not easy to understand as Chinese consumer expectations and

purchasing behaviours are varying in different region.

In 1999, domestic market, of which the total demand is RMB 73.4 billion, is the main market

that Chinese manufacture enterprise competes for. The total furniture demand has been

expected to be rising. Western Chinese furniture market and kitchen furniture market

achieved people’s attention from 1999 to 2000. The development in responsibility for

approving small and medium size foreign invested retail operations from Beijing to local

provincial Ministry of Commerce on 1 March 2006 eased the process for multinational

retailers.

China is the fourth largest global economy with a total GDP of US$ 2,644 billion, which

exceeds France and Italy and slightly beyond Britain according to 2006 Global GDP report

issued by World Bank (World Bank, 2006). The development of China’s economic policy

during the last twenty years aimed at manufacturing especially export-oriented

manufacturing. The emergence initiated from the central planning system in the mid 1990s

allowed foreign firms to gradually accessing domestic retail and distribution markets. This

was because the government wanted local firms to develop adequately to be able to compete

with foreign firms. The speedy appearance of urban middle class and sophisticated consumer

demand are due to the rapid economic growth of China and increasing openness to the global

market.

The birth of a true property market, the promotion of the construction of residence houses and

the development of relevant industries which are, for example, furniture retailers and

construction raw materials providers were resulted from the alteration of the housing system

and fast urbanization in the 1990s. Most customers have been searched for buying new

apartments where they have to decorate by themselves.

Hence, mid to high end segments of the market is the target of retailers as these buyers tend

to spend large money on decoration of the new apartment. The devolve responsibility in

choosing materials and decoration to homeowner created ‘Buy it Yourself’ market. Furniture

market in China has shown the great potential as it indicates that furniture for the new house

are being bought by 5 million families each year.

Furniture manufacturing has shifted to developing countries which have relatively low cost.

The advantage in scale of market, other fundamentals, such as, low cost with good quality

labor, land and intelligence and more importantly the stable political situation are factors that

lead China to be one of the most suitable markets.

The value of China’s furniture industry production (including non wooden furniture) in 1978

was just $157 million but by 2000, after more than 20 years of development, it had reached

$12.7 billion. By 2001 the output value had risen to over $16.9 billion representing an

average annual growth rate of almost 23% since 1978. During the same period the number of

furniture enterprises grew to more than 50,000 different types of enterprises (predominantly

small and medium sized) with a total of nearly 5 million employees throughout China. The

rapid development of the furniture industry in China over the past years has been due largely

to foreign investment (mainly from US, Taiwan Province of China and other Asian countries)

and joint ventures increasingly attracted by the increased domestic demand accompanying

economic growth, low wages, sufficient raw materials, competitive export tariffs and other

incentives for production and exports. With China’s entry to the World Trade Organization

(WTO) in 2002, foreign investment in the furniture industry is expected to maintain its fast

growth and play a bigger role in development. The pace of trade growth in China The upward

trend in furniture production has been driven by a strong growth in both furniture exports and

domestic consumption.

Figure 1

Figure 1 shows that, from 1995 to 2001, the total value of furniture exports have increased

almost four-fold from $1.1 billion to $3.96 billion at an average annual growth rate of 24%.

Wooden furniture exports, in turn, more than doubled from $932 million to $2.4 billion in the

same period, at an average annual growth rate of 17%. China’s furniture is exported mainly

to the United States (around half of Chinese exports), Japan and Taiwan Province of China

(P.o.C.) with substantial re-exports from Hong Kong Special Administrative Region (S.A.R.)

Markets are gradually being developed in Middle East, Africa, Europe, Southeast Asia and

South America. Manufacturers based in China have been successful in penetrating high value

markets such as Japan and, particularly, the US (the world’s largest furniture market) with

their furniture. China has developed a special ability to provide products well suited to the

changing fashion in the US at highly competitive prices. US imports of Chinese wooden

furniture have increased more than three-fold since 1992. China now competes fiercely with

Canada for dominance of the huge US furniture market.

Figure 2

Figure 2 shows the world’s largest exporters of wooden furniture. In 2000, China overtook

Germany as the third largest exporter globally and now competes with Canada for the second

spot, with Italy being by far the world’s largest supplier of wooden furniture. The impact of

China on the US domestic industry is being seen in the closing or restructuring of furniture

plants and, over the next few years, many US furniture companies will likely shift their

production to the Far East and focus on marketing and distribution at home. From the point of

view of major exporting developing countries such as Indonesia, Malaysia and Thailand,

China is a major competitor in their main export outlets. In fact, China overtook Thailand in

2000 as Japan’s largest supplier of furniture.

Figure 3

China’s furniture export industry is mainly concentrated in the southern province of

Guangdong, located on the Pearl River delta, and the northeast provinces of Beijing,

Heilongjiang and Liaoning. The development of the furniture export industry has taken place

mainly in the southern coastal area of China due to its proximity to large consumer markets

and good trade infrastructure. Guangdong alone, a Special Economic Zone (SEZ), accounts

for more than half of China’s furniture exports and has progressed from being the leader in

China to become the largest furniture production and export base in the Asia-Pacific region.

With total furniture exports estimated at $1.25 billion in 2001, Guangdong looks set to

eclipse former regional leaders Malaysia ($1.3 billion) and Indonesia ($1.1 billion). The cities

of Dongguan and Shenzhen accounted for virtually all of Guangdong’s furniture exports.

Rapid developments have been seen in the furniture export industry of these cities in recent

years because they greatly benefit from commercial and political privileges received under

the SEZ framework; they are closely connected to Hong Kong and Macao S.A.R.s and

Taiwan P.o.C.; and they have well established international marketing network and business

ties. Despite the dominance of Guangdong, wooden furniture exports are also flourishing in

other areas of China. In Hainan Province, an island in south-eastern China, rubber wood is

grown extensively in 330 000 ha of plantations and is being increasingly used for furniture

manufacture for export, earning considerable foreign exchange for the Province (around

$27.6 million in 2001). Hainan’s rubber wood furniture exports go mainly to France,

Germany, Italy, United Kingdom, United States, Japan and Hong Kong.

Despite the booming of the furniture export industry, domestic demand is the engine driving

growth in China’s furniture industry. Together with higher disposal income and improved

living standards, one of the key factors in this growth is housing reform, which seeks to

gradually scrap the systems of state- and workplace-distributed housing in favour of private

ownership with easier access to housing loans. Chinese have recently been allowed to own

their homes for the first time in 50 years. Figure 3 shows that the domestic consumption of

furniture has grown accordingly, almost doubling from $5.8 billion in 1995 to $9.2 billion in

2000, equivalent to about three-quarters of China’s total furniture output. This rapid growth

in consumption has created unparalleled business opportunities for China’s furniture industry.

Shanghai, for instance, has more than 2, 500 high rise buildings recently completed or under

construction. Furniture demand in Shanghai’s urban area amounted to $1.2 billion in 2000

and has been growing at an annual average rate of 20% in the last few years. In 1989, it was

approaching the level of moderate income families in some developed countries. With

expanded living space and improved housing quality, China’s urban residents are spending

more on home interior decoration and improvement. Other factors affecting the medium-term

consumption of furniture and timber products in general are large-scale infrastructure projects

such as the construction of the Three Gorges Dam in Hubei Province (the world’s largest)

and the building of stadiums, gymnasiums, halls, hotels and other facilities for the 2008

Olympic Games. The building of the Dam, to divert the water of the Yangtze River from

south to north, will require the flooding of thousands of villages and hundreds of towns and

cities by 2009 and the resettlement of over one million people. These infrastructure projects

will have associated increases in construction activity and demand for furniture.

ISSUES FACED IN CHINA.

IKEA store location can be a problem in China, where the population have no cars, therefore,

IKEA locates its store inside the cities in China. The price is also a problem, where a cheap

price can be an expensive one somewhere else.

Culture is seemed to have been embedded in elements of society, which are religion,

language, history, education, family, arts, entertainment, and education. These elements are

cultural forces that influence the cultural messages as symbols, rules of behavior and

knowledge. These factors are important in the selection of goods and services, the

consumer’s decision process. Therefore the culture influences buyer behavior. Therefore, in

retailing, the strategy of the product, the price, the location, and the promotion is links with

the culture of the country.

IKEA is used to be perceived as having low prices, this also one of the competitive

cornerstones of the whole concept of IKEA (see above). But this is not the case in China;

here the perception is a fairly exclusive western retailer, a store for the higher middle class.

For example, for the Chinese, Billy (the inexpensive, high selling book case) was perceived

as a luxury.

China is considered to have a high psychic distance from Sweden which is the country

of origin of IKEA.

The layout, atmosphere and location were required to be reconstructed and change

from its location in mid-2004 to reveal the identity of IKEA

One of the big differences when it comes to communication with the consumer in

China compared to the rest of the world is the reliance on the catalogue

IKEA have run many different ads in China, in TV, newspapers and in print. Themes

in campaigns are the same as everywhere in the world but with the Chinese twist (be

different, break tradition)

Consumers in China are demanding when it comes to service. The self service

concept of IKEA and the DIY is one thing that is hard for Chinese to accept.

IKEA has another challenge that affects service and that is the fact that many products

despite increased sourcing in China – have huge lead times in terms of shipping from

Europe and other sourcing markets to China.

STRATEGIES USED BY IKEA IN CHINA

In the 1990s with the emergence of better public housing, improved incomes and raised

expectations of households, the market has moved beyond the provision of shelter to the

quest to provide pleasant homes tailored to the households needs.

The result of this trend has been for the Chinese government to begin to sell-off state housing

and create a class of homeowners, primarily in the larger cities but gradually throughout the

country. With the future development of a secondary housing market, eventually it is

envisaged that the Chinese housing market will come to resemble that seen in mature private

property markets.

Key Facts

• Home ownership has been the catalyst behind the home improvements market and has

encouraged consumers to engage in DIY and home improvement/ decorating activities.

Additionally, this growth in private housing is attracting domestic and foreign retailers such

as B&Q and IKEA to China.

• The market had grown by 106.4% since 1994, with the opening up of the housing market,

continuing rapid increases in average salaries and consumer spending power and the

improved retail supply of goods all contributing to the strong growth. 

As the market opens, so China is becoming increasingly 'house-proud' while the home

improvements industry is becoming an increasingly established part of the Chinese retailing

and consumerist landscape.

Relating and Supporting Industries in China The Chinese translation of IKEA pronounces

"Yijia", which literally means "suits home." IKEA has a 4 prong strategy for China: setting

up commercial offices, opening stores, establishing procurement centres and investing in

setting up factories. It is reported that IKEA has invested US$60 million to build Asia's

biggest furniture market in Shanghai (area 36 000 square metres). The company president is

on record as saying the company also plans to set up 2 new stores every year in China. The

coastal cities and developed inland cities will be its main focus. Currently the company's

commercial office in Chengdu City, Sichuan Province plans to procure furniture valued at

yuan 4 million every year.

The company also invested US$180 million to build an industrial area in Shanghai's Song

Jiang and establish IKEA's production base in China. Today furniture companies in China

have become IKEA's biggest trading partners and 30% of IKEA's products are made in

China. Most of the raw materials also come from China so that product prices are

competitive. 

IKEA has sold US$86 million in products through its own retail outlets by August 26, 2003

in China. This is a new record for the company, and represents 24 percent growth over the

same period last year. IKEA has been expanding its retail network, and sourcing more

production in China.

IKEA won the hearts of Chinese consumers, and the government, by announcing its

expansion plans for China in May, during the SARS crisis, when many international

businesses were re-examining what they would do. Just as China Business Strategy predicted

at the time, China's economy and consumers have quickly bounced back from the SARS

crisis. 

IKEA's new Shanghai store has set a record number of shoppers for one day, with 80,000

visitors in one day. Current estimates are that IKEA sources 15 percent of the products sold

in its stores from China. It is estimated that by 2005, IKEA will source more than US$1

billion of products from China.

IKEA's products have struck a chord with Chinese consumers who like European style

furniture at prices they can afford.

Firm Strategy, Structure, and Rivalry in China There are many furnishing stores in China,

take OBI, ChengWaiCheng as example.

These furnishing stores are always good design and function, or low prices. For the most of

middle class, they trend to choose the reasonable price and good quality.

According to the expenditure level of middle class, common people build their home will

consider ChengWaiCheng furnishing store firstly.

OBI furnishing store is tend to be market niche, only the upper class can afford that price.

Build a comfortable home is harder than a luxury one. Some of the product are not pratical

and short service life.

IKEA's Competition Advantage ---- low-price strategy Swedish home furnishing producer

IKEA said it will maintain its low-price strategy and planned to open new stores in China in

the new financial year.

Prices decreased by about 12 per cent in the past financial year. Low prices remained in the

coming year to make products more affordable for IKEA's 8 million customers.

With more local purchases, lower prices are becoming more possible. China is IKEA's main

purchasing market and 15 per cent of all home furniture sold by IKEA is made from materials

purchased in China, according to Duffy.

The expansion is driven by its robust growth in its mainland operations. IKEA's sales in

China between September 1, 2002 and August 26, 2003 were 713 million yuan (US$86.2

million), 24 per cent more than the previous year. The opening of the firm's Shanghai store,

its biggest in Asia, attracted a record 80,000 visitors within one day. Ikea China manager Ian

Duffy said that the company had achieved double-digit growth in sales every year since

opening in China in 1999.

At the same time, the average price of Ikea's products will be reduced by 10 percent starting

Wednesday as the company continues its aggressive strategy of targeting families with 3,350

yuan (408 dollars) income per month. And the number of people who visited IKEA's two

stores over the last fiscal year grew by 1.8 million to 6.5 million. 

In conclusion, the world's largest home-furnishing retailer, Sweden's IKEA has been

expanding sales all over the world by they national competitive advantage, especial in the

increasingly wealthy China. IKEA China main to attract sales as the proportion of China's

middle class grows. In the not so distant future the size of China's domestic furniture market

will be as big as the whole Europe's.

In 1995, it could be said as the exploration phase that IKEA sited first trading office in China

to purchasing some raw materials and limited ranged of articles but there were not any stores

in mainland and no any sales to local customers. Although the logistics part of IKEA in

China was quite simple, it was still confronted with big challenges not only by IKEA’s

requirement for logistics quality in many respects like transparency, cost, flexibility,

competency, quality-control etc, but also Chinese policy and regulation on foreign investment

business before entering into WTO. So IKEA outsourced its whole logistics operation to its

old partner-Maersk logistics. Later on, with its first store opened in Shanghai in 1998 and

second in Beijing in 1999, IKEA accelerated expansion in mainland China and its strategic

center of gravity in Asia.

Pacific began to shift to China. In following years, sales in China rose around 40% per year

continuously and 10% of global purchasing was from China. With the increasing of suppliers

and expanding of sales territory, IKEA required high quality logistics support for its growing

purchasing and services networks from all aspects like inbound and outbound of materials,

products, inland transport, storage, warehousing, and distribution and so on.

Apparently, it required the service providers to offer an integrated planning for the whole

supply chain and it’s hard for just one Logistics Company to handle everything. Then more

service providers were involved into IKEA logistics operation. From 2005, IKEA entered

into its consolidation phase. With IKEA’s DSAP (distribution service Asia-Pacific) moved

from Singapore to Shanghai, IKEA began to take back major function of supply chain

management from its service providers gradually and switched from outsource to insource.

Talking about land transport strategy in IKEA China, there are totally three different land

transportation modes, including truck, barge and railway with their respective percentages are

86%, 13% and 1%. The growth of the volumes during this developing period is so

remarkable.

Meanwhile, the transportation network is becoming more and more enlarged and

complicated. Because of this situation, road transport has been put on a pivotal position.

Conclusion

IKEA are considered as retailer internationalization since IKEA plan in organizing strategic

objective, understanding the local nature of markets and using outlet as a retailer’s product.

Besides, IKEA also has strong relationship of network structure, large number of suppliers

and customers and cost structure in order to internationalize.

To internationalize, there are different driving forces that push IKEA to enter in Chinese

markets. IKEA expanded into Japan because of economic constraint, deregulation and asset-

based advantage while supporting environments which are political and social and economic

conditions as well as transaction advantage are the influences that support IKEA to

internationalize in Chinese market.

The factors that influence the success and failure of IKEA in Asia, Chinese market and

Japanese market, are summed up, namely, psychic distance and learning, strategic decision

making process, degree of adaptation of retail offer, entry strategy, characteristics of

organization and management characteristics. In brief, firstly, psychic distance creates

barriers for IKEA to enter both Japanese market and Chinese market because of differences

in many aspects between European and Asia which lead to learning in different perspectives.

Secondly, strategic decision in planning leads to achievement in Chinese market while

planning and researching are missing in Japanese market. Thirdly, there are too little in

degree of adaptation in Japanese market but the adaptations in Chinese market exist.

Fourthly, though IKEA invested in both Japanese market and Chinese market without

directly owned in order to gain knowledge; there are differences in modes of entry as IKEA

applied franchising in Japanese market but joint venture in Chinese market. Fifthly, size of

store is matter in characteristics of organization since the store of IKEA in Japan is small but

rather big in China. Next, IKEA in Japanese market lacks of supply network while IKEA

owns supply centers in China which lead to different characteristics of management.

Furthermore, though IKEA do not achieve in expanding in Japanese market but Chinese

market later on, internationalization of IKEA in Japanese market for the second round is a big

challenge for IKEA to use their learning and experiences to conquer Japanese market over

again as well as other distance countries.