Only while sleeping one makes no mistakes

Ingvar Kamprad

Cultural Barriers to Entry into International Markets - IKEA’s Case Study
Chichi Natasha Wambebe Ewa Kochanowska Maria Blanco

Agenda
Who What Where How IKEA Barriers to entry Case studies Recommendations

History & Timeline

1943 IKEA is founded

1951 IKEA publishes 1st catalog

1953 IKEA ‘s first showroom

1958 First IKEA store opens

1963 IKEA’s 1st intl store

2011 - Thailand IKEA opens its 332nd store

Annual sales (€ billions) .

Sales worldwide North America 15% Asia & Australia 6% Europe 79% .

Value curve 12 10 8 6 4 2 0 IKEA Low-end retailers High-end retailers .

Barriers defined? Market .

Most Common Barriers         Absolute cost advantage Economies of scale Customer loyalty Firm’s concentration/size Capital requirements Customer switching cost Distribution channels Government policies .

Distances to Successful Entry Cultural Administrative Geographic Economic Firm’s size Country risk Country openness .

0 3.5 Threat of new entrants 3.1 Threat of Substitutes 3.1 Complementors 3.Porter’s Five-Forces Analysis Supplier Power Buyer Power 3.1 .1 Rivalry 3.

3 billion. rose by 28% 10th on the list of TOP retail brands network of 1.Brand value $7.300 suppliers in 53 countries .

Geert Hofstede .Cultural differences are a nuisance at best and often a disaster Prof.

Cultural Dimensions Power Distance Index Individualism Masculinity Uncertainty Avoidance Index Long-Term Orientation .

Cultural Dimensions 120 100 80 60 40 20 0 Power Distance Individualism Masculinity Uncertainity Avoidance Long-Term orientation US Russia Sweden China .

USA 1985 – 1st store in Philadelphia 2011 – 38th store in Centennial .

Initial poor performance and slow start .

Clothing storage ways .

Result .

Godis glass in the EU 10 cm high 23 cl Godis glass in the USA 16 cm high 40 cl Size matters .

Measurements Standard EU: 140 x 200 cm vs. 152 x 202 cm 59 7/8”x 79” Standard US queen .

Language surprises for Anglophones Fukta Jerker Fartfull Lyckhem .

Families’ size and preferences .

or do they? 70% Modern IKEA vs.One doesn’t discuss taste. Traditional US taste .

SOLUTIONS Turnaround Adaptation Customization .

Revenues doubled over a four-year period US the 3rd biggest market .

IKEA experienced similar obstacles worldwide bureaucracy .

“The unpredictable character of administrative procedures in some regions” .

Language – Köge Swedish imperialism in Denmark .

Lebanon .

China from 1998 Misperception of IKEA as a luxury brand .

 Web site challenges  Low-focus on customer service concept misunderstood Other Culture and Life Style Barriers .

IKEA’s ideas to improve its cultural sensitivity Learning as a driving force behind internationalization .

Backpacker Journey Program for Co-workers .

 Customization of some IKEA products  Food items are replaced/changed/added  Products with inappropriate names are withdrawn quickly .

Recommendations  cultural adjustment costs  move along learning curve  exploit previous experience .

Invest more in Market Research .

 Be cheeky • Educate about the Swedish design  Be sensitive • Customize to habits (through local “detectives”) • Consult with linguists and cultural studies specialist  Spread the IKEA spirit among new co-workers to ensure quality customer service .

e.Expand higher-end furniture i. Stockholm line .

the more we have to find ways to appeal to a broader public. We have to find a balance” Andres Dahlvig.The more stores we build and the more we increase our market share. Scandinavian design is what makes us unique. president of the IKEA Group 1999-2009 . But we don’t want to be just another supplier of traditional furniture. Scandinavian design and style is a niche and it is not to everyone’s taste.