Read the attached case study from Ikea and answer the 2 following questions. ??IKEAs model of purchasing furniture that is flat-p

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Part Two CASES

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2-1 IKEA USES MARKET RESEARCH TO ADAPT FOR GLOBAL MARKETS

IKEA is a well-known Swedish retail

company that sells low-cost, stylish furniture that is purchased in a flat-

packed form and usually assembled at home. It is known for a simplistic, clean-

lined Scandinavian style. IKEA has large

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warehouse-style stores throughout the

world. Although there are differences in various regions, the stores are typically

set up into “rooms” that show the furniture arranged as it would be in

homes so visitors can experience it.

They also host kid-friendly play areas and cafeterias with Scandinavian foods,

as well as some local dishes.

IKEA stores are often destination shopping centers where consumers

frequently travel many miles to visit and

spend the day enjoying the experience. IKEA executives believe one reason for

IKEA’s success is it listens to its customers’ needs and wants to co-create

value.

However, the exact Swedish model does not translate well directly into all

cultures. So, the company takes plenty

of time before entering a market to make sure it is done right. Even so, IKEA has

encountered some missteps. Years often are spent conducting extensive market

research and ethnography (the study of

local customers and cultures), both before and after entry into a new market.

IKEA researchers visit surrounding homes and talk with numerous

consumers to discover local tastes,

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preferences, and ways of living. They

also pour over market reports and perform company and consumer

surveys. These practices allow IKEA to attain success in a variety of different

cultures with disparate tastes and values

through local adaptations. Adaptations can be found in many areas, including

catalogs, products, pricing, and shopping styles. According to IKEA

Chief Executive Mikael Ohlsson:

Most people don’t really

know and can hardly imagine that we visit thousands of

homes around every store in the world every year. We sit

down in the kitchen and talk

to them. That’s the way we try to learn and understand.

“What are you annoyed with? What are your

frustrations? What would

you like to have? How much can you afford? What are

your alternatives?”

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CATALOG ADAPTATIONS Each year, IKEA distributes a catalog in each of the countries in which it is

located. This is a massive undertaking,

especially considering the vast array of lifestyles and values across the various

markets. For example, in 2017, IKEA distributed 203 million copies of its 324-

page catalog. There were 72 different versions specific to various regional

cultures. IKEA’s extensive research

allows for tailoring the communication and imagery to best target consumers in

a given region. There are many different types of kitchens throughout the world

and the images attempt to fit the norms

of the locations where consumers are viewing the catalogs. For example, in

China kitchens are smaller than in the United States. IKEA modifies its catalog

photos and in-store kitchen models to

reflect the smaller kitchen size, as well as other important aspects appealing to

Chinese consumers. Other changes are more dramatic, such as the edition for

Orthodox Jews in Israel. In the Israeli

version, no female models are included in the photos. Instead, all models are

male and some are studying religious texts. The 2011 and 2012 versions for

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Saudi Arabia similarly omitted female

models, or in some cases the images for the Saudi editions contain no models at

all. This omission of women in these versions was meant to appeal to those

male-dominated cultures. However, after

consumer protests, IKEA had to issue apologies in both instances and

recognize such practices are not consistent with IKEA values. This is the

2017 statement:

We realize that people are

upset about this and that the publication does not live up

to what IKEA stands for and we apologize for this. We will

make sure that future

publications will reflect what IKEA stands for and at the

same time show respect for the Haredi community.

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PRODUCT ADAPTATIONS Marketing research and talking with consumers reveal several adaptions to

product offerings in the United States.

IKEA quickly learned that homes are larger and Americans

prefer their household furnishings to be larger as well. Curtains

are made longer, sofas are made deeper, spaces in kitchen cabinetry are widened

to accommodate U.S. appliances, and

tableware is enlarged. Upon first entry, IKEA executives pondered why they

were selling unusually high numbers of vases. It did not take long to realize that

Americans were buying them as

drinking glasses because the actual initial drinking glasses offered were too

small for American tastes. Also, IKEA stores initially lacked large tables and

serving platters to accommodate large

groups of people because Thanksgiving was an unfamiliar concept. IKEA

performs this type of research even within regions of the same country.

Recently, IKEA felt it may have been out

of touch with the large Hispanic population in California. After visiting

many homes, IKEA made product adaptations such as adding more bold

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colors and elaborate picture frames to its

offerings.

Likewise, IKEA found several differences in regional tastes, values, and

preferences in India that shaped product offerings there. The market research

revealed that Indian consumers prefer

home furnishings with vivid colors; the family life centers around the sofa in the

living room where they eat their meals, do homework, and even sleep; and

Indians do not enjoy the do-it-yourself

culture. In response, products offered in the Indian market are adapted to have

more vivid colors, in contrast to the Scandinavian versions where white and

beige color schemes are preferred. Sofas also are redesigned so that they are

expandable for sleeping and entertaining

and collapsible for maximizing space. Finally, delivery, assembly, and

installation are highlighted ancillary products to overcome the antipathy to

do-it-yourself culture.

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PRICING ADAPTATIONS In China, research shows key differences from other regions: Chinese consumers

are highly price sensitive to products for

domestic consumption, like household furnishings, and they view shopping as

an experience more so than many other cultures. Chinese people are willing to

pay a price premium for more visible Western brands, such as automobiles

and Starbucks coffee. However, furniture

is a much less conspicuous form of consumption. Additionally, there are

many low-cost competitors of household furnishings in China. Therefore, IKEA

had to reduce prices by about 50 percent

before Chinese sales really took off. It was a successful strategy though, as

evidenced by IKEA becoming the largest foreign commercial landowner. An

average Saturday in the Bejing IKEA

sees about 28,000 visitors, which approximates the weekly average in

European stores.

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SHOPPING STYLE ADAPTATIONS Many Chinese visitors enjoy the

shopping experience but do not make a purchase. In fact, in contrast to IKEA

stores in other countries, China’s IKEA stores are often filled with people

sleeping in the model beds and on the

sofas. It is not uncommon for whole families to pile into the bedroom

displays alongside strangers to nap and then go eat in the IKEA cafeteria after

awaking. Chinese IKEA management

welcomes them because they will likely become customers later and by allowing

visitors to spend the day in the store resting and enjoying the air-conditioning,

IKEA is accommodating local culture

and building brand relationships.

IKEA is committed to understanding its customers by continuously engaging in

ethnography and other forms of marketing research to keep in touch with

their needs, preferences, and values in

regions and countries where IKEA is located and those in which it may

potentially enter.

Discussion Questions