Background
IKEA was founded 1943 in Sweden by then 17 years of age Ingvar Kamprad. Kamprad who today is 90 years old, is Sweden's richest man undoubtedly, through his property in IKEA.
IKEA is using the franchise strategy and the primary financial concept is to grow by using own resources, meaning they earn the amount of money before they spend. IKEA is making an investment a lot of the profit in existing or new stores, product development and ecological solutions. IKEA's idea and eyesight is "To make a better everyday activity for the many people".
Today IKEA has 340 stores in 28 countries.
Why have IKEA commence to expand?
They would like three basic benefits with international strategy: increased market size, economies of scale and location gain. IKEA needs to grow to leverage on their strong key competencies and record the countless opportunities outside US and Europe. A major part of their production is made in Asia, plus they see big prospect of increasing their market talk about in the Asian market.
IKEA in China and Asia
IKEA opened their first store in China in 1998. To adjust to this market, IKEA trim prices to make their products much more affordable than in the american market. They also repositioned their brand to become more fanciful, innovated to focus on the young and more educated upper middle class. So in truth, they lowered the price set alongside the traditional western market and at the same time they located themselves more exclusive than in the traditional western market.
IKEA gained valuable knowledge using their company experience in China that they later carried out when opening their stores in Thailand and Indonesia. Starting an IKEA store in Vietnam as well as moving area of the production there may be beneficial in many ways. Except from the actual fact that they might enter market with almost 92 million people they would by moving parts of the production help Vietnam into an improved economy, which would in foreseeable future make them gain more costumers.
Hofstede Framework
By using Hofstede's platform the similarities and distinctions between the Chinese and Vietnamese culture could be discovered. The comparison demonstrates the countries are incredibly equally with high report on electric power distance and long-term orientation and with low results on individualism and uncertainty avoidance. For the masculinity level it shows that China is more masculine than Vietnam, so IKEA need to adapt to the more womanly culture in Vietnam in order to succeed there. However the culture of IKEA is a culture of hearts, packed with passion and togetherness that could easily fit into well with the collectivist and feministic world in Vietnam.
International strategy and admittance model Usually, IKEA have used franchising when extending to new marketplaces which is also the advice when coming into the market in Vietnam.
From the Hofstedt research the conclusion is that the Chinese language and the Vietnamese market are very similar. IKEA can therefore study from the growth to China when entering Vietnam.
In the Chinese language market IKEA needed to adopt their placement, target and location which is the truth even in Vietnam. In Vietnam, IKEA should concentrate on focusing on the young middleclass.
The young middle-class is informed, have relatively high income and is aware of European styles.
IKEA have to keep in mind that usage of autos in this target market is rare so a syndication system or a remedy where the costumers can bring their goods on the scooters must be found. In various cities in several countries IKEA have different alternatives for this. Generally in most metropolitan areas in Sweden the common costumers has their own automobiles but there are exceptions. In Swedens oldest University City Uppsala cars are rare and the majority of the costumers reach the store by cycle. So their solution was to provide trailers for bikes so the costumers could buy bigger furniture in their store without the situation of not getting their new furniture home. Either IKEA could use a similar system with trailers for scooters in Vietnam or they could develop a more sophisticated distribution system with home delivery.
After stepping into the Vietnamese market the step continues to be big to help expand enter Cambodia and Laos since these are really poor countries. IKEA's business strategy is modified to a society with higher economic wealth, either in the whole people or at least in groups of the contemporary society.
So the Cambodian and the Laos-market are still not adult for IKEA's business, however when these are, IKEA often will use the same model for entering as they now can do for Vietnam.
International management, HTW Berlin, 2017
Anton Karlson
