IKEA Cultural Barriers to Entry Into International Markets
Transcript of IKEA Cultural Barriers to Entry Into International Markets
![Page 1: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/1.jpg)
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
![Page 2: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/2.jpg)
Agenda
Who What
Where How
IKEA Barriers to entry Case studies Recommendations
![Page 3: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/3.jpg)
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
![Page 4: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/4.jpg)
Annual sales (€ billions)
![Page 5: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/5.jpg)
Europe 79%
North America
15%
Asia & Australia
6%
Sales worldwide
![Page 6: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/6.jpg)
Value curve
0
2
4
6
8
10
12
IKEA Low-end retailers High-end retailers
![Page 7: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/7.jpg)
Barriers defined?
Market
![Page 8: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/8.jpg)
Most Common Barriers
Absolute cost advantage
Economies of scale
Customer loyalty
Firm’s concentration/size
Capital requirements
Customer switching cost
Distribution channels
Government policies
![Page 9: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/9.jpg)
Distances to Successful Entry
Cultural
Administrative
Geographic
Economic
Firm’s size Country risk Country openness
![Page 10: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/10.jpg)
Rivalry
3.1
Threat of new entrants
3.0
Buyer Power
3.5
Supplier Power
3.1 Threat of
Substitutes
3.1
Comple-mentors
3.1
Porter’s Five-Forces Analysis
![Page 11: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/11.jpg)
Brand value
$7.3 billion, rose by 28%
10th on the list of TOP retail brands
network of 1,300 suppliers in 53 countries
![Page 12: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/12.jpg)
Cultural differences are a nuisance at best and often a disaster
Prof. Geert Hofstede
![Page 13: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/13.jpg)
Cultural Dimensions
Power Distance Index
Individualism
Masculinity
Uncertainty Avoidance Index
Long-Term Orientation
![Page 14: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/14.jpg)
Cultural Dimensions
0
20
40
60
80
100
120
Power Distance Individualism Masculinity Uncertainity Avoidance
Long-Term orientation
US Russia Sweden China
![Page 15: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/15.jpg)
USA
1985 – 1st store in Philadelphia
2011 – 38th store in Centennial
![Page 16: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/16.jpg)
Initial poor performance and slow start
![Page 17: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/17.jpg)
Clothing storage ways
![Page 18: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/18.jpg)
Result
![Page 19: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/19.jpg)
Size matters
Godis glass in the EU
10 cm high
23 cl
Godis glass in the USA
16 cm high
40 cl
![Page 20: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/20.jpg)
Measurements
Standard EU:
140 x 200 cm
152 x 202 cm
59 7/8”x 79”
Standard US queen
vs.
![Page 21: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/21.jpg)
Jerker
Language surprises for Anglophones
Fartfull Lyckhem
Fukta
![Page 22: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/22.jpg)
Families’ size and preferences
![Page 23: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/23.jpg)
70% Modern IKEA
vs.
Traditional
US taste
One doesn’t discuss taste, or do they?
![Page 24: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/24.jpg)
SOLUTIONS
Turnaround Adaptation Customization
![Page 25: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/25.jpg)
Revenues doubled over a four-year period US the 3rd biggest market
![Page 26: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/26.jpg)
IKEA experienced similar obstacles worldwide
bureaucracy
![Page 27: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/27.jpg)
“The unpredictable character of administrative procedures in some regions”
![Page 28: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/28.jpg)
Swedish imperialism
in Denmark
Language – Köge
![Page 29: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/29.jpg)
Lebanon
![Page 30: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/30.jpg)
China from 1998
Misperception of IKEA as a luxury brand
![Page 31: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/31.jpg)
Other Culture and Life Style Barriers
Web site challenges
Low-focus on customer service concept misunderstood
![Page 32: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/32.jpg)
IKEA’s ideas to improve its cultural sensitivity
Learning as a driving force
behind internationalization
![Page 33: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/33.jpg)
Backpacker Journey Program for Co-workers
![Page 34: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/34.jpg)
Customization of some IKEA products
Food items are replaced/changed/added
Products with inappropriate names are withdrawn quickly
![Page 35: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/35.jpg)
Recommendations
cultural adjustment costs
move along learning curve
exploit previous experience
![Page 36: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/36.jpg)
Invest more
in Market
Research
![Page 37: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/37.jpg)
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
![Page 38: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/38.jpg)
Expand higher-end furniture i.e. Stockholm line
![Page 39: IKEA Cultural Barriers to Entry Into International Markets](https://reader036.fdocuments.in/reader036/viewer/2022081716/547f22b2b37959822b8b5663/html5/thumbnails/39.jpg)
The more stores we build and the more we
increase our market share, the more we have
to find ways to appeal to a broader public.
Scandinavian design and style
is a niche and it is not
to everyone’s taste.
But we don’t want to be just another
supplier of traditional furniture.
Scandinavian design is
what makes us unique.
We have to find a balance”
Andres Dahlvig, president of the IKEA Group 1999-2009