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A Standard is Ed Approach to the World IKEA in China

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A standardised approach to the world? IKEA in ChinaUlf JohanssonDepartment of Business Administration, Lund University, Lund, Sweden, and

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Asa ThelanderDepartment of Communication Studies, Lund University, Helsingborg, SwedenAbstractPurpose The purpose of this paper is to analyse the marketing strategy in China of the furnishing retailer IKEA in the context of standardisation and adaptation of marketing activities. IKEAs strategy in China is compared to its corporate strategy throughout the rest of the world. Design/methodology/approach The four P classications are used as a framework to compare the central marketing strategies of IKEA with marketing strategies used in China. The paper builds on both primary and secondary data. Interviews with senior managers at IKEA are conducted and studies on business and retailing in China are used. Findings The marketing strategies used by IKEA in China are found to be different from the standardised strategies it uses throughout the rest of the world. Several of the changed strategies are central to the business concept of IKEA. Research limitations/implications The present paper shows the challenges for a standardised marketing concept and its implications. Originality/value The paper provides, in the context of the standardisation and adaptation of marketing activities, a more nuanced and up-to-date picture of the strategies used by IKEA compared to previous studies. Keywords Retail management, Marketing strategy, Standardization, China Paper type Research paper

1. Introduction Retail internationalisation is not a new topic. Rather, it is one of the most discussed topics in retailing in the last ten to 20 years. The themes on these topics have varied. Much of the literature focuses on the direction of internationalisation where different international retailers have aimed their internationalisation efforts and their modes of internationalisation, e.g. organisational forms used to enter new markets such as strategic alliances, joint ventures, acquisition, greeneld development, etc. (Alexander, 1990, 1997; Brown and Burt, 1992; Burt, 1991; Dawson, 1994; Gielens and Dekimpe, 2001; Gripsrud and Benito, 2005; McGoldrick and Davies, 1995; Pellegrini, 1991, 1994; Salmon and Tordjman, 1989; Sternquist, 1998; Treadgold and Davis, 1988; Williams, 1992; Wrigley and Lowe, 2002; Vida, 2000). Some parts of this literature are fairly descriptive in their nature, trying to describe the patterns and modes of internationalisation following the more general literature on international business ( Johanson and Widersheim-Paul, 1975; Johanson and Vahlne, 1977, 1990). Another major theme has been the notion that retail internationalisation does not follow a linear success model but rather is a process of entry and withdrawal, denoting failures in internationalisation (Burt et al., 2002, 2005).

International Journal of Quality and Service Sciences Vol. 1 No. 2, 2009 pp. 199-219 q Emerald Group Publishing Limited 1756-669X DOI 10.1108/17566690910971454

IJQSS 1,2

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A theme that dominates the literature on international marketing is the question of standardisation and adaptation of marketing activities from a company point of view (Baek, 2004; Levitt, 1983; Lim et al., 2006; Theodosiou and Leonidou, 2003; Szymanski and Bharadway, 1993) or from a consumer point of view (de Mooij, 2004). This discussion has not really penetrated the eld of retailing. With a few exceptions that are mainly general discussions on the subject (Martensson, 1981; Salmon and Tordjman, 1989; Treadgold, 1991), there is not very much research in this area. This is a strange shortcoming because, to a large extent, the literature on retailing seems to follow that of international marketing. Despite the fact that research on failures in international retailing argues that the former patterns of internationalisation are no longer true (Burt et al., 2003), it seems clear that for European retailers, interest in Asian markets is not particularly developed and that some of these markets do not give the easy successes expected early on. Some argue that these markets are distant in several senses (Dupuis and Prime, 1996; Evans et al., 2000; Evans and Mavondo, 2002) compared to the origin of many of the retailers active there. This is something that seems especially true for the Chinese market the focus of this paper. IKEA, the Swedish home furnishing retailer, has been present in China since 1998. The company had three stores in 2006 but the plan is to build ten stores by 2012. Compared to expansion elsewhere in the world, expansion in China has been fairly slow, by IKEA standards three stores in eight years but the company views it as successful. This may be an indication of the challenge ahead. After a fairly slow start, IKEA has seen substantial growth in China; between 2004 and 2005 sales grew by 50 per cent. Still, with a turnover in China of approximately $120 million, the business did not make a prot. However, IKEA management insists that they would make a prot in the near future. Asia (including Australia), only accounts for 3 per cent of IKEAs turnover, while Europe has a share of 81 per cent and North America 16 per cent. Still, Asia and indeed, China, are a big sourcing market for IKEA. Asia accounts for 30 per cent of IKEAs sourcing with China being the biggest individual sourcing market for IKEA with 18 per cent of total sourcing. A characteristic that makes IKEA stand out among global retailers is the alleged standardised approach to every market it enters. It looks and operates the same in every market. Or does it? Existing analyses of IKEAs marketing strategy are either fairly old (Salmon and Tordjman, 1989) or examined from a very general perspective (Salzer, 1998; Martensson, 1981, 1987) with little emphasis on marketing activities in specic countries and also with a lack of understanding of what standardisation and adaptation might mean in a retail perspective. More recent studies (Edvardsson and Enquist, 2002; Edvardsson et al., 2006) have a distinct service-management perspective rather than an overall marketing-strategy perspective. In many ways, China is a culturally-different market and in that sense, it is a challenge. As already mentioned, price is one challenge for retailers who enter the Chinese market. For IKEA, with its emphasis on price, low prices in China are a big challenge. Past experience of entering different markets has not always been positive. During the 1970s and part of the 1980s, IKEA tried to enter Japan but at that point in time, the Japanese did not like the at packaging, which required do-it-yourself (DIY) skills.

Among academics there is an increasing argument that one key success factor in international retailing has been the adaptation of marketing strategies, rather than standardisation (Dawson and Mukoyama, 2006; Rundh, 2003; Samiee et al., 2004). The adaptation of marketing strategies seems to be especially true for internationalisation in Asia and in China. So where does that leave IKEA and its business model? Is it something that only works in Europe and the USA? Will IKEA, like other retailers, have to adjust its strategies to meet the very demanding and different Asian markets? The aim of this paper is to analyse IKEAs marketing strategy for China, in the context of the standardisation and adaptation of marketing activities. IKEAs strategy in China will be compared to its corporate strategy in the rest of the world. 2. Conceptual framework What is standardisation and adaptation really about? As Ryans et al. (2003) pointed out there is no consensus among researchers. However, this quotation sums up what standardisation (and adaptation) could be:[. . .] the offering of identical product lines at identical prices through identical distribution systems, supported by identical promotional programs in several different countries (Buzzell, 1968, p. 103).

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This denition stresses, in accordance with much of the literature, the four P classications: product, price, place and promotion. Standardisation and adaptation thus refer to how and if marketing activities are adapted (in reference to the four Ps), or not, across countries in which a certain company operates. Other researchers have dealt with standardisation and adaptation based on the appropriateness of each strategy. One of the more well-known advocates of standardisation of strategies, Levitt (1983, p. 65) argues:The modern global corporation contrasts powerfully with the aging multinational corporation. Instead of adapting to supercial and even entrenched differences withering and between nations, it will seek sensibly to force suitably standardized products and practices on the entire globe.

Levitt argues in a general sense and mentions no products and no markets as exceptions from his vision of the globalisation of markets. It would be the same vision for sectors that mix product and service (like retailing) and also for very different markets across the globe. Levitt sees factors, like technology and converging consumer demands, as driving forces. Although he was inuential and after much debate, it is suggested that the weakness of the Levitt article lies just in his general perspective. From a very general perspective, it can be argued that everything looks the same. Opposing views in the standardisation and adaptation debate are those who argue from a national, cultural perspective (Hofstede, 2001; de Mooij, 2004). Without much statistical evidence, two other advocates suggest that the world is spiky (Florida, 2005), rather than at (Friedman, 2006): the business landscape is not homogenous but instead heterogeneous making adap

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