IKEA in China: Competing through Low-Cost Strategies


Code : COM0112

Year :

Industry : Retailing

Region : Sweden China

Teaching Note: Available

Structured Assignment : Not Available

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IKEA: A Brief Profile Established in Sweden in 1943 by Ingvar Kamprad, IKEA has grown rapidly to become one of the world's largest retailers of home furnishing. IKEA specializes in stylish but inexpensive Scandinavian designed furniture. The name IKEA was formed fromthe founder's initials Ingvar Kamprad and the first letters of Elmtaryd and Agunnaryd, the farmand village where he grew up. In the beginning, IKEA started with selling pens, wallets, and picture frames at low prices...

IKEA's Foray into China IKEA entered China in 1998 through a joint venture and started its first store in Shanghai. This was followed by a store in Beijing in 1999. Since 1980s, several economic, trade and investment reforms have enabled the growth of furniture industry in China. By 2004, China's furniture production was $24 billion and its exports were $7 billion. Further, consumer preferences in China are rapidly evolving from basic needs to sophisticated wants...

IKEA's Low-Cost Strategy When IKEA arrived in China, it was regarded as an expensive brand. Ulf Smedberg, marketingmanager of IKEA in China, said, "When IKEA first entered China, the store was considered too expensive for its target consumers—young, professional couples—and the company lowered its prices. The store's prices are now considered mid-range in Shanghai". By increasingly stocking IKEA's Chinese shops with China-made products, Ian Duffy, president of IKEA China, pushed prices on some items as low as 70% below prices in IKEA outlets outside China...

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