Marketing Across Cultures

A Case Study of IKEA Shanghai

Bharat Baradia PGDIM 17 Sec A 43

Contents
1. Case Study Background ....................................................................................................................... 3 2. Research Questions and Aim of Research .......................................................................................... 3 3. Key Theoretical Concepts.................................................................................................................... 3 3.1 Marketing Concept ....................................................................................................................... 3 3.2 Culture Concept ............................................................................................................................ 3 4. Cultural Construct ............................................................................................................................... 4 5. Marketing Construct ........................................................................................................................... 4 5.1 Product .......................................................................................................................................... 4 5.2 Price .............................................................................................................................................. 5 5.3 Place .............................................................................................................................................. 5 5.4 Promotion ..................................................................................................................................... 5 6. Conclusion ........................................................................................................................................... 6

1. Case Study Background

The case study presents IKEA Shanghais marketing performances from a cultural perspective, following the model of the marketing mix (the 4Ps of marketing). IKEA entered the Chinese market in 1998 by first opening a shop in Shanghai, the financial centre of the country and are now ready to expand further. The findings convey an important message in terms of international marketingthe company must think globally and act locally in hope of building long-term customer relationships and capturing customer value. In marketing decisions, culture does not hold an ultimate status but still calls for due attention as much as other factors, such as the marketing environment and the companys strategic plan.

2. Research Questions and Aim of Research

In todays increasingly interdependent world, barriers to trade and international exchanges are constantly diminishing. However, the dimension of culture remains the single most enduring feature that is necessary to be integrated in marketing strategies and in their implementation, especially when they focus on international markets. This case study raises the following questions: 1. How culture influences marketing in international business? 2. How IKEA designs marketing strategies for the Chinese market, integrating its global marketing strategies with culturally-based marketing activities? 3. How IKEA conducts its marketing strategies to appeal to customers cultivated in a different culture from the country of its origin?

3. Key Theoretical Concepts

3.1 Marketing Concept
Marketing theories is based on Armstrong and Kotlers (2006) understanding of marketing and marketing process and illustrated with IKEAs global marketing concepts. In the case the importance of designing a customer centred marketing strategy and the implementation of such a strategy through the marketing mix (the 4Ps model) is discussed.

3.2 Culture Concept

In the case development of the culture concept is discussed and cultural studies explains the feasibility of associating marketing theories with culture, which serves as the theoretical foundation for studying IKEA Shanghais marketing performances through a cultural approach.

4. Cultural Construct
Culture is one of the most difficult things to define. Over the years, it has been defined in number of ways by people. In the context of Chinese culture following observations are made by different people: Fan examines Chinese culture at the level of national culture, which is best embodied in the values held by its people. A value system is seen as a relatively permanent perceptual framework that influences an individuals behaviour (England 1978). Fan (2000) proposes the Chinese cultural value system is so unique that it distinguishes Chinese culture from Western cultures and the other Eastern cultures. The key to understand the traditional Chinese culture is Confucianism. Having competed with the other schools of thought in history, such as Taoism, Buddhism, etc., Confucianism is undisputedly the most influential thought, which forms the foundation of the Chinese cultural tradition and still provides the basis for the norms of Chinese interpersonal behaviour. The basic teaching of Confucius, the Five Constant Virtues: humanity, righteousness, propriety, wisdom and faithfulness, underlies the interactions among Chinese people in every aspect of their life.

5. Marketing Construct
In the case, Armstrong and Kotlers (2006) model of the marketing mix (the 4Ps) is followed and explored adding cultures impact on designing a marketing strategy centred on Chinese consumers. The study demonstrates how IKEA Shanghai manages to act in accordance with the IKEA groups business idea around the globe. At the same time, how the company keeps a balance between global standardization and local adaptation. Strategic management has to be global, whereas marketing management largely needs to be tailored to local contexts; therefore, an intercultural orientation to international marketing best serves a global strategic view. IKEA Shanghai begins to contemplate the notion when designing marketing strategies and trying to appeal to the local customers. The company tries to look for the best possible compromise between large-scale operations and adaptation to local markets.

5.1 Product
IKEA made the following changes in its product and service to appeal to Chinese customers taste 1. Showroom was designed and arranged in accordance with a Chinese style 2. More products on offer 3. Consideration of Chinese style of cooking and eating in addition to the Swedish food at the adjoining restaurant 4. Release of series of products before the Chinese new year featuring red rooster and red pig which is considered lucky and indication of good fortune by the Chinese 5. Customizing the products as per the Chinese culture

6. Simple packaging in contrast with the belief of Chinese people that the packaging should match the goods inside. IKEA defended it by establishing it as a conscious step for their own sake by protecting environment. 7. Reduction in the cost of free installation and delivery service to compete with the other retailers 8. IKEA named its products in Chinese language with a nice meaning to create a positive image of the product among Chinese people

5.2 Price
IKEA Shanghai treats pricing as a key strategic tool for creating and capturing customer value. The companys pricing policy is cost oriented as well as customer-value oriented but not necessarily culturally based. IKEA Shanghais priority lies in capturing the most customer value at the lowest cost, which is achieved by sourcing locally 1. Reduction in price to attract customers 2. Introduction of cost effective measures to reduce the prices of the products. One of the measure was to source locally 3. Replacement of thick yearly catalogue with cheaper, smaller and thinner brochure published 5 times per year. This move helped IKEA to cut costs and to communicate newly reduced prices immediately to Chinese customers

5.3 Place
IKEA Shanghais distribution method is not really decided by the culture of China. Culture is confined to traditional Chinese culture in the thesis and shopping in big stores is a modern phenomenon. The efforts of improving the distribution system are made because it reduces the transportation cost so the company is in a better position to lower prices and reach out to more customers, and in a long term benefits the companys development in the whole country as well as the Asia-Pacific region. Hence, the local marketing environment and the companys long term strategic plan decide IKEA Shanghai moves on distribution.

5.4 Promotion
The promotion mix is the most culture-bound element of the marketing mix. Promotion in the local market has to adapt for language and cultural reasons. IKEA blended its marketing communication in accordance with the Chinese culture. IKEA took the following steps: 1. IKEA Shanghai advertises on the local news papers or on TV of its upcoming sales and other activities in Chinese language 2. Well thought timing of promotion just before the Chinese new year 3. Introduction of a local face in the advertisement to attract the customers 4. Efforts to build long relationship with the customers by means of various activities like selling umbrellas at half the price during rainy season etc. 5. Effort to build good public relations by engaging in the social causes

6. Conclusion IKEAs achievements in China are built on a well designed, customer centered marketing strategy. The designers of IKEA Shanghais marketing tools blend the 4Ps (product, price, place and promotion) smoothly. Paying due respect to the distinctive Chinese culture as well as keeping a balance between its global strategic plan and local marketing activities, IKEA Shanghai adapts the 4Ps to appeal to the local customers while maintaining a uniform corporate culture. The case of IKEA Shanghai conveys an important message to other multinational companies that the key to successful international marketing is adequate cultural awareness in various markets. Also it conveys that culture has certain influences on marketing decisions but it is surely not the ultimate factor. Multinational companies must carry out thorough market research, paying due attention to every aspect to get a complete picture of the market and customers.