Keywords: ikea matrix framework, ikea global structure
INGKA Positioning BV is the ultimate parent company for all those IKEA Group companies. This includes the industrial group Swedwood, which companies IKEA furniture, the sales companies that run the stores, as well as purchasing and supply functions, and IKEA of Sweden (IoS), which is responsible for the look and development of products in the IKEA range.
IKEA uses a transnational firm Strategy. The organisation composition that the IKEA Group uses is a matrix composition, emphasising the need for forward, reverse and lateral knowledge flows. It's important to comprehend the matrix composition, especially in the light of how knowledge moves within IKEA. Every country has something Office (SO), a countrywide HQ with support systems. The SOs support the stores in their market. Depending on challenges in a new country, or a preexisting market where in fact the expansion is poor, IKEA sometimes selects to determine both a Country Director and a Retail Administrator. The Country Supervisor handles getting new assignments, discussions with government bodies and other issues that are specially complicated. As knowledge has turned into a key learning resource for firms striving for competitive edge it is important to have the ability to acquire local knowledge and also to talk about this worldwide.
In marketplaces such as Russia and China where Retail must cooperate more with Trading and Syndication, the Country Supervisor performs an important role. The Retail Director can then concentrate on the retail business, which is the standard responsibility for a Country Director. At the SO gleam Sales Administrator, HR (Human Resources) Manager etc, to whom the Sales Manager and HR Director in each store survey. Under each team there are managers accountable for different product categories. The matrix facilitates knowledge sharing. Knowledge is distributed line-wise in each store and country respectively. Function-wise knowledge is distributed through the SO in each country to a global SO and through total annual functional meetings. In addition, knowledge is distributed within and between six parts; Europe North, Europe Mid, Europe South, THE UNITED STATES, Asia Pacific and Russia/Ukraine.
IKEA's strategy is to use replication as the opportinity for internationalisation, that is, a standardised principle and range is put in place in all market segments despite cultural differences. This is characterised as having a solid corporate and business culture where is it important to be cost-efficient in order to be able to offer low prices.
Here we analyse on retail internationalisation of IKEA's international enlargement with specific give attention to the market admittance into Russia, China and Japan. The explanation for choosing these markets is that they are all new markets to IKEA. All three market segments are relatively faraway from the home market, culturally different and symbolize different examples of developed marketplaces; China and Russia are types of emerging markets and Japan can be an example of a mature market, being the world's second largest consumer market. Japan is very different market from Russia and China. Also, IDEA entered in China and Russia in 1998 and 2000, respectively. The organisation of IKEA in Russia was more or less like the original organisation set-up. However, the organisation for the Chinese market is a fresh organisation. Thus in conditions of organisational composition, Russia and China will vary in some esteem. Japan is a new market that IKEA joined. Here we take the truth of each market in parting and are learning the many strategies applied by IKEA.
IKEA opened its first test store in Beijing in 1998. By mid-2004, a new store in Beijing was under building because the existing one was not a 'real' IKEA store in terms of looks. By 2007 there were four stores in China: Beijing, Shanghai, Chengdu and Guangzhou. IKEA prepared to start 10 stores in China before 2010. At the original stage, the extension focused on eastern China.
One of the major issues for IKEA China was how to offer low prices. Due to high import responsibilities it was extremely difficult for IKEA to offer low prices. In addition, as the income level is suprisingly low in China (see Table 2) it was difficult to reach many people. It had been essential that the useful areas within In order well as between SO and Trading distributed knowledge in a seek out new solutions and local development. A good example of this was that when IKEA got into China the Klippan sofa was sold at a price of 7000 RMB. In those days it was an brought in item. Another challenge in China is the fierce competition with many copycat firms and products. However, IKEA possessed decided not to fight every case of an copied product. By offering low price products in huge quantities IKEA hoped to make an impression on some of the countless rivals in the Chinese market. It had been therefore vital to create locally. However, even more important was to improve further IKEA's home interior competence, which really is a key competitive advantages in China. There are few firms that have chosen this positioning strategy of promoting home interior competence. To become able to control this process, market knowledge in combination with commercial knowledge was considered important.
By middle-2004, IKEA got four stores operating in Russia, two of them in the outskirts of Moscow, one store in St Petersburg and one in Kazan. The company had also exposed its Mega Mall shopping complex at the Tyoplyi Stan site, next to 1 of the IKEA stores in the outskirts of Moscow. Mega Malls can now be found in Tyoplyi Stan and Khimki. They are treated as a separate business, and are an addition to IKEA's primary concept. As of 2007, there were eight stores in Russia: three in Moscow, two in St Petersburg, one in Kazan, one in Nizhiny Novgorod and one in Yekaterinburg.
As regarding IKEA China, one of the major troubles in Russia was the way to handle the situation with high transfer duties. This pressured the different functional areas to share knowledge and also to cooperate to be able to increase the procedure of producing more products in Russia. This also forced IKEA to develop new routines for handling inbound goods to the stores. Another obstacle was the relationship with bureaucratic authorities. At the start of its entrance in to the market, IKEA was considered by the Russian federal government as a 'tactical trader' and special transfer duties received. However, the Russian industry put strain on the government and the sooner reasonable import obligations have increased a great deal since that time. However, by writing these experiences with other IKEA countries (Sweden, Poland, Germany and Italy) that have experienced similar problems, IKEA in Russia was convinced that these issues could be conquer. This illustrates the value of experiencing expatriates, that is, experienced IKEA managers with considerable knowledge of internationalisation. A 3rd challenge was how to attract customers. Your choice to make and invest in Mega Malls is based on the need to develop the retail culture in Russia. Another reason is the fact IKEA draws in other retailers with their location and IKEA therefore should take good thing about that by acquiring the surrounding land.
In July 2002, the IKEA Group proven IKEA Japan KK. By early 2005, IKEA had not opened up any stores. The first store was exposed in Tokyo, Funabashi in Apr 2006. The next store, also situated in Tokyo, Kohoku, opened in Sept 2006. According to the Country Supervisor, the entrance is referred to as the largest greenfield overseas investment available in Japan. IKEA organized to start 46 stores in 33 years to become able to meet up with the potential level of sales. Primarily, they plan to launch 8-12 shops, with the first stores in Tokyo.
Japan was described as a hardcore and competitive market. 2 yrs before store beginning there have been two travel organizations concentrating only on arranging trips to go to existing IKEA countries. Thus, one major obstacle was how to control the tough domestic rivals as it was argued that 'copying in Japanese identifies copy something and make it even better'. Apart from tough competitors, Japanese customers were referred to as very quality-oriented. One example of this was that in Japan product packaging is important. This is considered as a huge problem for IKEA as product packaging is generally not considered top priority. However, in Japan the looks of packaging will have a great impact on the buying decision. Another challenge related to the Japanese customers was the fact that people stay in alternatively small and congested homes. For IKEA, a huge task was how to persuade the customer to buy services as there is absolutely no space still left in the existing homes. As a result, IKEA developed a service where old furniture was carried away by IKEA. One third and critical challenge was how to set the right/affordable price however, not one which is too low. Despite the fact that '100 yen stores' were becoming more popular in Japan, Japanese consumers tended to evaluate good deal as low quality.
We can see from above that IKEA executed different localized ways of enter and succeed in different geographies. At the same time superior integrating mechanism and inter geographic posting of knowledge made certain that the company stays focused in its corporate goals. In the case of IKEA Russia it was obviously emphasised that expatriates were needed in order to ensure that IKEA remained IKEA and did not turn into a Russian IKEA. Another reason for regarding many expatriates was to be able to start businesses from Day One. Thus, here was a greater emphasis on corporate and business than on market knowledge. At IKEA China there was a greater focus on diversity among expatriates than with IKEA in Russia. Within the pre-entry stage of IKEA's accessibility into Japan offered as a program for understanding how to seek out relevant market information.
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