Mid term assignment report international marketing topic ikea market expansion marketing plan

MODELS FOR MARKET SELECTION 3.1 General market screening process: 3.2 The rationale for choosing Asia Pacific: 3.3 The rationale for choosing Emerging markets 3.4 The rationale for choos

FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

MID-TERM ASSIGNMENT REPORT INTERNATIONAL MARKETING TOPIC: IKEA MARKET EXPANSION

MARKETING PLAN

GROUP 5

Ho Chi Minh City, March 2023

TABLE OF CONTENT LIST OF FIGURE

3 MODELS FOR MARKET SELECTION

3.1 General market screening process:

3.2 The rationale for choosing Asia Pacific:

3.3 The rationale for choosing Emerging markets

3.4 The rationale for choosing China and India

3.4.1 First Screening Process

3.4.2 Second Screening Process - Fine-grained screening

3.4.3 MACS matrix and expansion strategy

5.2 Promotion & Advertising:

6 RECOMMENDATIONS & CONCLUSION

LIST OF FIGURE Figure 1: Revenue of the furniture market worldwide from 2012 to 2026 3 Figure 2: Annual revenue of the IKEA Group worldwide from 2001 to 2022 (in billion euros)

4

Figure 5: Asia Pacific Furniture Market Size, 2017-2028 (USD Billion) 7 Figure 6: Emerging market and developing economies: Gross domestic product (GDP) 1n current prices from 2017 to 2027(in billion U.S dollars) [6] 7

Figure 8: Number of employees working in China between 2020 and 2022 (in

LIST OF TABLE

Table 5: Competitive Strengths of IKEA in China with regards to its strongest regional

Table 6: Competitive Strengths of IKEA in India with regards to its strongest regional

Table 7: Comparison between waterfall approach and shower approach for IKEA in

Table 9: SWOT analysis - joint venture of IKEA in China 20

1, EXECUTIVE SUMMARY

The study aims to evaluate and analyze IKEA’s prospective market, namely China, for IKEA to expand and develop its business Based on research into the tendency of global consumers, the overall picture of the furniture industry will indicate suitable markets for IKEA to enter To fortify the possibilities of the selected nation , first screening, fine-grained screening and MACS models are used to prove its competitive advantages such as dense population, high GDP and big market sizes In order to gain more market shares, a joint-venture is considered to be the best entry mode in China The use of key marketing tactics (promotion and product) in China will also be illustrated The final section of the document covers the issue of whether to standardize or adapt products

The global furniture industry generated a total revenue of 673 billion dollars in 2021 According to the Statista Consumer Market Outlook, it is projected that by 2026, the revenue for this market would increase to 844 billion dollars [1]

— The Ist Trend: cost of Itving is a concern for everyone

- Although there is a rise in globally sustainable consumption, the pricing is a deterrent 67% claim that purchasing sustainable goods is considerably discouraged from the high cost

— The 2nd Trend: Increasing tendency is consistent with the fundamental principles

of Ikea, which are to prioritize affordability and eco-friendliness

2.2 Ikea, Inc

Ikeas has 460 IKEA stores in 62 markets (Ikea.com)

Ikea is a Swedish multinational retail corporation which offers a wide range of self-assembled furniture, home decoration and daily necessities at affordable prices Ikea is well known for its cost leadership strategy In 2022, Ikea’s revenue amounted

to approximately 44,6 billion euros worldwide (Statista - furniture market worldwide,2022)[3]

KEA: annual global sales 2001-2022

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Figure 2: Annual revenue of the IKEA Group worldwide from 2001 to 2022 (in billion euros)

3 MODELS FOR MARKET SELECTION

3.1 General market screening process:

Regional macroscreening BERI model

Pleminary screening:

General criteria:

* Market size/ growth

* Buying power of customers

* Culturally similar morkets

=> Highest market potential

chain functions that the

customers rate as important

to them?

Pa Te, Amazon's competences

compared with strength ond

weaknesses of Shopee

MD Highest sales potential

Lo nc China

Segmentation by customer group Possibl

Figure 3: General market screening process

3.2 The rationale for choosing Asia Pacific:

- Emarketer predicts "Green" consumer trends in Asia, which is good news for IKEA's environmental purpose, vision, and objectives

—\I an worried about climate change

—— try to have a positive impact on the environment through my everyday actions ewe | feel | can make a difference to the world through my choices and actions

Figure 4: Climate Awareness and Action [4]

In terms of market share, Asia Pacific was dominant in 2020 and Asia Pacific furniture market size is predicted to see a sharp growth in the next few years

Figure 5: Asia Pacific Furniture Market Size, 2017-2028 (USD Billion)

3.3 The rationale for choosing Emerging markets

- The McKinsey Global Institute reports that 18 of the 71 emerging economies have surpassed their counterparts and international standards, and have become

a well-established contributor to the growth of the global economy

Firgure 6: Emerging market and developing economies: Gross domestic product (GDP) in current prices from 2017 to 2027(in billion U.S dollars) [6]

- Moreover, GDP is a key indicator of a nation’s economic strength In the last twenty years, Asian emerging markets, including India, China, Cambodia, and Vietnam, have outperformed other emerging economies, registering an average

annual real GDP growth of over 6% between 2000 and 2020 [7]

- Over the next twenty years, Emerging Asia is anticipated to remain an alluring emerging market area owing to its advantageous demographic structure, robust consumer class progress, swift urbanization, digital conversion, and technology implementation

— Markets with the potential and sustainability to increase Ikea's market share This

is an opportunity for IKEA to grow its business and gain market share in Emerging Asia

3.4 The rationale for choosing China and India

3.4.1 First Screening Process

- The Gross Domestic Product (GDP) and the Middle-income class rate are two essential indicators that give vital insights into a country's or region's market potential

- GDP is a measure of a country's overall economic production, to assess a country's overall economic health and progress, as well as its potential for expansion

- The Middle Income Class rate refers to the percentage of the population that falls within a certain income range This group is seen as a crucial economic driver since they have the purchasing power to support companies and drive demand for goods

lable 1 - Stage 1: First Screening

3.4.2 Second Screening Process - Fine-grained screening

a) Market Attractiveness of some potential Emerging market in Asia Pacific

- Market size & Market Growth: refers to the total number of potential buyers for your product In order to be considered an attractive market, one country must have a large value of market size and high growth rate

- GDP per capita measures a country's economic output per person, indicating the purchasing power of consumers Population indicates market size and potential for sales and revenue A larger population can translate to a larger customer base, which can increase the potential for sales and revenue

- LPI is a benchmarking tool that measures logistics efficiency based on customs clearance, infrastructure, shipments, logistics services, tracking, and delivery For furniture companies, LPI provides insights to decide where to source materials and distribute products

lable 2: Market Attractiveness scoring criteria

Market

< 500m 500-2000m |2000-5000m |5000-8000m |>8000m size

Logistics

Performance |0,15 |3,15%% 3,15 |3,23 3,2 |3,4# 3,4 |3,612 3,61 Index (LPI)

Total value 1 2,6 3,33 2,66 4,29

=> China and India is consider to be high potential

b) Competitive strength of China and India

- When analyzing the competitive strength of a company, it is important to consider a range of criteria Local market knowledge is crucial as it enables a company to better understand the unique characteristics and preferences of a particular market

- Product fit to market demand is also essential as it ensures that a company's offerings align with the needs and wants of consumers in that market, and brand reputation is another critical factor, as it can influence customer loyalty and willingness to pay a premium for a company's products

- Price is also an important consideration, as it can affect both demand and profitability Access to distribution channels is another key factor, as it impacts a company's ability to reach customers and generate sales

- Local policy considerations can also impact a company's competitive strength, as regulations and laws can impact a company's ability to operate in a particular market

- Finally, market share is an important metric, as it can indicate a company's relative position in a given market and its ability to compete effectively against other players

lable 4 - Competitive strength of China and India

lable 5: Competitive Strengths of IKEA in China with regards to its strongest regional

competitor, Red Star Macalline

IKEA has been working in China

for almost 20 years and has made

significant investments in knowing

the local market They have

The firm was started in 1994 and has since evolved to become one

340

largest companies, having over

tailored their goods, marketing

techniques, and shop layouts to

Chinese consumers' requirements

They have tailored their goods,

marketing techniques, and shop

layouts to Chinese consumers’

requirements and tastes

A large selection of items that cater to a wide range of consumer interests and budgets The firm sells furniture such as couches, beds, dining tables, and cupboards,

as well as home décor goods

reputation

According to WPP and Kantars

2021 "BrandZ Top 100 Most

Valuable Chinese Brands" survey,

IKEA is the 16th most valuable

brand in China

In the Chinese furniture industry, Red Star Macalline is widely regarded as having a strong brand reputation, with a dedicated client base and a _ reputation for high-quality items and customer service

4 Price Provide low-cost furniture while

retaining high-quality standards

Nonetheless, some consumers who

are accustomed to purchasing

cheaper local items may find the

pricing to be higher than typical

One of its primary initiatives is to provide a diverse choice of items

at reasonable costs The firm obtains its items directly from manufacturers and — suppliers, which allows it to keep costs low and pass savings on to clients

5, Access to

distribution

channel &

Technology IKEA has created alliances with

local businesses, including

manufacturers and suppliers, to

assist them in better understanding

the market and building Red Star Macalline has made

significant investments in digital technology and e-commerce, allowing the company to reach new customers and expand its

company's online store and mobile payments

app

6 Local Policy The Chinese government imposes

stringent controls on international

corporations operating in China,

As compared to other regions in China, Red Star Macalline had better conditions with government

making it difficult for IKEA to]subsidiaries

comply with local legislation

7 Market share | According to Euromonitor| According to Euromonitor

International, IKEA is the|International, Red Star Macalline

fourth-largest player in China's

furniture industry, with a 3.8%

market share - Top4 will hold a 7.1% market share in

China in 2021

lable 6: Competitive Strengths of IKEA in India with regards to its strongest regional

competitor, Godrej Interio

IKEA has been in India since

2018, but it has done extensive

research into the area and has spent

in knowing the local market and

client preferences

The firm has been in India for more than 80 years and has a significant influence in the Indian furniture market Godrej Interio has a significant presence in the Indian furniture industry, and the firm is well-versed in local client tastes and requirements

2 Products fit to

market demand

To appeal to the Indian market, the

corporation has modified its

product line, pricing approach, and

retail structure For example,

IKEA has created more

smaller-sized furniture to cater to

Indian clients' smaller houses and

According to a YouGov study

performed in 2021, IKEA was

regarded as the eighth most trusted

brand in India IKEA's good image

in India stems from its dedication

to sustainability and low costs

Godrej Interio is a well-known brand in the Indian market The brand is well-known In India for its quality, dependability, and inventive designs Godrej Interio

manufacturing

high-quality, furniture The company is also known for being long-lasting

ecologically conscientious

4 Price

IKEA's pricing strategy in India

aims to offer items at reasonable

rates while keeping the brand's

reputation for quality and design

IKEA offers lower-cost items by

locally and which

sourcing materials

manufacturing 1n India,

reduces shipping expenses Godrej Interio goods are often

somewhat more expensive than equivalent IKEA products This is due in part to Godrej Interio's use

of higher-quality materials in their

production costs

5 Access

distribution

channel

to To guarantee that its goods fulfill

local quality and environmental

requirements, IKEA has formed

sourcing agreements with Indian

vendors Ranganathan Industries,

Exports are some of its important

a competitive edge inside India

6 Local Policy IKEA encountered legislative

challenges such as limits on FDI in

single-brand retail and sourcing

standards

The Indian government has been supporting the Make in India project, which aims to stimulate domestic manufacturing and entrepreneurship Godrej Interio, being an Indian brand, may be perceived as more committed to this endeavor than IKEA

7 Market share IKEA has a 5% market share in the

Indian furniture sector (Statista) Godrej Interio is India's leading

furniture brand in both the household and Institutional sectors, with a 15% market

share"!

3.4.3 MACS matrix and expansion strategy

a) MACS matrix