Global Marketing: An Analysis of the Case of Ikea
Organisations emphasising on globalisations often experience several challenges to cope up with the alterations in different international markets. Several scholars are agreed with the fact that the business globalisation process is significantly dependant on the global marketing process. In the words of Kangis and Passa (2007), assessing the trend in the target market and developing global marketing strategies accordingly is crucial in ensuring a successful globalisation process. In this context, the current study has been conducted assessing various aspects and significance of global marketing initiatives. The case of IKEA has been evaluated in the respect of two international target market including India and Mexico. The overall study has been conducted in four parts. At the outset, market analysis and market entry strategies of IKEA have been evaluated taking into consideration the two chosen target markets. The second task reflects the branding and positioning of the brand in the chosen destinations. The third question critically analyses the degree of standardisation and the fourth question evaluates the suitable marketing mix strategies in the countries.
IKEA is considered as a leading global retail brand operating Europe, North America, Africa, Asia and Oceania. The brand has a complex corporate structure and controlled from the headquarter in Leiden, Netherlands. The brand is renowned for ready-to-assemble furniture and home appliances. Recent reports suggest the fact that the brand has accounted more than 28.7 billion sales across 315 stores in 27 countries. The overall product range has been accounted for 9500 while the store visit data is accounted at 716 million.
Market analysis: India
The Indian retail industry can be analysed following a PESTEL analysis. Considering the political aspect, Indian political culture is stable (Pelham, 2010). Being the largest Federal Parliamentary Republic, the country’s retail sector is not particularly influenced by politics. India is considered to be one of the fastest growing economies in the world, having total GDP of approximately $D4.99 trillion. When it comes to social aspect, the middle class segment has been on the rise while increasing number of people are motivated towards western culture (Matsuno and John, 2010) Considering the technological factor, a mix result can be observed and the technological infrastructure differs across different regions across India. While the Indian IT sector has accounted staggering growth over the last five years, frequent power cut across the country remains a major constraint for technology. Constant industrial growth has affected climate conditions and therefore, business organisations are required to conduct environment-friendly business operations. The Indian government has recently introduced several new regulations on recycling policy, minimum wage and discrimination and the organisations are needed to comply with the acts.
Market analysis: Mexico
The political environment of Mexico is stable while 2.99% GDF growth has been accounted recently (Donnelly, 2009). When it comes to social factors, rise of middle class can be experienced and people in the country have strong traditional belief. The technological platform is sound enough in the region. Strong technological infrastructure could be beneficial for new businesses in the country. However, the environmental context is troublesome for businesses with limited waste disposal facilities coupled with air and water pollution. The situation is critical regarding legal framework as well. The crime rates are accounting an all-time high which can impose a negative impact on businesses.
Market entry strategies in India:
While entering the Indian market, IKEA is needed to emphasise on an effective marketing mix approach. As cited by Jeannet et al. (2004), a localised marketing initiative is likely to be more successful during globalisation of a brand. IKEA can focus on an innovative product design, analysing the local market trend. When it comes to pricing strategy, IKEA is needed to consider a competitive pricing policy comparing the pricing strategies of Local brands. Top metropolitan cities can be selected to launch new stores while affiliated distributors can be included in the organisational supply chain process. Finally, promoting products in India could be done through television, newspaper, event promotion, celebrity endorsement and loyalty card process.
Market entry strategies in Mexico:
A localised marketing mix strategy can be prioritised while venturing in the Mexican retail industry. Since there is a blend of Spanish and indigenous culture in the region, IKEA can prioritised an ethnic design of products while focusing on the local customers’ demand. Due to the increasing volume of middle class segment, IKEA can quote a competitive price tag for the products comparing with other global brands. Considering the words of Wong and Amrik (2003), the economic situation of Mexico is improving although achieving a niche in the market is still a stiff challenge for business organisations. Favourable place for marketing products in Mexico is found to be the leading metropolitan areas as the areas accounts dense population. Venturing in the e-commerce segment can be a viable option for IKEA as more Mexican customers have started preferring online shopping. Finally, an effective promotion strategy is needed to be followed to enhance customers’ awareness regarding IKEA products. In this context, particular emphasis is needed to be given on television advertisement, newspaper and celebrity endorsement.
IKEA would require emphasising on particular branding and positioning strategies in target markets such as India and Mexico. Considering the words of Marsden and Murdoch (2006), creating a unique identity and in the target market would ensure competency in the industry while relevant positioning strategy would increase the sales volume. When it comes to branding strategy, IKEA could consider creating an attractive logo while emphasising on a tagline to promote brand values. On the other hand, an effective positioning strategy would require keeping in mind the price, promotion, packaging, distribution and industry competition.
Indian retail industry consists of a diverse range of customers. While there is both niche market, middle class and economy class customers in the industry, majority of the people prefer competitive pricing policy of the retail brand (Pelham and David, 2006). Therefore, IKEA can establish a specific logo that could promote the concept of ‘quality product in competitive pricing’. Ezzamel (2010) acknowledged that a great logo can draw customers’ attraction and increase brand’s pulling power. In order to bolster the brand’s pulling power, IKEA can also develop a new tagline for enhancing brand popularity among the Indian customers. Since, Indian customers prioritise ethnic values, emphasising on a cultural aspect through the tagline could be a viable option.
The Indian retail industry is found to be fairly competitive and leading furniture brands like Godrej Interio, USHA Lexus Furniture, Dynasty are found to be popular brands among the customers. Therefore, IKEA is likely to face stiff competition from these brands while operating in the Indian region. In this context, IKEA can emphasise on an effective positioning strategy while focusing on pricing, promotion, packaging, distribution and competition. IKEA can focus on local manufacturing units so that end products can be sold at an aggressive pricing. Aaker (2007) acknowledged that focusing on an aggressive pricing policy can be an effective option in increasing sales in developing economies. A localised production process could help IKEA minimising the shipping cost and the lower product prices could motivate customers to buy the products. Adding to that, online product selling could be emphasised for optimum distribution. Thus, IKEA can sell products online through the official corporate website or avail the assistance of third-party e-commerce organisations such as Flipkart, Homeshop 18 etc.
As far as the reports of 2011 are concerned, there are more than 29 million households in Mexico and the country’s median age was derived at 28 years (Milliken, 2007). Adding to that, majority of the customers in the retail industry are urbanised having a mix of Spanish and indigenous ethnicity. Therefore, in order to develop an effective branding initiative in the region, IKEA can emphasise on a unique brand logo with ethnic value. A combination of Spanish and indigenous values could be integrated through the brand logo and official tagline. The process would influence the Mexican customers to relate the brand values better with the personal attributes. The approach could promote a localised strategy and thus, a unique brand value can attract potential customers in the industry.
While operating in the Mexican retail sector, IKEA can target the urban population as the population density is larger in the Mexican city and the associated region. Therefore, the positioning strategy can be developed emphasising on the demand of the urban population. Majority of the customers in the region are from economy class. Thus, prioritising a competitive pricing policy could be an effective option. In reference to Porter’s Generic strategy, a cost leadership approach could help achieving improved market competency (Day and Robin, 2008). When it comes to promotion, IKEA can promote the brand in various sport events as Mexicans are usually sports fanatic. For instance, IKEA can target sport events such as football matches and promote the brand name using banners or electronic displays. Products can be sold through both online and offline modes. Since the e-commerce segment is still not that competitive in Mexico, IKEA could be benefitted from selling products online.
While approaching the global markets, IKEA needs to consider a certain degree of standardisation so that any legal issues could be avoided regarding quality and safety related issues concerning the products delivered. According to Mathur (2008), business organisations need to comply with the quality benchmarks for the products offered. The situation is similar in the retail industry as well. Since the major product segment of IKEA is furniture, the brand needs to comply with the standards of several institutions. The American National Standards Institute (ANSI) has promoted a quality standard regarding ‘openness, balance, consensus and due process’. The standard emphasises on an accepted standard of products while ensuring improvement of the safety and protection for the customers (Mutebi, 2007).
The Americans with Disabilities Act (ADA) promotes a set of accessible designs regarding technical requirements of the products (Stiglitz, 2005). The proposed standards are needed to be maintained while designing the building facilities. Any alterations of the same could end up in violating the ADA Act, 1990.
The provisions of Scientific Certification System (SCS) are needed to be prioritised by IKEA which is regarding the emission criteria. IKEA needs to ensure manufacturing of low emitting office furniture and seating facilities (ANSI/BIFMA X7.1) so that the energy and environment-friendly design procedure could be ensured.
Bureau of Home Furnishing and Thermal Insulation (BHFTI) imposes the Home Furnishing and Thermal Insulation Act. The policy aims to protect customers from upholstered furniture along with bedding and thermal insulation (Beal, 2010). The institution ensures consumer protection through licensing the upholstered items and inspecting the manufacturing procedure. In this context, flammability testing following the CAL TB 133 process is conducted to measure the scale of fire test (Pasco and Le Ster-Beaumevieille, 2007).
In order to develop a sustainable global marketing strategy, IKEA would need to emphasise on the standards highlighted by the foretold institutions. By assuring the safety, quality and compatibility of the IKEA products, the brand can expect sustainable business in Indian and Mexican retail sector.
The Indian retail sector differs from the Mexican retail sector in some context. As a consequence, IKEA needs to focus on different promotion policies for the two international regions. As mentioned by Chenhall and Morris (2006), due to the cultural differences and variance in ethnicity, the trends in different international regions are likely to be different. Therefore, IKEA is recommended to follow following sets of promotion policies.
Promotion in Indian retail industry:
Customers in the Indian retail industry are found to be sensitive and people in the country prioritise ethnicity. Since Indians prioritise cultural values, IKEA could follow an ethnic promotion process while operating in the country. The philosophy could be integrated in both online and offline promotion process. However, there has been an ongoing argument regarding online versus offline promotion process. While Sim and Teoh (2007) consider traditional promotion process using banner ads and television are proven methods, Dawson (2007) argued that online promotion is more effective in the era of Web 2.0. However, IKEA is suggested to consider a blend of online and offline promotion policies to address the perception of the Indian customers.
When it comes to online promotion, popular social media such as Facebook, Twitter, You Tube etc could be considered. Recent survey reports highlight that Indians are active social media users. Therefore, promoting the product range online could be a viable option for IKEA. Pay per click could be another effective approach that could help IKEA promoting the products to a wider demography.
IKEA could also focus on a range of traditional promotion processes. In this context, banner advertisement and television advertisement could be prioritised. The past year report accounts approximately 150 million television viewers across the country (Svensson, 2006). Therefore, promoting IKEA products through television advertisement could be an effective option. On the other hand, the highway junctions in India are generally highly populated regions. Therefore, promoting products in these regions using banner ads could help creating greater awareness among the Indians.
Promotion in Mexican retail industry:
Higher population density in Mexico is found in Mexican city and the suburban area. Therefore, these regions are needed to be prioritised when it comes to promotion policies. Adding to that, the mixture of indigenous and Spanish culture is needed to be prioritised. Therefore, IKEA is recommended to emphasise on specific linguistic elements and ethnicity while promoting products in Mexico. Dess and Beard (2014) argued that a standardised promotion approach might not be suitable for a globalised marketing strategy and therefore business organisations need to promote products assessing local language and culture.
Sports events particularly football is a popular sport in Mexico. Therefore, IKEA could emphasis on possible sponsorship deals for successful Mexican football teams such as Club America, Chivas de Guadalajara etc. Such sponsorship deals could significant enhance brand awareness among the target population. As cited by Jeannet et al. (2004), sponsoring popular brand names could be an effective promotion option although the promotional strategy could be a costly affair.
Celebrity endorsement strategy can be prioritised by IKEA as a considerable number of brands have been successful following similar strategies in the region. In this context, IKEA could promote products through popular celebrities such as film stars or popular sport personnel. Aaker (2007) acknowledged that celebrities can significantly influence people’s purchase decision making process.
Both Indian and Mexican retail sectors are found to be promising international regions for IKEA. However, the brand is recommended to consider a localised marketing strategy during venturing into the two international markets. However, the brand is needed to comply with the provisions of several industry benchmarks. For instances, quality benchmark provisions highlighted by ADA, ANSI, SCS and BHFTI are need to be addressed for ensuring standardisation.
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