Cross Cultural Communication: Case Study of IKEA

1: Introduction

Management Communication is considered as the critical element in the overall performance of an organization internally, externally and in the corporate world of stock market and public image as argued by Gerry Johnson and Kevan Scholes (2003)^[1]. This is naturally because of the fact that the elements associated with the communication not only strive to communicate the management intentions to the audience but also to win their support in order to effectively improve the organization’s performance thus gaining competitive advantage in the target market. The management communication is also treated as the overall element that comprises of the marketing communication, shareholder communication, supplier relationship management and above all establishing corporate identity in the real world as argued by Richard Lynch (2003)^[2]. In this report a critical analysis on the cross-cultural communication and the role played by management in terms of effectively achieving the cross-cultural communication strategy to increase performance is presented to the reader. Examples from the success of IKEA – the leading furniture and household retailer from Sweden in China are presented to the reader. The analysis strives to provide evidence to justify the importance of management communication in the cross-cultural scenario to the reader.

The research first presents an overview on the cross-cultural communication describing the critical elements that influence and contribute for successful cross-cultural communication. Then an analysis on the cross-cultural communication in the light of the Chinese market is presented to the reader. This section presents the application and nuances specific to the Chinese markets. This is followed by an insight on the application of the concepts discussed in the light of the IKEA and its performance in China as the research focus is on the cross-cultural communication in china. Finally the research will conclude with a brief summary on the overall importance of cross-cultural communication and its role in the chosen geography and company.

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2: Cross-Cultural Communication

Geng Cui et al (1998)^[3] argue that in a cross-cultural communication situation, the management not only faces the challenge of effectively communicating to the audience but also to ensure that the audience’ reciprocation is supportive to the organization. In order to ensure that the cross-cultural communication by the management achieves the goals of the organization, Geng Cui et al (1998) identify the following as the key ingredients for the communication.

Social Interaction is one of the major elements that can influence the overall performance of an organization in the given target geography as argued by Geng Cui et al (1998). This is not only because of the fact that the increase in the visibility of organization to the target audience will create the familiarity but also increase the overall acceptance of the organization by the people in the target geography. Frances Brassington and Stephen Pettit (2003)^[4] further argue that the communication element is the critical factor that influences the overall effectiveness of the organization in the target market. In the light of the aforementioned, the social interaction effectiveness of the management will increase the visibility to the target audience thus communicating a positive image on the organization’s position towards the society in which it is intending to perform business.

Another interesting element with the social interaction is the fact that an organization trying to gain market share in a new geography requires the efforts of the senior management to push the presence of the organization as a positive element in the overall business of the economy in the target geography as argued by Gerry Johnson and Kevan Scholes (2003). Hence from a strategic perspective, it is essential for the social interaction to create a positive image about the organization to increase its presence in the market as a potential competitor. Another interesting element with the social interaction and the management communication is the fact that it involves the people associated with the communication and the social interaction demands face-to-face conversation thus making it clear, a positive approach from the organization to present itself as potential new entrant in the market will strengthen its corporate identity. The social interaction also provides the opportunity for the organization to appreciate the self-esteem and other subtle elements of the people in the target market that will help forge better stakeholder relationship as argued by A.M.M. Rad and M. Yarmohammadian (2006)^[5].

Cultural Empathy is described as one of the major critical success factors for an organization to gain visibility in a new target market as argued by Miranda Y.P. Lee and Daniel W.C. So (2007)^[6]. The apparent reason for this is the fact that an understanding of the culture of the target market’s culture and the big-picture of the target geography itself, the new-entrant organization can efficiently identify the potential customers in the target market.

This process is further justified as the key to successfully forging the stakeholder relationship in case of managing projects involving the change and development of an organization in new target demography. Whilst social interaction is considered as a corporate identity element, cultural empathy is considered as both a critical success factor to devising the product lines for the target market as well as communicating to the customers in the target market as argued by Miranda Y.P. Lee and Daniel W.C. So (2007). Another interesting element associated with the cultural empathy and the cross-cultural communication is the fact that the parent organization being a new entrant to the target market, it is critical to appeal to the target audience’ (customer, suppliers and stakeholders alike) cultural background to justify their contribution to the development of the society in terms of the business development strategies of the organization itself. This is argued as one of the successful as well as complex strategies as argued by Richard Lynch (2003) since the entering organization faces the challenge of winning the customers to their organization’s benefit.

Alongside, it is also essential for the understanding of the cultural factors associated with the target market for a new entrant in the market because of the natural tendency of the customer to rely on the seller who can understand the needs of the customer (Richard Lynch, 2003). In order to accomplish this strategy, it is thus essential to understand the customer requirements from a customer perspective, which apparently demands the understanding of the cultural factors associated with the target market.

Ethnic Communication is a term that has gained popularity with the increasing success of the deployment of appealing to the ethnic factors associated with the target geography as argued by Guilherme Pires and John Stanton (2000)^[7]. The subtle difference between the cultural empathy and the ethnic communication is the fact that the cultural empathy provides information and educates the organization to address the target market whilst the ethnic communication is the actual strategy put in action to reach the customers in the target market. In addition, the increasing competition due to globalisation and the threat of new entrants from competing organizations entering the chosen target market justifies the need to create a long-lasting impression among the customers about the products and services of the organization. The ethnic communication strategy is considered as the successful element to increase the visibility of the organization in the chosen target demography and the target market.

Alongside, Geng Cui et al (1998) argue ethnic communication as an acceptable strategy for an organization’s effectiveness in designing its communication plan in order to reach its audience in the new geography. The audience mentioned include, the customers, shareholders, supplier and the general public to whom the management communicates on a day-to-day basis. This makes it clear that the ethnic communication element is a critical success factor for the overall effectiveness of the organization. Also, it is important to understand that the cross-cultural communication is not a unidirectional process and must involve the overall interaction of the target audience and the organization that is establishing itself in the target new geography as argued by Geng Cui et al (1998). This makes it clear that the interaction is one of the critical elements that is achieved through the ethnic communication that helps create a positive image for the organization among the target audience.

Local Knowledge

Local knowledge is commended as a critical success factor for an organization that is trading in different geographical locations across the world as argued by Thomas Brenner (2007)^[8]. Thomas Brenner (2007) further argues that the local knowledge is predominantly gained through the continuous social interaction with the target audience mainly because of the fact that the tangible knowledge value is not gained from a mere understanding of the culture behind the target audience. In the case researched in this report, the tangible knowledge on the target geography (i.e.) China is a critical element and understanding of the culture through public resources is not ample for efficient trading in China as argued by Peter Williamson and Ming Zeng (2004)^[9]. They further argue that multinational organizations entering China for trading face four fundamental handicaps in building competitive advantage in the chosen target market of China. These are

1. Poor supporting infrastructure that often prevents an organization from utilizing its advantage in the new target market in terms of management effectiveness, technological advances, etc.,
2. Supply chain management also faces a critical issue in the Chinese market mainly because of the poor infrastructure and managerial effectiveness along with the inherent disadvantage of communication gap due to lack of local knowledge.
3. The inability to reap the economies of scale and lack of flexibility to spread the higher fixed costs imposed through the need to integrate operations in China.
4. Finally the organizations face the early development stages in most of the Chinese markets thus making market penetration with high-end goods unsuccessful.

From the above mentioned constraints it is clear that the cross-cultural communication can not only provide advantage through local knowledge but also bridge the communication gap thus allowing the organization to strategically position itself in the target markets and identify the market development stage to introduce innovative product lines as argued by Peter Williamson and Ming Zeng (2004).

Communication Competence

Peter Williamson and Ming Zeng (2004) argue that the communication competence is a critical element in the overall success of the organization in a new target market because of the fact that the cross-cultural communication factors like social interaction, ethnic communication, cultural empathy and local knowledge are demonstrated in the communication competence of the organization. This makes it clear that the senior management representing the organization in a new geography must be able to communicate effectively in the local language embracing the aforementioned in order to gain competitive advantage. This also makes it clear that the communication competence in the cross- cultural communication strategy of a management is the final element that represents the overall strategy in action. Hence it is essential for the organization to ensure that their management staffs facing key audience in the new target market are competent in the local language thus ensuring strong relationship with the customers, suppliers, stakeholders and the general public.

Peter Williamson and Ming Zeng (2004) further argue that the major disadvantage for an organization entering China is the lack of the knowledge on the local language that is necessary for competence in communication for negotiation and sales. Thus it is clear the communication competence is the primary element that supports the overall strength of the strategy thus leveraging competitive advantage for the organization.

Finally, it is interesting to note that the Chinese market for the furniture market is not only developing but also increasing in demand with the increasing awareness among the customers in the target market on the fashion and trends in the west as argued by Ann Priest (2005)^[10]. The company that is under analysis (i.e.) IKEA – is one of the leading conglomerates in the retail of flat packed furniture and house wares (Company Profile, 2006^[11]). A detailed analysis on the company’s performance in China and the role of cross – cultural communication is presented in section of the report.

3: Measures of Success

Management communication is argued as the critical strategic element for the effective performance of an organization in the chosen area of business (Gerry Johnson and Kevan Scholes, 2003). The role of cross – cultural communication in an organization’s success are focused on three critical segments of audience in the target market as argued by Miranda Y.P. Lee and Daniel W.C. So (2007). They are customers, supplier and stakeholders of the senior management. The application of cross- cultural communication for the abovementioned three audience groups in the Chinese markets is presented to the reader.

3.1: Customers

The customer is the ultimate audience to an organization due to the obvious reason that the purchasing from the customers is the driving element for the overall business as argued by Richard Lynch (2003). In the Chinese market, the demand from the customers depend mainly on the costs (i.e.) the pricing strategy of the organization and the ability of a seller to produce innovative products reflecting the Chinese culture as argued by Miranda Y.P. Lee and Daniel W.C. So (2007). This is apparently because of the fact that the Chinese markets are still in the development phase and hence the sales of high-end products in the retail shop floor is not a successful strategy as argued by Xueming Luo et al (2004)^[12].

Hence effective marketing communication is a critical element in the successful promotion of the product lines of a new entrant in the target market. From a strategic perspective, the marketing communication is the key for the effective promotion and strong positioning of the product lines in the target market as argued by Philip Kotler and Kevin Lane Keller (2005)^[13].

The marketing mix which is argued, as the critical element in the overall promotion of the products and services to an organization is the key area where cross – cultural communication approach must be applied to reach the customer effectively as argued by Xueming Luo et al (2004).

Xueming Luo et al (2004) further justify that the efficient application of the 4Ps of marketing along with the application of the cross – cultural communication strategy to ensure that the marketing communication appeals to the target market’s culture as well as reflects upon the product innovation to meet the demands of the customers is the key for devising a successful marketing promotion plan for a product line.

From the above-mentioned it is clear that the traditional marketing strategies are applicable to a given target market but the ingredient of the cross – cultural communication that bridges the communication gap between the customers and the new entrant seller in the market is the key for increasing sales and productivity in the target market. Alongside, it is also interesting to note that the effectiveness of the marketing communication is only through the understanding of the cultural factors and the local knowledge of the target demography as argued by Philip Kotler and Kevin Lane Keller (2005).

Alongside, the marketing communication takes different forms right from the face-to-face interaction with the customer at the shop floor up to advertisement through media as argued by Frances Brassington and Stephen Pettit (2003). This makes it clear that the cross –cultural communication effectives is the critical element for the overall success of the marketing strategy itself in an organization.

Besides, the marketing communication targeted towards developing markets where the market development is in its early stages in most areas, the success of a new entrant is dependant upon the communication factor as argued by Gerry Johnson and Kevan Scholes (2003).

3.2: Suppliers

Suppliers in the Chinese market are not only an essential element for continued production and promotion of products but also essential for the effective cost reduction and production profit management strategies as argued by Xueming Luo et al (2004). This is because of the fact that the increasing competition in the Chinese retail markets both from the domestic competitors as well as the new entrants from the west, has increased the need for cost efficient supply chain strategies to ensure that there is better profit margin for the organization. Alongside, the increasing demand for innovative product lines and the continuous requirement to procure new raw materials as well as reduce the lead time associated with the procurement, production and supply; it is thus essential to maintain effective supplier relationship.

The bargaining power of the supplier which is one of the five forces that affect the business growth in a given target market (Gerry Johnson and Kevan Scholes, 2003) is evident in the aforementioned case where the need to forge strong supplier relationship with domestic suppliers in China is a critical element for continuous growth of an organization. The cross – cultural communication in terms of the fluency in host language (i.e.) Chinese and the ability to understand the business process methods of the suppliers to ensure strong relationship are critical success factors for the overall success of the organization itself.

Alongside, Malcolm J. Sanders (1997)^[14] argues that the reduction in the supply chain delays and ensuring strong supplier relationship is the key for effective management of the production in an organization. Thus through exercising effective control over the supply chain, an organization can quickly respond to a change in the market demands. This will eventually increase the productivity and sales for the organization. In the light of the aforementioned, it is clear that the conversation skills of the management as well as the key supply chain staff is essential for the effective management of supply chain in the Chinese retail markets as argued by Xueming Luo et al (2004).

3.3: Stakeholder management

Xueming Luo et al (2004) say that the strategic positioning of an organization in the Chinese markets requires the continuous support of the stakeholders in the local geography. This is because of the fact that partnership or partial acquisition is deemed as one of the successful strategies in the market development strategy of an organization entering a new market as argued by Gerry Johnson and Kevan Scholes (2003). Hence the efficient communication with the stakeholders through fluency in the local language and understanding of the cultural demands are the critical elements to ensure their continuous support.

In the light of the aforementioned it is thus clear the cross – cultural communication is a critical element to win the audience’ support for the continuous business development and sustainable competitive advantage in the Chinese retail markets.

3.4: Human Resource Management 

The management of the workforce and strong working relationship with the staff members and management are argued as critical success factors by Derek Torrington and Laura Hall (2003)^[15]. In the light of the aforementioned, addressing the Chinese retail market, it is clear that local workforce is one of the critical elements to reduce the cost overhead associated with staffing for a new entrant. Gerry Johnson and Kevan Scholes (2003) further argue that the streamlined communication between the management and the staff is the critical element for increasing the productivity of the organization. This makes it clear that the cross – cultural communication is necessary in the form of fluency in local knowledge and understanding of the working culture of the Chinese labour market in order to increase the sales and gain sustainable competitive advantage. Alongside, the labourers being part of the overall general public, the strong human resource relationship demonstrated by the management will forge a positive corporate identity for the new entrant in the Chinese markets.

4: IKEA and China

Briefly, IKEA entered the furniture retail market of China in 2003 by establishing the first store at Shangai, China (Company Profile, 2006). This was followed by further development of the business into other popular geographies of China including Beijing and Hong Kong. In this section the use of the cross – cultural communication discussed in sections 2 and 3 by IKEA is presented to the reader.

4.1: Customer Relationship

The company’s strategy in utilising the services of one of the leading Chinese advertising agencies Saatchi & Saatchi Beijing as well as other advertising agencies in the local geographies of china has increased its ability to reach the customers in the target market effectively (Media Asia, 2006^[16]). Alongside, the company’s adherence to the understanding of the host culture through providing innovative product lines that appeal to the customer demands as well as the culture of the target demography is one of the critical success factors in establishing strong customer relationship. Another interesting element is the focus on the wider geography as well as specifically targeting the Western residents in the target markets (Company Profile, 2006) demonstrates the effective use of the cross-cultural communication strategy in marketing to forge strong customer relationship.

The success of IKEA as the top loyalty brand in Hong Kong (Media Asia, 2006^[17]) justifies the role played by the cross-cultural communication by the management to increase sales.

4.2: Supplier Relationship

The procurement strategy of IKEA in the Chinese market is mainly through encouraging the local channels and small scale industries that produce specific product lines and made to order product lines (Company Profile, 2006). This demonstrates the effective cross-cultural communication by IKEA and its ability to maintain effective supplier relationship to increase productivity.

4.3: Human Resource Management

The company utilises the local workforce in all levels of the organization, which is evident from the store manger positions held by the Chinese national in Shangai. The concept of cross-cultural communication and appealing to the staff culture apart from the traditional methods of human resource management is evident from the aforementioned. Alongside, the effective management of the human resource is also evident from the company’s rewarding strategy that is not only intended to motivate the staff but also introduce the overall organizational culture among the staff members in the Chinese branches. This approach motivates the staff members and is successful because of the local knowledge exercised by the organization.

Alongside, the key measures in terms of management and staff relationship were queried with IKEA’s sales team in the UK. The results prove that the sales staff shop floor have the following key skills irrespective of the geography they are deployed.

1. Understanding host culture
2. Participate to resolve the host social issues
3. Have friendly relationship with the host

In the Chinese retail market, the aforementioned are demonstrated as follows

1. The advertising and promotion strategy of the organization using the services of the local advertising agencies to appeal to the cultural factors of the demography justifies the understanding of the host culture by IKEA, China
2. The organization’s innovation strategies like its contribution to the space problems in the Hong Kong target market (Lee Michele, 2002^[18]) are a classical example for the organization’s ability to participate and resolve the host social issues.
3. The company’s top score in the brand loyalty and customer loyalty in the Hong Kong and Beijing markets justifies its ability to forge friendly relationship with the host.

5: Conclusion

Thus to conclude the research it is clear that the cross – cultural communication effectiveness is a mandatory element in the success of an organization in a new geographical location. The increase in the globalisation and the need for business development have increased the need to reach Far Eastern nations for potential markets which justifies the need for efficient cross – cultural communication. The analysis on IKEA further justifies that only through the effective cross – cultural communication it is justifiable for an organization to develop business and sustain growth in the target market.

References

A.M.M. Rad and M. Yarmohammadian (2006), A study of relationship between managers’ leadership style and employees’ job satisfaction, Leadership in Health Services Vol. 19 No. 2, 2006

Ann Priest (2005), Uniformity and differentiation in fashion, International Journal of Clothing Science and Technology Vol. 17 No. 3/4, 2005

Company Profile, (2006), IKEA Group, Datamonitor

Derek Torrington and Laura Hall (2003), Personnel Management – HRM in Action, FT: Prentice Hall

Frances Brassington and Stephen Pettit (2003), Principles of Marketing, FT: Prentice Hall

Geng Cui et al (1998), Cross – Cultural Adaptation and Ethnic Communication: Two Structural Equation Models, Howard Journal of Communication, 9:1, 69-85

Gerry Johnson and Kevan Gerry Johnson and Kevan Scholes (2003) (2003), Exploring Corporate Strategy – Texts and Cases, Prentice Hall

Guilherme Pires and John Stanton (2000), Marketing services to ethnic consumers in culturally diverse markets: issues and implications, Journal of Services Marketing, 2000, Vol. 14 Issue 6/7

Lee Michele (2002), Ikea plays up space solutions in HK burst, Media Asia, 10/4/2002, p4

Malcolm J. Saunders (1997), Strategic Purchasing and Supply Chain Management, Financial Times – Prentice Hall

Miranda Y.P. Lee and Daniel W.C. So (2007), Corporate-slogans of corporations operating in Greater China, Corporate Communications: An International Journal Vol. 12 No. 1, 2007

News Article (2006), IKEA plays up ‘more’ in mega store’s opening, Media Asia, 15621138, 4/7/2006: Business Source Premier

News Article, IKEA tops loyalty brand survey in Hong Kong, Media Asia; 10/6/2006, p11-11

Peter Williamson and Ming Zeng (2004), Strategies for Competing in a Changed China, MIT Sloan Management Review, Summer2004, Vol. 45 Issue 4

Philip Kotler and Kevin Lane Keller (2005), Marketing Management – 12^th Edition, Prentice Hall

Richard Lynch (2003), Corporate Strategy, FT: Prentice Hall

Thomas Brenner (2007), Local Knowledge Resources and Knowledge Flows, Industry & Innovation, Jun2007, Vol. 14 Issue 2

Xueming Luo et al (2004), The Effects of Customer Relationships and Social Capital on Firm Performance: A Chinese Business Illustration, Journal of International Marketing, 2004, Vol.12 Issue 4

Footnotes

^[1] Gerry Johnson and Kevan Gerry Johnson and Kevan Scholes (2003) (2003), Exploring Corporate Strategy – Texts and Cases, Prentice Hall

^[2] Richard Lynch (2003), Corporate Strategy, FT: Prentice Hall

^[3] Geng Cui et al (1998), Cross – Cultural Adaptation and Ethnic Communication: Two Structural Equation Models, Howard Journal of Communication, 9:1, 69-85

^[4] Frances Brassington and Stephen Pettit (2003), Principles of Marketing, FT: Prentice Hall

^[5] A.M.M. Rad and M. Yarmohammadian (2006), A study of relationship between managers’ leadership style and employees’ job satisfaction, Leadership in Health Services Vol. 19 No. 2, 2006

^[6] Miranda Y.P. Lee and Daniel W.C. So (2007), Corporate-slogans of corporations operating in Greater China, Corporate Communications: An International Journal Vol. 12 No. 1, 2007

^[7] Guilherme Pires and John Stanton (2000), Marketing services to ethnic consumers in culturally diverse markets: issues and implications, Journal of Services Marketing, 2000, Vol. 14 Issue 6/7

^[8] Thomas Brenner (2007), Local Knowledge Resources and Knowledge Flows, Industry & Innovation, Jun2007, Vol. 14 Issue 2

^[9] Peter Williamson and Ming Zeng (2004), Strategies for Competing in a Changed China, MIT Sloan Management Review, Summer2004, Vol. 45 Issue 4

^[10] Ann Priest (2005), Uniformity and differentiation in fashion, International Journal of Clothing Science and Technology Vol. 17 No. 3/4, 2005

^[11] Company Profile, (2006), IKEA Group, Datamonitor

^[12] Xueming Luo et al (2004), The Effects of Customer Relationships and Social Capital on Firm Performance: A Chinese Business Illustration, Journal of International Marketing, 2004, Vol.12 Issue 4

^[13] Philip Kotler and Kevin Lane Keller (2005), Marketing Management – 12^th Edition, Prentice Hall

^[14] Malcolm J. Saunders (1997), Strategic Purchasing and Supply Chain Management, Financial Times – Prentice Hall

^[15] Derek Torrington and Laura Hall (2003), Personnel Management – HRM in Action, FT: Prentice Hall

^[16] News Article (2006), IKEA plays up ‘more’ in mega store’s opening, Media Asia, 15621138, 4/7/2006: Business Source Premier

^[17] News Article, IKEA tops loyalty brand survey in Hong Kong, Media Asia; 10/6/2006, p11-11

^[18] Lee Michele (2002), Ikea plays up space solutions in HK burst, Media Asia, 10/4/2002