A Case Study Of Ikea In China Market Marketing Essay

2587 words (10 pages) Essay in Marketing

5/12/16 Marketing Reference this

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The purpose of this report is intending to understand how the diverse culture impacts on the operation of the company in the global business. Meanwhile, it is also aiming to come up with an effective solution of dealing with the cultural differences for managing the cross national activities.

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With the continuous rapid development of the globalization, in particular, the increasing of global trading and corporation, it is inevitable that different cultures meet together. However, since the complex of the culture in difference areas, exhibiting the multifaceted characteristic, the culture conflict is unavoidable as well. The people from diverse culture find it is difficult to communicate with each other, not only due to the language barrier, but also the influenced by the difference of the culture styles. As the diversity of culture enhances the ambiguity and confusion and it deteriorates the effectiveness of the team working, the companies or organizations involving in the global market are directly facing the challenge with regard to adopting in cultural diversity. In the end, the cross-cultural management is getting more and more important, and it is able to bridge the gaps between the difference cultures. The management of the across cultures becomes a priority for multinational companies and the global organizations in pursuing their international strategy.

In this report, it analyses the case of IKEA’s cultural management, a Swedish furniture company, and understand how IKEA successfully conducts its business operation in China market, where has the significant difference culture with western countries.

Cross-cultural Management

Cross-cultural management, as a new field, is very complicate and involving multifaceted issues, therefore it is very difficult to define this new business concept.

Cross-cultural management is usually involving in the international business activities in globally, and it is the subject regarding how to maintain the local culture, basing on the new thoughts, dealing with cultural difference.

For the multinational companies, the technique of cross-culture management is able to help the management to face the challenges and opportunities of managing their employees in a cultural diverse organizational situation. Increasing globalization has created more awareness of the need for managers to be sensitive to the cultural aspects of decision-making (Miller, 2010).

Analysis

The analysis starts off by discussing the difference between from western culture to Chinese culture.

Difference between Chinese and Western Culture

There is a significant difference between the key philosophies of Chinese and western life. China is an ethnically and culturally diverse country, and its dominant cultural tradition has been heavily influenced by Confucianism and Taoism, which is entirely different from western heritage.

As the Chinese culture has its own values, background and unique belief system, therefore westerners find the Chinese culture complex, and hard to understand. Due to the diverse culture between western and Chinese, the lifestyle of western and Chinese is also vast difference in some aspects. The western has a luxurious lifestyle, while most of Chinese are prone to having a modest way of living. For example, the Chinese may have no more than 40 sq. feet of living space on average (Wang & Li, 2006).

There are at least three major differences between western culture and Chinese culture, setting forth as the following:

– Westerners believe in individualism, while Chinese are more incline on collectivism.

– The western culture encourages expressing the affection freely, and Chinese culture express the emotion puritanically.

– The western culture believes in a materialistic approach, with a pragmatic and emotional attitude, whereas the Chinese believe in relationships, and searching for inner happiness through mediation (Wang & Li, 2006).

As mentioned earlier, due to the significant culture difference from difference geographical region, the multinational enterprise or the global organizations must adapt themselves in the given business environmental and situation with diverse culture, with a view to improve the competitive edge through taking advantage of the culture difference.

It is interesting to look at how IKEA to operation its business from the cross-cultural management aspect. The business culture of IKEA Sweden is be used as a base for the comparison with IKEA China.

The Development of IKEA

IKEA, based on south of Sweden, was set up in year 1943 by Ingvar Kamprad, in his 17 years old. IKEA is only global-scale furniture Distributor, its furnitures are widely acknowledged as the international, low-cost and good -quality home products and IKEA’s furnitures are also known for its modern design (Dhanyasree, 2007). Currently, the Group has established more than 292 IKEA stores in thirty-six countries and the other stores are run by franchisees which are out of the IKEA Group in 16 countries (Johansson & Thelander, 2009).

One of IKEA’s business principal is to provide a wide mix product, and functional right furnishing articles, with the lowest price possible so as to attract as many as possible people to purchase them (Johansson & Thelander, 2009).

IKEA has widely succeeded globally and it has a highly strong business culture with aSwedish image. In order to enhance the culture perspective of IKEA, they make sure to interpret symbols (such as pictures or objects)in specific countries.

IKEA’s Cultural management in China

As the real-stated of commercial and residential establishments boosted, it also increased the sales of home decoration and furnishings.

To fill the increasing demands of decoration market, especially the high quality furniture products. IKEA started its retailing operations in China and set up its first store in Shanghai in year 1998. The decision of IKEA to enter Chinese market stems from supporting political, social and economic conditions that allow IKEA to beneficially acquire advantages in the Chinese market (Pan, 2005).

IKEA needs to face various challenges in terms of business practices, socio-economic and political conditions, as well as its unique culture in Chinese market. Chinese people from different regions may exhibit distinct characteristics as well. Taking the language for example, the spoken language varies greatly from region to region. It is not surprised that someone from Shanghai cannot understand residents of Guangdong province, if without special study of Cantonese.

In China, IKEA’s products have the image of catering to high-end consumers, whereas the perception of IKEA’s products is regarded as a ‘good value’ buy elsewhere in world. In order to attract larger number customers and maintain the company in reasonable profit, IKEA continues to implement the effective strategy both from external and internal cultural management.

External culture management of IKEA

From the external cultural management perspective, to help Chinese customers deeply understand the IKEA concept, the company also posts in-house instructions and design suggestion, publishes brochures, which is distributed in the stores and through the mail, and operates a completed company website.

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Meanwhile, in order to better understand Chinese people’s lifestyles and their home aspirations and frustrations, IKEA performs a large number of home visits, surveys, and focus group meetings. In additional, IKEA also study the customers’ comments on IKEA’S product range, price and service levels, and it provide the useful information for the company to position its target consumers.

At the very beginning, most of IKEA’s China customers are range from 20 to 35 years old. As a result of the market repositioning strategy, the stores are now attractive an increasing customers with age closing to 45. Among these customers, many are generally well-educated couples and earn higher double-income with no children (Blomqvis, 2005).

In terms of housing, the average square meters per person in Sweden is much large than in China. Until recently, now Beijing and Shanghai apartments average 80 m2. To suit the specified needs of Chinese consumers, IKEA needs to design and provide more storage containers and facilities (Blomqvis, 2005).

In additional, with keeping up-to-date study on Chinese home-life, IKEA alters products to meet the local customers need. For example, IKEA sold standard size beds in mainland China, while the consumers in the Sweden generally prefer larger items.

In additional, the value of “the customer is kings” is also deeply acknowledged in the Chinese people minds, and the Chinese customers prefer to enjoy the completed services in the whole process in their furniture purchasing activities. Normally, the Chinese customers would like to shopping accompany with the store staff to introduce the products to them. Meanwhile, for most of the Chinese customers, it is perfectly that the store staff to distribute the products directly to their house and install all the furniture as well (Pan, 2005).

Nevertheless, IKEA creates the unique shopping environment in China, and teaches customers of the concept of self-services. It encourages the customers coming to personal if they have any question or need for any assistance. Nowadays, Chinese people would use IKEA Beijing Store as the theme part, hanging out in the store and directly experience the furniture.

Moreover, IKEA also adapt its do-it-yourself assembly concept to the Chinese consumers, which are very appreciated in the West. As the labor costs in west are much higher than in China, the western people prefer the assembling product for saving money and some of them actually enjoy install the furniture. In China, the people prefer to the ready products and use the IKEA’s assembly services more than in other countries (Miller, 2010).

Internal culture management of IKEA

From IKEA’s internal culture management aspect, there are differences among the working culture in every country. The western culture and Chinese culture is significant difference in some aspects, therefore the business culture of Sweden and China is also obvious diverse.

The theories mentioned that western culture is more inclined to the individual way, in this regard and the managers of IKEA Sweden are pretty good at marking contact and build up team work, and they often want to jump into projects and participate. In the same time, the communication in IKEA Sweden works vertical and the employees are not afraid to disagree with their superiors. The management style is informal, for example they address each another with their first name. The management style is also based a lot on delegations. Meanwhile, IKEA Sweden has an open-door policy, every employee is welcome to directly go and speak to their superiors if there are some ideas on their mind. In the end, the atmosphere around the store managers in Sweden is quite open and friendly and the employees all seems to be comfortable to talk and make jokes with their boss. This kind of management style and the working environment is very important in IKEA’s culture (Pan, 2005).

As mentioned earlier, the Chinese culture is prone to more connotations, and Chinese prefer to express their own emotion and idea in the puritanical way.

The unique characters of Chinese culture lead the traditional Chinese corporate culture tending to emphasize the relationship and respect their seniors (Pan, 2005)

The traditional Chinese corporate culture tends to emphasize seniority and relationships more than responsibility and accountability which is contrast with the Western emphasis on personal accountability and demonstrated merit and ability (Chen, Wang & Chu, 2011).

The values of caution make the store managers in China taking a long time to make a decision and unwilling to make the risky decision. What’s more, if the store managers in China under this conservative management style, the employees in IKEA China, who most directly people connective with customers, would not create the new ideas and express the useful information for their supervisors.

In another hand, due to the rapid economic development in China in the recent decades, the value of “time is money” is deeply caved into China business culture, in particular in the residents who living in big cities in China. Hence, the time is also as a further more environment factor to manage in majorities of companies in China, and it is used thoroughly, budgeted properly and should not be wasted. However, this is not really how IKEA works when they making their decisions, actually IKEA allows the mistake to be made in the working, and something that would cost time (Miller, 2010).

In order to make sure that important values are spread throughout the entire organization, even out among the customers, IKEA has implemented team-building activities throughout the entire store in IKEA China.

To avoid the store managers unwilling to take risk in general would do in Chinese companies, IKEA provide the internal in-house or oversea training to the store managers and the general employees in IKEA China, with a view to enhance the management understanding the values of IKEA and every member in IKEA make their points. After putting lots of the efforts in cultivating the open and free working environment, currently, IKEA China is well organized on how to take care of the new hires. As soon as a new employee step into the companies, he or she needs to take the short-term or median terms of orientation training, and they would be taught of the values of “IKEA way” (Miller, 2010).

Meanwhile, with willing to be in consistence with the human orientated culture, IKEA organize the annual outing, the big kick-off parties when IKEA catalogs launch and sport activities occasionally for the entire stores in China, and this helps to create the happy working environment for everyone in IKEA. Through building up this internal company culture, it is helpful for the store managers to take their own responsibilities and initiate the innovative ideas in the management. Meanwhile, it is obviously improve the employees’ feeling of belonging of “IKEA” and the employee feel more casual to express the own ideas and suggestion to their boss. In IKEA China, the employees are also come up with the difference opinions on some essential and valuable ideas, which are useful for running the business (Miller, 2010).

Based on the implementing effective cultural management strategies in China, IKEA overcome the barriers of western and Chinese culture and significant gains the diverse cultures in China.

Conclusion

The above analysis with regard to cross-cultural management has shown that there are highly distinguished differences in the attitudes and behavior of managers and employees from different countries/regions which worked in the multinational companies or global organizations. In this regard, the cross national companies and organizations shall make the great efforts to understand and document cultural differences when they step into a new situation, including the deeply understand the people’s characteristic, their ways of things, lifestyle, belief and so on. From the case of IKEA’s business operation in China market, noted that the communications, particularly in the process of integration the dissimilar companies is an effective approach in the cross-cultural management. In this regard, the management of the multinational companies shall be clearly awareness of the important of the communication. Effective communications are able to establish a friendly understanding of the difference values and beliefs of people in the diverse culture (Dietz, Orr & Xing, 2008).

In the end, the managers shall build up a common strategy and clearly mission for to articulate the local culture, including the specific responsibilities and roles of employees in each level.

Meanwhile, the multinational companies must recognize of the advantages and disadvantages of the cultural difference in the business activities, establishing the suitable cross-cultural management, and build up the competitive edges in the international market.

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