Individual Assignment: Case on IKEA: Expanding through franchising to the South American market. The objective of this paper
1. Until now, IKEA’s international marketing strategy has been centrally controlled by corporate headquarter. However, the case study identifies a number of challenges facing the company including culture and demographic differences around the world. How should IKEA react to this challenge? 2. How attractive is Brazil for IKEA? And which market entry method do you recommend, and why?
IKEA is a Swedish furniture company which has a unique design and applied a traditional internationalization strategy as centralisation. Certain marketers agree that the standardized marketing strategy which focuses on the similarities among cultures and develops global marketing plans eliminating the need of culture can be used for creating strong global brands and expanding business globally without any problems. The marketers employ this approach as a result of they see the world as a one large market in which difference between cultures have diminished and consumers have developed similar needs and want independent of location. However, there has been a long debate on the issue why many marketers try to change the approach of internationalization from standardization to adaptation which focuses on cultural uniqueness for each local market. In this essay will discuss “How should IKEA adjust its conservative strategy as regardless of cultural boundaries, How attractive is Brazil for IKEA, and which market entry modes do you recommend, and why?” Moreover, this paper also focusing on the advertising strategy related to a cross culture as it is an important appearance for IKEA in the global market so IKEA need to understand the nature of people in difference countries.
Overview of case study
From the case study of IKEA, IKEA used franchising as an entry method for expanding to Brazilian market. It brings several problems to IKEA including the difficulty of cultural sensitivity, demographic trend and many more. With this mode, even if IKEA allows franchisees to design the rest of product mix to fit domestic market, the centralized head office still involved totally in selection processes. To solve the above mentioned difficulty, headquarter should permit the local partner to make a decision for products sold in its market since the company knows more about customer demand. The extensive training and operational support should be managed by the franchisees. Additionally, the design of all catalogues and promotional advertising should be transferred to be the duty of local franchisee because it is more easier to meet the local demand, since culture including the differences of values and attitudes, languages, religions, aesthetics, dietary preferences and education is a reasonable factor to be examined in relation to build IKEA internationally. Advertising and Cultural affect to IKEA market
To expand globally by using advertisement, there is no universal meaning of an advertisement across borders. Mooij (1991) agreed that ‘Advertising, to be effective, must derive from and be part of a culture sharing the language and values of the target audiences.’ The culture analysis with Hofstede’s cultural dimensions helps to study the influence of culture on global advertising. People in different cultures show different orientations toward power distance, individualism and collectivism, masculinity, uncertainty avoidance and Confucian work dynamism (Hofstede, 1996). Each factor influence advertising in term of culture. This paper will examine focusing on 3 dimensions as below: Firstly, power distance refers to the degree of inequality among people which is viewed as being acceptable. People in high-power distance culture expect clear directions from authority in relation to a particular action, while the cultures with less power distance is likely to make their own decision on the basis of fact...
References: Chang, L.T. (2004), “China Eases Foreign Film Rules”, the Wall Street Journal, October 15, p. B2.
IKEA Annual Report (2002), www.ikea.com
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