IKEA is often cited as an example of a ‘global’ retailer which pursues a similar ‘standardized’ approach in every market. This paper systematically assesses the degree of standardisation (and adaptation) of four commonly identified retail marketing mix activities – merchandise, location and store format, the selling and service environment, and market communication – within three countries. These countries – Sweden, the UK and China – represent different cultural settings and are markets in which IKEA has been operating for different lengths of time. The data upon which the comparison is based was generated from personal interviews, in-country consumer research, company documentation and third party commentaries. The conclusions drawn suggest that whilst IKEA operates a standardized concept, degrees of adaptation can be observed in customer facing elements, and in the supporting ‘back office’ processes which support these elements. These adaptations arise from differences in consumer cultures and the length of time, and subsequent exposure to and experience of, the market. This suggests that standardisation in international retailing should be considered from the perspective of replicating the concept, rather than replicating the activities.
One theme that dominates the international marketing literature is the degree of standardisation and\or adaptation of marketing activities, either employed by a company (e.g., Baek, 2004, Levitt, 1983, Theodosiou and Leonidou, 2003, Szymanski et al., 1993 and Lim et al., 2006), or experienced by a consumer (e.g., De Mooij, 2004, De Mooij, 2005 and De Mooij and Hofstede, 2002). This discussion has not, however, penetrated the field of retailing to the same extent which appears strange, as many of the research themes pursued in the retailing literature follow those established in international marketing. This may reflect the fact that retail internationalisation into more distant markets is a relatively recent phenomenon (Dupuis and Prime, 1996, Evans et al., 2000 and Evans and Mavondo, 2002).
IKEA, the Swedish home furnishing retailer, has been active in foreign markets since 1973, when the company entered Switzerland. Today IKEA has stores in 37 countries and is expanding in many markets, not least in Asia where the company has only had a presence over the past decade. In broad terms, IKEA has followed the ‘traditional’ pattern of internationalisation, first moving into neighbouring countries and markets with similar language and cultural traditions, before venturing into more exotic markets on other continents.
One of the characteristics that makes IKEA stand out amongst internationalising retailers is the (alleged) standardized approach taken to every market it enters. It appears to operate in the same way in every market—and is often referred to as a ‘global’ retailer. Existing analyses of IKEA’s marketing strategy are either relatively old (Salmon and Tordjman, 1989) or take an overview perspective (Salzer, 1994, Salzer, 1998, Mårtenson, 1981 and Mårtenson, 1987). Little emphasis has been placed upon analysing retail marketing activities in specific countries, and many studies lack a clear understanding of what marketing standardisation and adaptation might mean in a retail perspective. More recent studies (Edvardsson and Enquist, 2002 and Edvardsson et al., 2006) take a service management perspective, rather than an overall marketing strategy perspective.
Amongst academics there has also been a growing debate over whether one of the key success factors in international retailing is the adaptation, rather than the standardisation, of customer facing marketing strategies (e.g., Cui and Liu, 2001, Dawson and Mukoyama, 2006, Rundh, 2003, Samiee et al., 2004, The McKinsey Quarterly, 2004, The McKinsey Quarterly, 2006a and The McKinsey Quarterly, 2006b). This seems to be especially true for retail internationalisation into geographically and culturally ‘distant’ markets. So where does this leave IKEA and its ‘global’ business model? Is the model something that works in Europe and North America, but requires greater adaptation for the very different Asian markets?
The aim of this paper is to examine IKEA’s marketing strategy in three different countries: Sweden, the UK and China. IKEA’s history and presence differs in each of these markets: Sweden is the home market where IKEA was founded in 1953 and the where first store opened in 1958; the UK was entered in 1987 and is now the fourth most important market in terms of sales volume; whilst China saw its first IKEA store in 1998. These markets also vary in terms of both the cultural and institutional setting: Sweden and the UK are essentially ‘home’ markets in these terms—Sweden naturally fulfils this role but the UK is an Anglo-Saxon market with similar consumer behaviour and business traditions; China is of course very different in this respect, but will IKEA’s marketing strategy need to be different in recognition of this? Is there a need to recognise a more subtle gradation of the retail marketing mix, which takes into account a more constrained geographical focus—for example at a regional level ? or which recognises the length of time in, and subsequent experience of, a market ?
The paper starts with a brief review of some of the literature on the retail marketing mix to establish a generic framework. This framework is then used to present an analysis of IKEA’s approach to the three different countries, based upon a combination of both primary and secondary data from these markets. Finally, the implications for existing conceptualisations of globalisation and standardisation/adaptation in an international retail context form the conclusion.
In this paper we have analysed IKEA’s marketing strategies in three countries from a standardisation/adaptation perspective. What have we found? We are dealing with a standardised retailer that wants all markets – and continents – to conform within a given frame. Compared to several other global retailers operating out of a large store format – Tesco, Wal-Mart, Carrefour – we have observed much less adaptation in how the market offer is constructed and portrayed. This in part reflects the fact that IKEA is, to some extent, a niche retailer, but it also reflects the centrality of the business model and a desire to hold onto what made the company successful. The view of senior IKEA managers is that sticking to the established business model – low price, centralised sourcing, new design and self-assembly/self-service retailing – is what has made IKEA successful, and that this will continue to be a successful formula, rather than allowing uncontrolled adaptation just because a particular market does not like self-service, etc. The IKEA argument is that markets will learn and see the benefits of the IKEA concept as a whole. In essence, the retailer will drive market change and the market will ultimately adapt to the retailer (Tarnovskaya et al., 2008).
When IKEA has journeyed further afield onto new continents (in this case represented by China) some of the very different market conditions seem to have come as a surprise. However, should an experienced retailer really have been surprised to find that the Chinese have a lower standard of living, so the concept of price and value may differ, and that big-box retailers are rare? On the basis of the evidence from China, it appears that IKEA took a very European ethnocentric approach to this intercontinental move. This approach is characterised by Usunier and Lee (2005) as exhibiting self-reference criteria, meaning that we tend to think that what works here (Europe) will work in other cultures as well (or others will adjust to our ‘superior ways’). If IKEA had not added other support services (home delivery and assembly) in China and if the proportion of local sourcing had not been increased, to keep prices down, China might well have provided IKEA with the same experience that it had in another distant market, Japan, in the late 1970s.
In the case of retailing, it is often argued that ‘back room’ processes can be standardised, but customer facing elements may need some adaptation. Whilst this would appear to apply in the case of IKEA, the country cases also reinforce how important some of the ‘invisible’ aspects of the retail business, for example the supply chain and sourcing approach, are in the ultimate delivery of the market proposition. The focus in retailing, and particularly in the globalisation debate, is often on the customer facing ‘front’ end of the retail operation in isolation, and less attention is paid to the contribution – and one may argue the key role – performed by underlying systems and processes. For example, if IKEA had persisted with the standardised approach of sourcing merchandise from Europe, Chinese customers would have been faced with untenable market prices and out of stock situations. This suggests that the contribution of ‘back room’ functions and activities in retailing, which are perhaps taken for granted at home, is magnified when trying to do business in more distant markets on a different continent.
Of all the retail marketing mix activities, intra-country and intra-continental differences appear to be the most magnified with respect to communications both with and in the market. In general, communication appears to be the one area where some divergence from the standard approach is expected. Whilst the company’s view of its market position is to be respected, and the message should reflect a similar theme (i.e. different from the norm), the way that this is expressed reflects and reacts to the local context and behavioural norms in the host market. Also the tools used to communicate the message show some variation. The IKEA catalogue is not so sacrosanct in some markets as one might believe.
Finally, another consequence of doing business globally is the opportunities and challenges which arise from the organisational learning experience, and the role of the length of time spent in the market. Whilst in China the internationalisation challenge has been about introducing a business concept that is – at least in some parts – very different to what customers are used to, in Sweden and the UK the different contextual situations have also impacted upon the approach taken to these markets. Swedes have 50 years of experience of IKEA, and the risk in this market is one of over-exposure – the concept and activities become so familiar that they are perceived as boring, establishment, and even old-fashioned, if innovation is not maintained. For a ‘standardised’ retailer continual innovation needs to somehow be found from within the established business concept. British consumers have over 20 years of experience of IKEA, so the challenge here is also to continue to be innovative whilst becoming more and more part of the establishment.
From a theoretical retail standardisation and adaptation point of view, the IKEA case shows that it is possible to operate internationally through a fairly standardised concept in markets that are very different from that where the business concept originated. However, the case also shows that there are limits to retail standardisation. In the IKEA case it is clear that some adaptation is needed to be true to the business concept. This also suggests that in future research it may be more beneficial to focus on whether or not a retail company is true to its business concept, rather than if it is using the same marketing strategies all over the world (Burt and Mavrommatis, 2006). The challenge, therefore, becomes one of replicating the concept, rather than the activities, so the emphasis on standardisation switches to the business concept. It is the retail business concept that is exported and in order for the concept to be the same all over the world, the marketing strategies sometimes need to be adapted to achieve concept standardisation.
