Ikea’s failure and success on the Japanese market

BAMMC-THESIS BY: ALEXANDRA STOLBA Supervisor: Henrik Christensen Aarhus School of Business Aarhus University 2009

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Table of Contents

Table of Contents ..........................................................................1 1. Introduction ................................................................................3 1.1 Background ...................................................................................................................................... 3 1.2 Thesis statement ............................................................................................................................. 3 1.3 Delimitations..................................................................................................................................... 3 1.4 Method .............................................................................................................................................. 4 1.4.1 Choice of theory ............................................................................................................................ 4

2. Discussion of theory ..................................................................5 2.1 Reasons for internationalization ................................................................................................... 5 2.2 The Uppsala internationalization process model ....................................................................... 6 2.3 The concept of psychic distance ................................................................................................. 10 2.4 Srandardization vs. adaptation ................................................................................................... 11

3. Background............................................................................. 14 3.1 IKEA background information ..................................................................................................... 14 3.2 The Japanese Market background information ........................................................................ 15 3.2.1 The Japanese economy and market situation in the period from the 1970’s till 1990’s. . 15 3.2.2 The Japanese economy and market situation in the period from 1990’s till the time of second entry .......................................................................................................................................... 16 3.2.3 Japanese Home Furnishing sector and lifestyle preferences .............................................. 16 3.3 Ikea on the Japanese market ...................................................................................................... 17

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4. Analysis .................................................................................. 18 4.1 Internationalization of Ikea on the Japanese market ............................................................... 18 4.1.1 First round .................................................................................................................................... 18 4.1.2 Second round .............................................................................................................................. 20 4.2 Degree of adaptation .................................................................................................................... 21 4.2.1 Product ......................................................................................................................................... 23 4.2.2 Pricing ........................................................................................................................................... 23 4.2.3 Place/distribution ......................................................................................................................... 24 4.2.4 Promotion/marketing communication ...................................................................................... 25

5. Conclusion .............................................................................. 26 6. Bibliography ............................................................................ 27

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1. Introduction 1.1 Background Ikea is furniture retail company established in 1943 in Sweden. Nowadays, Ikea is the major retail company that is present in 36 countries around the world. Although there are 279 of Ikea stores in 36 countries, Ikea group owns 247 Ikea stores in 24 countries, the rest being managed by franchisees in 16 countries. During Ikea’s expansion on the international market Japan was the first country in Asia that Ikea considered to enter in 1970’s. The differences between culture, lifestyle and behavior made Ikea face the failure. Japan is different from other European countries that Ikea was already present in, so it was difficult to pursue success in the same way. In 1986 Ikea had to withdraw their store out of Japan because of difficulties and then, twenty years later, they decided to reenter the Japanese market for one more time. At present, there are six Ikea stores in Japan, last of which was opened in 2009. Having entered only five European countries by the time Ikea decided to internationalize in Japan, Ikea’s international experience was rather poor. In this thesis, it will be studied why Ikea chose to internationalize in a culturally distant country as Japan at the given time as well as analyzed which cultural and strategic factors were behind Ikea’s failure and success on the Japanese market.

1.2 Thesis statement The objective of the thesis is to understand factors in Ikea’s internationalization strategy in Japan that influenced the failure on the Japanese market in the first round but success in the second round.

1.3 Delimitations The thesis makes use only of secondary data, whereas primary data is not present, due to the difficulty in accessing the data since Ikea has expanded to Japan for the first time for a long time

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ago. Moreover, executives continually changed, which made it very difficult to find a way of contacting them. Customer interviews, which could have been a useful tool for analyzing effectiveness of Ikea’s new strategy in Japan, are not used in this thesis for the reason of great distance between Japan and Denmark and language barriers, which made it almost impossible for me, as a student, to accomplish. In depth economical analysis of the Japanese market is left out of discussion being considered irrelevant, since the thesis focuses on external communication. For the same reason analysis of Ikea company structure and internal communication is not included.

1.4 Method In the thesis secondary data is used for analysis. Even though secondary data does not possess the same advantages as primary data, which is collected for a particular research purpose, it is less time and money consuming, proving a suitable method to solve a specific research problem.1 The information retrieved by and large form various articles was carefully collated and subjected to critical scrutiny in order to increase its consistence and reliability. Yet, since Ikea’s first expansion on the Japanese market took place more then thirty years ago, no articles which would treat the whole set of strategies employed at that time were available. The information derives mainly from articles which describe Ikea’s new entry on the market and only refer to the past events. It is fully acknowledged that this fact can result in a somewhat deficient picture of Ikea’s strategy in the 1970’s, yet the key data relevant for our analysis could still be retrieved from the secondary sources to form a reliable basis for our research.

1.4.1 Choice of theory As this thesis is about internationalization process, literature relevant for the topic had been reviewed. In order to find out why Ikea internationalized on the Japanese market, what factors influenced the choice of marketing strategy in the fist round and lead to failure, and what factors made Ikea to review the strategy and succeed in the second round, the choice had been placed on the following theories:

1

Kotler, P. & Keller, K. (2006). Marketing Management. (12th edition). United States of America: Pearson Prentice Hall, p. 104.

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1. The Uppsala internationalization process model explains the impact of knowledge and learning to the firm’s approach to foreign markets. It has been used to understand why Ikea decided to internationalize on the Japanese market in the first place and how the knowledge affected the entry mode and strategy choice. Moreover, it is used to analyze why and how Ikea has changed the strategy when expanding on the Japanese market for the second time and the consequences of that. Criticism of the theory is taken into consideration when conducting the analysis. 2. The concept of psychic distance is implemented to gain understanding of factors that hampered the successful internalization and explain how the perception of the cultural differences influenced choice of a marketing strategy. 3. Geert Hofstede’s cultural dimensions have been used to define cultural differences between countries of interest. 4. Standardization and adaptation approaches are used to elaborate on the strategies used on the Japanese market, and explain how the degree of adaptation contributed to failure in the first round and success in the second. Furthermore, advantages and disadvantages of both strategies are discussed.

2. Discussion of theory In this section theories that are considered relevant for the study are presented and discussed.

2.1 Reasons for internationalization

The retailer’s decision to internationalise is in most cases driven by the sales growth. Sales growth is a measure of success and if the desired growth could be achieved on the domestic market, according to Kotler, most companies would prefer to remain domestic. However, it is much easier to grow sales by increasing the store network than by getting more sales out of existing stores, and if the domestic market is not large enough any more, foreign markets give the retailer an opportunity to grow. The international arena gets attractive when the company discovers higher profit opportunities than on the domestic market, when it needs a larger customer base to achieve

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economies of scale, when the company wants to reduce its dependence on a particular market or gives an opportunity to counterattack the competitors that attack the company on its domestic market on their home markets.2 In general, a company prefers to enter countries that rank high on market attractiveness, that are low in market risk, and in which it possesses competitive advantage.3

2.2 The Uppsala internationalization process model Once a firm has reached a decision to internationalize, the next step would be to choose a strategy. The internationalization strategy is a first step to success or failure. The choice of the country and the way to approach it require knowledge of foreign markets. The Uppsala internationalization model reflects on how the knowledge development influences the market choice and international marketing activities, and is employed in this thesis while analyzing Ikea’s expansion on the Japanese market.

The Uppsala internationalization model was developed by Johanson and Vahlne in 1977 and is based on Johanson and Wiedersheim-Paul study of internationalization of four Swedish firms. There are two assumptions that the model is based on: first, firms want to increase their long term profit at one site, but at the other site want to keep risk-taking at a low level; second, the lack of knowledge about foreign markets is a major obstacle to the development of international organizations, and that the necessary knowledge can be acquired mainly through operations abroad.4 It focuses on four aspects that firms should face while going abroad: market knowledge and commitment, and commitment decisions and current activities which are divided into stage and change aspects that interact with each other in a cycle.

2

Ibid., p. 669. Ibid., p. 674 4 Johanson, J. & Vahlne, J.E. (1977) The internationalization process of the firm – a model of knowledge development and increasing foreign market commitments. Journal of international business studies, vol. 8, no.1, p. 23., p.27 3

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The two state aspects market knowledge and commitment decisions are resources committed to foreign markets.

Market commitment is measured as the amount of resources committed to foreign markets on the one hand, and the degree of commitment on the other hand. The amount of resources committed is easy to grasp. “It is close to the size of the investment in the market, using this concept in a broad sense, including investment in marketing, organization, personnel, and other areas.”5 The degree of commitment is related to the difficulty of finding an alternative use for the resources and transferring them to it. “The more specialized the resources are to the specific market the greater is the degree of commitment.”6

Market knowledge is classified into two types. Objective knowledge can be taught and on its basis it is only possible to formulate theoretical opportunities. Experiential knowledge can only be learned by personal experience and provides the framework for perceiving and formulating opportunities. Johanson and Vahlne view the experiential knowledge as critical, for it cannot be so easily acquired as objective knowledge. It must be gained successively during the operations in the country. Another way to classify knowledge is to make a distinction between general knowledge and market-specific knowledge. General knowledge concerns, in the present context, marketing

5 6

Ibid., p. 27 Ibid., p. 27

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methods and common characteristics of certain types of customers, irrespective of their geographical location, depending, for example, in the case of industrial customers, on similarities in the production process. It has been argued that the market-specific knowledge relates to characteristics of the specific national markets such as its business climate, cultural patterns, structure of the market system, and, first and foremost, characteristics of the individual customer firms and their personnel. While general knowledge can be transferred from one country to another, market-specific knowledge can be achieved mainly through experience in the market.7

The two change aspects are current business activities and commitment decisions. They are of more variable nature then the state aspects.

Current business activities are all of the activities undertaken by a firm at a certain moment. There is a lag between current activities and the consequences of these activities. The longer the lag, the higher is the commitment of the firm. Marketing activities are a good illustration of this. Current activities are also the prime source of experience. Market experience can be also obtained by hiring people with this experience or to make an appeal to external advisors. To clarify the roles of these alternative ways of integrating experience into the firm in the internationalization process, the authors of the model make a distinction between firm experience and market experience, both of which are essential. Persons working on the boundary between the firm and its market must be able to interpret information from inside the firm and from the market. “The interpretation of one kind of information is possible only for one who has experience in the other part.”8 The authors conclude that, for the performance of marketing activities, both kinds of experience are required; and in this area it is difficult to substitute personnel or advice from outside for current activities. The more the activities are production-oriented, or the less interaction is required between firm and its market environment, the easier it will be to substitute hired personnel or advice for current activities. On the other hand, the more market-oriented, the more difficult it is to rely on hired personnel or external advice because they lack the necessary firm experience.

The second change aspect is the decision to commit resources to foreign operations. According to Johanson and Vahlne, these decisions are made because there are problems or opportunities in the 7 8

Ibid., p. 28 Ibid., p. 29

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market. Problems and opportunities are mostly discovered by parts of the organization working in the market (marketing personnel, salesmen). But opportunities can also be seen by individuals in organizations with which the firm is interacting; these individuals may propose alternative solutions to the firm in the form of offers and demand. The probability that the firm will be offered opportunities from outside is dependent on the scale and type of operations it is performing; that is, on its commitment to the market.9 There are two kinds of commitment decisions: scale-increasing commitment decisions and uncertainty reducing decisions. Scale-increasing commitments are influenced by factors such as competitive or political stabilization of the market, which means that the firm can function peacefully and obtain market knowledge through experience, that way increasing market commitment by declining uncertainty about the market, and increase of total returns of the firm or more aggressive approach towards risk, which leads to increasing market commitment by raising the maximum tolerable risk level. Uncertainty-reducing commitment can be occasioned by decrease of maximum tolerable risk level or increase of existing risk in the market.10

Another aspect of the model, the stage model, is that firms develop their activities abroad over time in an incremental fashion, based on their knowledge development, in two dimensions. One dimension is mode of operation which illustrates the market commitment, and the other is market dimension which illustrates the geographic diversification. There are 4 stages of entering an international market in the mode of operation. First stage is no regular exports activities, stage two is export via independent representatives, third stage is establishment of a foreign sales subsidiary, and fourth stage is foreign production and sales subsidiary. The successive stages represent higher degrees of market commitment.11 International activities require knowledge when entering new markets, which is emphasised in the market knowledge aspect of the model. The better the knowledge about the market the more valuable are the resources and the stronger is the commitment to the market.

Even though the empirical research confirms that commitment and experience are important factors explaining international business behaviour, some criticism concerning the model has been

9

Johanson and Vahlne, op.cit., p. 29 Johanson and Vahlne, op.cit., p. 29 11 Hollensen, S. (2001). Global marketing: A market responsive approach. (2nd edition), p. 48. 10

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expressed.12 Studies have shown that the model is not valid for service industries, because the growing reinforcement of foreign commitments implied by the process model is absent. Given that Ikea is not a service but a retailer only including subordinate services, this criticism will be seen at as not relevant in this particular case. Another criticism of the model is based on studies claiming that firms seem lately to skip the early stages of the establishment chain entering psychically distant markets at an early stage and to “leap-frog some intermediate entry modes in order to move away from the sequentialist pattern and more directly to some kind of foreign investment”.13 As Hollensen explains, this is possible, because the level of uncertainty is reduced by the fact that markets are becoming more homogenous, psychic distance has decreased, and services and information offered by international consulting firms reduce the level of uncertainty by providing knowledge about foreign markets. This does not exclude, however, that the firm’s international activities develop in the incremental fashion based on their knowledge development, but means that the process of knowledge development is going faster.

2.3 The concept of psychic distance The internationalization process is also explained by the concept of psychic distance, with firms expanding first into markets which are psychically close and most easy to understand and into more distant markets as their knowledge develop. Psychic distance is defined in terms of factors such as differences in language, culture, and political systems, which disturb the flow of information between the firm and the market.14 The higher is the level of psychic distance, the more knowledge is required in order to reduce the uncertainty level. However, there has been some criticism concerning among other things the measurement of the psychic distance. According to the model, psychic distance is caused by individual decision-makers perceived uncertainty, which means that the distance exists in the minds of individuals. As a result, “the concept does not refer to an objective concept or measurement of a cultural distance which may influence corporate behavior. Hence, the psychic distance may not capture the influence of cultural differences on firm’s internationalization process.”15 Seen from another perspective, however, cultural distances among countries have an influence on the individual’s perception. The greater the cultural distance of the 12

Ibid., p. 48 Ibid., p. 51 14 Ibid., p. 49 15 Bjorkman, I. & Forsgren, M. (1997). The nature of the international firm. Copenhagen: Reproset., p. 144. 13

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foreign country to the home country, the less knowledge about the new environment is likely to be available and the more difficult it is to understand and learn about the foreign country on the individual level as well. Thus, according to Sousa and Bradley analysis, there is a positive relationship between cultural and psychic distance: the greater the cultural distance between the home and the foreign market, the greater is the psychic distance.16 According to Sousa and Bradley, cultural distance, and thus psychic distance, can be measured using Hofstede’s study on cultural differences. Bjorkman and Forsgren argue, however, that Hofstede’s results concern cross-cultural differences in people’s relationship with one another when they act as employees, i.e. intraorganizational relationships across nations. They do not explain cultural differences in general, for instance, cross-cultural differences in consumer behavior.17 Still, cross-cultural differences in intraorganizational relationships and consumer behavior have the same root, which is the difference between cultures in general and lack of its understanding. Hofstede’s cultural dimensions, which are power distance, individualism, masculinity, uncertainty avoidance and long-term orientation, describe the cultural differences on the intra-organizational level because they explain the cultural differences in these areas in general, thus giving an insight in the culture. So, even though they cannot explain psychic distance and consumer behavior completely, they still do highlight some preferences and can be useful in an analysis of cultural differences. This conclusion will be used when dealing with the psychic distance concept in this thesis. The concept has also been criticized in other aspects. First of all, for that it assumes that all firms at a given stage of internationalization are influenced by cultural differences in the same direction and by the same intensity. This does not justify that multinational companies are not influenced by cultural differences in all aspects of their international behavior as small companies. Secondly, it may be problematic to use the country as a unit of analysis when dealing with psychic distance. What really matters is the gap between actual and expected behavior.18 This critic is considered when conducting an analysis.

2.4 Srandardization vs. adaptation

16

Sousa, C. & Bradley, F. (2006). Cultural Distance and Psychic Distance: Two Peas in a Pod? Journal of international marketing. Vol.14. no 1, pp 49-70. p. 53 17 Bjorkman & Forsgren, Op.cit. p. 144 18 Ibid. p. 144

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Once a company has decided which markets to enter, it needs to deal with the cultural differences identified on the foreign market and choose a marketing program accordingly. The following theory reflects on the strategy choice and will be used to analyse it in case of Ikea on the Japanese market. International companies must decide how much to adapt their marketing strategy to local conditions. At the one extreme are companies that use a globally standardized marketing mix worldwide, whereas at the other extreme is an adapted marketing mix, where the producer adjusts the marketing program to each target country. Standardizing the marketing program has advantages such as economies of scale in production and distribution, lower marketing costs, consistency in brand image, ability to leverage good ideas quickly and efficiently.19 It is said to offer the possibility of building a uniform worldwide corporate image, a world brand or global brand with a global image. However, only few products and brands allow for a fully standardized approach. Differences in consumer needs, wants, and usage patterns for products, consumer response to marketing-mix elements, differences in brand and product development, competitive environment, legal environment, marketing institutions and administrative procedures all make it necessary for the company to place the choice between standardized and differentiated marketing strategy. Some changes in product features, packaging, channels, pricing or communication are needed in different global markets in order to make sure that the company’s marketing is relevant to consumers in every market. The degree of adaptation can be influenced by product category, the company’s organization and management, homogenization of consumer needs and tastes, product life cycle and brand positioning or, for instance, by psychic and cultural differences.20 Depending on the situation, company can engage in dual adaptation, adapting both the product and the communication to the local market, or adapt only one the above mentioned. The process is described by the model below:

19

Kotler & Keller, op.cit., p. 678 De Mooij, M. (1998). Global marketing and advertising: Understanding Cultural Paradoxes. California: SAGE Publications., p. 27

20

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Communication adaptation happens at several levels. The company can use the same message everywhere, varying only the language, name, and colours. Other possibility is to use the same theme globally, but adapt the copy to each local market. The third approach is to develop a global pool of ads, from which each company selects the most appropriate one. Media and sales promotion techniques also require international adaptation dependent on the environmental conditions.21

Pricing is also an important issue. When selling abroad, companies have to deal with price escalation, transfer prices, dumping charges, and grey market. Because of the cost escalations varying from county to country, a company has to decide on how to set prices. There three opportunities. The first one is to set uniform price everywhere, but then profit rates would be different in different countries. It can also lead to prices being too high in a poor country and too low in a rich country. The second opportunity is set a market-based price in each country, where the charge is what each country can afford, but this strategy ignores differences in the actual costs from country to country. The third strategy is to set cost-based prices in each county, where a company would use a standard markup of its costs everywhere, but this strategy might price the company out of the market in country where the costs are high. Setting transfer prices for goods that a company ships to its foreign subsidiaries can also be problematic. If the charges are too high, it may end up paying higher tariff duties, although it may pay lower income taxes in the foreign country. If a company charges to low, it may be charged with dumping. “Dumping occurs when a company charges either less than its costs or less than it charges in its home market, in order to enter or win the market.”22 Often government does not allow

21 22

Kotler & Keller ,op.cit., p. 682 Kotler & Keller, op.cit. p. 684

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dumping by forcing a company to set a price close to what is charged by other competitor selling similar products.

3. Background In this section background information relevant for the analysis is presented.

3.1 IKEA background information IKEA is a Swedish company which was founded in 1943 by Ingvar Kamprad. Today Ikea Group is owned by Stichting INGKA Foundation. INGKA Holding BV is a parent company for all IKEA Group companies and owns the concept and brand name IKEA.23 Owning 262 stores in 24 countries and being represented by 296 IKEA stores in 36 countries, IKEA can be called one of the largest global furniture retailers. The company’s three distinct features are function, quality and low price. In the 1950’s IKEA developed its own way of doing things, using, for example, non-traditional materials for furniture such as plastic. That strategy made IKEA different from other furniture retailers and in that way developed a competitive advantage. “After that, we (AC: IKEA) basically copied the concept worldwide from the 1970s until now.”24 Now the vision of IKEA is “To create a better everyday life for many people”. Business idea is “To offer a wide range of well designed, functional home furnishing products at prices do low that as many people as possible will be able to afford them” and market positioning statement: “Your partner in better living. We do our part, you do yours. Together we save money.”25 The key IKEA messages all have their roots in the Swedish origin of IKEA and IKEA’s CEO Anders Dahlvig says that apart form the product range, IKEA’s Swedish values and culture are the factors that contributed to IKEA’s growth on the international market for the reason that Swedish way of doing business is different from the way they do it in many other counties. For him, an origin and unique idea is a key to international success. 26 23

Ikea group corporate site n.d., About the Ikea Group. Cited from (08.05.2009) http://193.108.42.168/?ID=25 Dahlvig, A., Kling, K. & Goteman, I. (2003). Ikea CEO Anders Dahlvig on International Growth and Ikea’s Unique corporate culture and brand identity. The academy of management executive, vol.17, no.1, pp. 31-37 25 Ikea n.d.. About Ikea. Student info. Cited from (27.04.2009) http://www.ikea.com/ms/en_GB/about_ikea/press_room/student_info.html 26 Dahlving A., et.al., op.cit. 24

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3.2 The Japanese Market background information In this section information about the Japanese market relevant for this thesis will be provided. Since Ikea entered the Japanese market for the first time in 1974 and pulled out again in 1984, the Japanese economy and market situation overview from 1970’s till 1990’s is considered to be relevant in order to understand what outside factors influenced the decision to enter and pull out. For the same reasons information about the Japanese market in period from 1990’s till the second entry time in 2001 is important. Tendencies in the Japanese furnishing sector and lifestyle preferences by the time of the second entry are mentioned as well to gain understanding of factors that made Ikea’s new strategy successful.

3.2.1 The Japanese economy and market situation in the period from the 1970’s till 1990’s. After Second World War Japanese economy grew rapidly from less-developed to developed status and in 1968 with an annual GDP growth of about 10 percent Japan’s economy became the world’s second largest, behind only that of United States. The percentage of Japanese living in the cities almost doubled between 1950 and 1970, thus increasing demand for services. From 1974-1979 economic growth slowed to 3,6 percent, caused by double-digit inflation and the Middle East oil crisis that reduced private investments. In spite of that Japan’s major export industries still remained competitive by cutting costs and increasing efficiency. In the 1980’s, the GDP growth slightly increased to 4,4 percent. Later in 1985 the value of yen rose increasingly to three times its value in 1971. Corporate investment, stock prices, new equity turned to rise exceedingly. As a consequence, government considered to tighten the value of asset, especially land, with monetary policies while higher interest rates sent stock prices into a downward curved. In 1993 the recession bottomed out, but has been recovering slowly since then.27

27

Asian info n.d. Summary of Japan’s economy. Cited from (01.05.2009) http://www.asianinfo.org/asianinfo/japan/proeconomy.htm

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3.2.2 The Japanese economy and market situation in the period from 1990’s till the time of second entry In the 1990’s, in order to keep the inflation level low, Japanese government undertook deflationary measures which triggered a decline in the Japanese economy. This decline resulted in higher unemployment though layoffs, once considered unthinkable in Japan due to its traditions of “lifetime employment” for selected workers and strong employee loyalty. To avoid these massive layoffs, many companies initiated a policy for reducing salaries and wages, thus lowering the living standard and decreasing spending, which, in turn, has prolonged the economic decline. Because of the decline, in 1996 Japan tried to restructure the financial sector by introducing the so-called “Big Bang” reform measures. Later, in 1997, the Asian crisis emerged and was considered as external economic factor of downturn. The economic decline in the 1990’s which inclined the Japanese government to encourage foreign investment by liberalizing the economy together with pressure from its trading partners and competitors forcing to open the market to foreign competition initiated deregulation reforms. It removed an enormous number of restrictive government regulations and the country moved from being a well-protected economy practically closed to foreign investments to a more open economy, although there are still some restrictions limiting the flow of imports. 28

3.2.3 Japanese Home Furnishing sector and lifestyle preferences Japan's home furnishings sector has experienced considerable expansion since the 1990’s, growing to 3.92 trillion yen in sales and 3,860 stores in 2003. The move beyond the usual retail practice of selling only products to stores adding value to customer’s shopping experience by giving innovative ways to solve household problems has become a prominent trend. Consumers have changed the way they thought of products in households by encouraged to search for home management solutions. Japanese consumers are known to value quality in a high degree. A demand for higher life quality and varying consumer styles are now met by home furnishing stores presenting their merchandise in coordinated settings.29 In general, Japan’s consumer market is witnessing the growing presence of two generations that are pursuing new lifestyles: the first is the “baby boomers” – those born during the late 1940s and who are now approaching retirement years and enjoying high disposable income and time; the second 28

Encyclopedia of nations n.d.Japan. Cited from ( 05.05.2009) http://www.nationsencyclopedia.com/Asia-andOceania/Japan.html 29 www.jetro.go.jp/en/reports/market/pdf/2005_50_l.pdf

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group is their children – the so-called “second-generation baby boomers” – who are currently establishing households of their own. These two groups are expected to generate robust demand for lifestyle-related products and services.30

3.3 Ikea on the Japanese market In 1974 as the economic expansion in Asia emerged, Ikea, which was highly successful in most of its international markets, entered Japan with a local partner, but failed to win over Japanese consumers and pulled out in 1986.31 When entering the new markets, Ikea is not just selling products, but also s philosophy: this is how things are done in Sweden. However, putting a Swedish accent on another country’s way of living wasn’t a success in Japan. Ikea encountered the failure as a result of rush into Japanese market and Japanese customers being not ready for flat pack living and not convinced of assembling their own furniture.32 According to David Marra, a principal at management consultants AT Kearney in Tokyo, “multinational companies entering Japan often do not spend enough time to understand the nature of the competition here, which is usually fairly fierce, and the so-called unique needs of Japanese consumers”.33 Ikea’s Japan K.K. CEO, Tommy Kullberg, commented on the failure: “The Japanese market and consumers were not ready for Ikea, and Ikea was definitely not ready for Japan at the time”.34 Since Ikea was not successful from the first time it entered Japanese market, in 2001 Ikea decided to re-enter Japanese market in part due to deregulation of Japan’s Large-Scale Store Law, which made it beneficial for large retailer to enter Japan, and in 2002 established Ikea Japan K.K. with the assistance of JETRO.35 In April 2006, after planning the return strategy for five years, first Ikea mega-store in Japan opened east of Tokyo. CEO of Ikea Anders Dahlvig thinks that Ikea will have a better time in Japan the second time around. “Japan is much more open, and we are a much stronger 30

Jetro Japan External Trade Organization n.d., Attractive sectors. Retail. Cited from (10.05.2009) www.jetro.go.jp/en/invest/attract/retail/retail2009.pdf 31 The Local n.d. (16.04.2006) ”Size matters as Ikea returns to Japan”. Cited from ( 09.05.2009) http://www.thelocal.se/3566/20060416/, 32 Lewis, E. (28.03.2005). Is Ikea for everyone? Cited from (10.05.2009) http://www.brandchannel.com/features_effect.asp?pf_id=256 33 The Local n.d. (16.04.2006) ”Size matters as Ikea returns to Japan”. Cited from ( 09.05.2009) http://www.thelocal.se/3566/20060416/, 34 “IKEA: The Japanese Misadventure and Successful Re-entry”, http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/IKEAJapanese%20Misadventure%20and%20Successful%20Re-entry.htm 35 Jetro Japan External Trade Organization n.d., Attractive sectors. Retail. Cited from (10.05.2009) www.jetro.go.jp/en/invest/attract/retail/retail2009.pdf

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company”, he says. “Today is the right time to come to Japan”.36 However, Ikea’s biggest barrier is these time the same that it was first time around. “Japan’s notoriously fussy consumers will not be open to the idea of building furniture themselves.”37 This does not bother Kullberg, who thinks that this time Ikea is prepared and has done its homework. “We are meeting the most demanding customers in the world, used to high quality and high service levels. Anyone operating on this market has to satisfy these demands”, Kullberg says. The new concept of Ikea on the Japanese market is “making an ideal home” and Kullberg also explains that it is the idea they want to inspire people with.

4. Analysis In this section Ikea on the Japanese market in round one and two is discussed and analyzed based on theories presented above as a tool to answer the research problem. Empirical data is utilized to analyse the cases. First, the Uppsala internationalization process model and the concept of psychic distance are used to answer the question why and how Ikea internationalize to Japanese market. Then, the market strategy and factors that made Ikea a failure on the Japanese market in the first round and success in the second round are analyzed using the concept of standardization and adaptation.

4.1 Internationalization of Ikea on the Japanese market 4.1.1 First round According to the Uppsala internationalization stage model, firms develop their activities abroad over time in an incremental fashion, based on their knowledge development, starting from nearby countries that are psychically close to the home market.38 Ikea, the biggest home-furnishing retailer, started the international expansion from the nearest countries, such as Norway (1963), Denmark (1969), Switzerland (1973), Germany (1974) and so on.39 Little geographic and psychic

36

Capell,K. (26.04.2006). Ikea’s New plan for Japan. Cited from (01.05.2009) http://www.businessweek.com/globalbiz/content/apr2006/gb20060426_821825.htm 37 Lewis, E. (28.03.2005). Is Ikea for everyone? Cited from (10.05.2009) http://www.brandchannel.com/features_effect.asp?pf_id=256 38 Hollensen, S., op.cit., p. 48. 39 Ikea group corporate site n.d., Ikea group stores. Cited from (28.04.2009) http://www.ikea-group.ikea.com/?ID=11

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distance between Sweden and the above mentioned countries, measured according to Hofstede’s dimensions, reduced the uncertainty level and made the internalization easier not requiring a lot of new experiential knowledge. After a successful entry in these countries, Ikea decided to invest in distance country in Asia, Japan. Internationalization of Ikea in Japan was shaped by environmental conditions such as economic and regulation. After the Second World War, due to the economic growth Japan became attractive for foreigner to invest as the economy expanded rapidly and turned Japan from less-developed into the second largest market in the world40 as well as the growing city population made the demand for services higher.41 Ikea considered the Japanese market attractive and decided to enter it in 1974. Hofstede’s dimensions describe Japan as culturally distant from Sweden in a very high degree.42 According to the Uppsala internationalization model, the more psychically distant is the market, the more knowledge is required to reduce the uncertainty level and develop a right strategy. However, in the critic of the model it is stated that some companies still enter the distant markets at an early stage, skipping stages of the establishment chain.43 Ikea, entering Japan in the 1970’s right after entering the closest markets, was not an exception. As it is mentioned in the critics of the psychic distance concept, the unit of analysis is not the country but the gap between actual and expected behaviour. Lars Petersson, president of Ikea Japan K.K., said that the strategy Ikea chose for entering Japanese market in the first round was the same as in the countries entered before.44 That means that by the time of first entry, Ikea perceived the psychic distance being smaller, which reduced the level of uncertainty and contributed to the expansion decision at an early stage. Perceiving the uncertainty level and the psychic distance as small leads to the conclusion that the knowledge development can be kept at low level too. At that point, general and objective knowledge, as well as market specific knowledge about home country and the nearest markets, can seem to be enough for the new entry. That explains Ikea’s choice to transfer their European strategy to Japan.

40

Japan fact sheet n.d., Japans economy in an era of globalization. Cited from ( 30.04.2009) http://webjapan.org/factsheet/pdf/04Economy.pdf 41 Asian info n.d. Summary of Japan’s economy. Cited from (01.05.2009) http://www.asianinfo.org/asianinfo/japan/proeconomy.htm 42 Itim international n.d. Geert Hofstede Cultural Dimensions. Cited from (01.05.2009) http://www.geert-hofstede.com/ 43 Bjorkman, I. & Forsgren, M. op.cit p.144 44 Lane, G. (09-10.2007). Failed businesses in Japan: a study of how different companies have failed, and tips on how to succeed, in the Japanese market. Cited from (28.04.2009) http://findarticles.com/p/articles/mi_m0NTN/is_73/ai_n21081525/pg_4/

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However, the real cultural distance ended to be larger then Ikea had expected. Petersson commented that Japan is not just another country. “There are a lot of local things you need to understand. You need to have local people employed right from the start, at a high level, that understand what this country is about”.45 General and objective knowledge were in a high degree not enough to deal with the Japanese market, and the lack of experiential and market specific knowledge while internationalizing on an early stage, together with outside factors such as instability of Asian economic growth and inflation46 among other things lead to failure and Ikea chose to withdraw stores out Japanese market in 1986.47 Anders Dahlvig, Ikea group president, commented on that: “I think last time in 1970s it was way too early to come to Japan”. According to him, the early entry was a big mistake and right decision was to leave and wait until they were ready.48

4.1.2 Second round After almost thirty years since Ikea unsuccessfully had tried to launch a store in Japan, in 2001 they finally felt that the time was right to re-enter the Japanese market, and in 2002 established Ikea Japan K.K. in assistance with JETRO ( Japan external trade organization is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world, with the focus toward promoting foreign direct investment into Japan and helping firms maximize their global trade potential).49 In 2006 the first Ikea mega-store was opened Tokyo (Funabashi).50 By the time of the second entry Ikea was already present in the most important markets of the world, such as USA (1985), Canada (1976), China (1998), Russia (2000) and Australia (1981), which contributed to Ikea’s international experience. This, together with deregulation changes in Japanese economy and large scale retail store law in 1990’s, which made the country much more open to foreign investments, created favourable conditions for the new entry. As discussed in the section “Japanese home furnishing sector and lifestyle preferences” Japanese generations of “baby boomers” and “second-generation baby boomers” were pursuing new life styles thus increasing the 45

Ibid. Asian info n.d. Summary of Japan’s economy. Cited from (01.05.2009) http://www.asianinfo.org/asianinfo/japan/proeconomy.htm 47 Lane G., op.cit. 48 News Gate NY n.d .. Ikea confident as new store opens in Japan. Cited from (01.05.2009) http://newsgateny.net/site/news/newsfile.php?titolo=Ikea%20confident%20as%20new%20store%20opens%20in%20Ja pan&persona=Anders%20Dahlvig 49 Jetro n.d., op.cit. 50 Ikea group corporate site n.d., op.cit. 46

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demand for life style related products and services. In general, Japanese customers have changed a little too, and now were warming to “do it yourself” shops, whereas Ikea’s modern aesthetic seems to appeal to Japanese taste.51 Moreover, it was a great challenge for Ikea to overcome cultural differences and maintain their advantages while using their experiences in the past to conquer lack of foreign knowledge. This time around, Ikea has done its homework and after five years of preparations was ready to meet the Japanese consumers. Realizing the cultural differences, Ikea was not content with general and objective knowledge any more, but learned from mistakes by gathering market specific knowledge.52 In order to understand customers and cultural pattern of Japanese, Ikea made a survey and visited more then hundred of homes.53 Market specific knowledge favoured the uncertainty decline and together with political stabilization of the market and changes in consumer tastes contributed to the commitment decision.54 According to Kullberg, now the time to expand on the Japanese market was right.

4.2 Degree of adaptation When entering a new market, a company should choose how to approach it and to which degree it must adapt their strategy to the local conditions.55 In general, Ikea uses a rather standardized approach to the foreign markets. Having a unique concept, doing things the other way around than the traditional furnishing business and benefiting from Scandinavian style, Ikea stood for something different from the local, domestic competition on the foreign markets. Having three distinct features – function, quality, and low price – the company basically copied the developed concept worldwide.56 The standardized approach, according to the theory, gives many benefits, such as economies of scale in production and distribution, lower marketing costs, consistency in brand image, ability to leverage good ideas quickly and efficiently.57 Moreover, it contributed to Ikea in building a global brand with a global image. According to Mooij, a global brand is “one that shares the same strategic principles, positioning and marketing in

51

Capell, op.cit. Johanson & Vahlne, op.cit., p. 28 53 Capell, op.cit. 54 Johanson and Vahlne,op.cit. p.28 55 Kotler and Keller., op.cit. p. 677 56 Dahlving A., et.al., op. cit. 57 Kotler and Keller., op.cit. p. 678 52

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every market throughout the world, although the marketing mix can vary. It carries the same brand name or logo. Its values are identical in all countries, it has a substantial market share in all countries and comparable brand loyalty. The distribution channels are similar.”58 Ikea as a brand matches to that description in a rather high degree. The concept all over the world is the same. Worldwide Ikea’s main target group is younger people and young families. The uniqueness of the concept, including a light Scandinavian furnishing style, showrooms, flat-pack and self assembling, gave Ikea the same advantages in each country that it had in Sweden in the early days.59 Moreover, a part of Ikea’s strategy is to inspire their global customers with Swedish family values. “In our world, home is the most important place and having children is the most important thing. Go home in time to see your children. That is the concept we want to inspire in people here”, says Kullberg.60 However, even a global brand that seeks to educate consumers, as Ikea does, can not allow a fully standardized strategy. According to Dahlvig, different countries, languages, laws, and all other factors have to be taken into consideration.61 As Ikea entered Japan for the first time in 1974 on a rather early stage in their internationalization process, the strategy for Japan was very similar to the one it used on its nearest markets. The degree of adaptation was very low, conveyed mainly in the small size of the store, 62 based on the fact that smaller stores are what the Japanese consumers were used to.63 But the lack of market specific and experiential knowledge at that time brought Ikea into disappointment. First of all, for the reason of its small size the store has not attracted enough attention and Japanese consumers were not willing to assemble Ikea’s do-it-yourself kits.64 This leads to a conclusion, that the low degree of adaptation and the wrong direction that it has taken is a consequence of Ikea relaying too much on the general knowledge and lacking the market specific one. Therefore in the second round Ikea being taught by the past mistakes gained the market specific knowledge and learnt to adapt the level of services. After spending five years on preparations, making surveys and visiting more then a hundred of Japanese homes, Ikea learned about tastes,

58

De Mooij, M. (1998). Global marketing and advertising: Understanding Cultural Paradoxes. California: SAGE Publications. 59 Dahlving A., et.al., op. cit. 60 Wijers-Hasegawa, Y.(25.04.2006). Sweden’s Ikea back in Japan after 20-year hiatus. Cited from (30.04.2009) http://search.japantimes.co.jp/cgi-bin/nb20060425a1.html 61 Dahlving A.,. et.al., op. cit. 62 Capell, op.cit. 63 The Local n.d. (16.04.2006) ”Size matters as Ikea returns to Japan”. Cited from ( 09.05.2009) http://www.thelocal.se/3566/20060416/, 64 Capell, op.cit.

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preferences and lifestyles of Japanese consumers and has developed a new strategy for the Japanese market based on those cultural differences. There are four elements of the marketing mix, that global brand can adapt to meet the needs of local consumers: product, price, place, promotion.

4.2.1 Product After having visited Japanese homes, Ikea got an understanding of the tastes and living conditions of the Japanese. Most Japanese homes are small; children usually live together with parents at home before marriage and also share space with grandparents or in-laws.65 That observation lead to conclusion, that large sofas, beds and tables which are top sellers in Europe would not attract Japanese consumers because they simply would not fit into their homes. 66 The adaptation in this case became a necessity. The decision was made not to adapt the products by, for example, changing their size, but to adapt the product range by selecting 7500 items out of 10000 suited to cramped Japanese homes.67 This strategy helped to avoid extra cost and to make the furniture appeal to the Japanese consumers as well.

4.2.2 Pricing Kotler and Keller discuss three options of setting prices on the international market. They are: uniform price everywhere, market based price in each country, and cost-based price in each country. The strategies are elaborated on in the theory section. If a company uses standardized approach to pricing, prices would be the same everywhere. However, this is not possible in the most cases, because in poor countries a company might not be able to sell products due to prices being too high, and in rich countries it would loose profit due to prices being too low compared to costs for production, taxes and other factors. Cost-based prices and market based prices are a part of adaptation strategy, because these pricing strategies take into consideration costs related to a specific market or its spending power of customers. To find out what strategy Ikea is using, prices for the same product in Japan and Sweden were compared. The finding was, that a sleeping couch in Sweden costs 3195 SEK, where as the same

65

Capell, op.cit. Ibid. 67 Wijers-Hasegawa, Y. op.cit. 66

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model in Japan costs 51900YEN, which equals to 4192 SEK at the current exchange rate.68 It makes clear, that an adaptation approach is used in pricing on the Japanese market. In order to find out whether it is cost-based or market based pricing, nominal GDP per capita of Japan and Sweden for 2007 is compared. Sweden turned out to be the ninth richest country, whereas Japan is on the sixteenth place.69 Based on that information, it can be concluded that the prices in Japan are not market based, because if they were Ikea should have been charging more in Sweden then in Japan. Thus, prices are cost-based. Having cost based prices has a risk that in countries where the costs are high company can be priced out of the market. However, it is not the case of Ikea in Japan. “The prices are still competitive compared to other well-known furniture retailers such as Muji, the “no brand” home ware retailer.” Customers were also pleasantly surprised by the prices being lower then they expected Scandinavian furniture to be.70 So it can be concluded that chosen strategy gave Ikea both: an opportunity to match differences in actual costs and a competitive advantage on the Japanese market.

4.2.3 Place/distribution When it comes to distribution, Ikea uses a quite standardized approach worldwide. Ikea makes use of big size stores with many showrooms to present their products to the customers. “Normally, we buy land and build a store on it”, says Dahlvig.71 Size of the store is a significant factor. Although Ikea is a mass retailer, by the time of the first entry on the Japanese market, they tried to adapt the size of the store by making it smaller, because small stores were what the Japanese consumers were used to. However, it was not such a good idea and, as discussed above, led to disappointment. Then, after accumulating market knowledge of the Japanese behaviour from the first round, they recognized that the size of the store is a matter in selling furniture in Japan. When entering Japan for the second time, Ikea introduced a mega store with 10,000 product lines supported by 2,200 car parking spaces, a child-care area and one of Tokyo’s largest restaurants.72 68

Ikea Japan corporate website and Ikea Sweden corporate website http://public.data360.org/pub_dp_report.aspx?Data_Plot_Id=183 70 News Gate NY n.d .. Ikea confident as new store opens in Japan. Cited from (01.05.2009) http://newsgateny.net/site/news/newsfile.php?titolo=Ikea%20confident%20as%20new%20store%20opens%20in%20Ja pan&persona=Anders%20Dahlvig 71 Dahlving A., et.al., op.cit. 72 News Gate NY n.d .. Ikea confident as new store opens in Japan. Cited from (01.05.2009) http://newsgateny.net/site/news/newsfile.php?titolo=Ikea%20confident%20as%20new%20store%20opens%20in%20Ja pan&persona=Anders%20Dahlvig 69

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The new store attracted a lot of attention and within the first four hours 15,000 people had passed through its doors.73 The store was located in Funabashi area, which is a battleground for furniture retailers, with ten large shops mostly located within two train stops from Ikea. Tokyo Interior, one of the most popular furnishing stores, opened its biggest store only a station apart from Ikea. Competition is taught, but Kullberg, for his part, says that his team enjoys it. “The more people talk about furniture, the more we sell”74 Moreover, locating the store on the outskirt of the city, which is Ikea’s worldwide strategy, gives Ikea an actual opportunity to built big stores and save on ground rent, thus lowering the actual costs and keeping prices low. Packaging is also an important issue when it comes to distribution, as flat-packs and self-assemble kits are an important part of Ikea’s concept. “Your partner in better living. We do our part, you do yours. Together we save money”75 is Ikea’s worldwide market positioning strategy. Standardizing the market positioning and applying the flat-packs and self-assemble kits strategy global gives Ikea the same competitive advantage on each market, contributing to low level prices. Yet, when the packaging concept was introduced in Japan, it was not a success. Japanese customers were not familiar with the do it yourself kit, where they need to assemble the furniture from compact box themselves at home, and very few were willing to do that.76 Customers’ unwillingness to do their part was one of the reasons that led to Ikea’s failure in the 1980’s and later on, after having gained the experiential knowledge, to review the concept in Japan and adapt it more to customers tastes and habits by providing home delivery and assembly for an extra charge.77 The lower degree of adaptation, conveyed in not changing the flat-pack concept completely, but providing extra services, still left space for Ikea to educate their customers and possibly train them to assemble the furniture themselves in the future.

4.2.4 Promotion/marketing communication

73

Ibid. Wijers-Hasegawa, Y., op.cit. 75 Ikea n.d.. About Ikea. Student info. Cited from (27.04.2009) http://www.ikea.com/ms/en_GB/about_ikea/press_room/student_info.html 76 Wijers-Hasegawa, Y., op.cit. 77 Capell., op.cit. 74

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Cultural and regulatory differences often force a company to adapt their communication to the local market.78 Ikea’s showrooms are a part of promotion strategy, which appeal to customers by presenting the furniture in almost real life housing conditions. Since in different countries living situation is very different, adaptation is vital. If the furniture is presented in housing conditions that customers can not relate to, it will not be appealing in a desirable degree. That is why before opening the new store Ikea studied Japanese living situation, finding that Japanese homes are mostly small.79 Based on the gained knowledge, Ikea comprised 70 mini-showrooms on the second floor of the store with the same size of typical Japanese room in order to convince their understanding of small-scale living.80 For the same reasons and to gain attention Ikea launched an outdoor exhibition in Aoyama, Ikea 4.5 museum, by setting up 14 showrooms along tree-boulevard. The 4.5 refers to the fact that each showroom is in the size of 4 and half tatami mats.81 Even in the TV commercial that Ikea launched in Japan in 2008 the emphasis is on the small-space living and educating the consumers about how easy it is to assemble the furniture yourself.82 Adaptation of the commercial to the specific market makes it both appealing and allows to focus on solving specific market-related problems.

5. Conclusion In this section conclusion of the thesis based on the thesis statement and the conducted analysis is provided. The factors in Ikea’s internationalization strategy that influenced Ikea’s failure on the Japanese market in the first round and success in the second round could be summed up to, namely, psychic distance, market knowledge and learning, entry time and strategy, and degree of adaptation. Firstly, psychic distance creates barriers for Ikea to enter the Japanese market. When entering Japan for the first time in 1974 Ikea underestimated the significance of cultural differences and due to the lack of experiential and market specific knowledge perceived the level of uncertainty as low and the time 78

Kotler & Keller, op.cit., p. 683 Capell., op.cit. 80 Ibid. 81 Snow, J. (12.04.2006) Ikea Funabashi. Cited from (13.05.2009) http://gridskipper.com/archives/entries/056/56578.php 82 http://www.youtube.com/watch?v=CRngo4fB6y4&feature=PlayList&p=6011624657F14FD7&playnext=1&playnext _from=PL&index=4 79

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as right to enter the Japanese market, which led to failure. Secondly, by the time of the first entry research, and thus market based knowledge, which is a platform for building the right marketing strategy, was missing. Thirdly, due to the lack of market specific knowledge, there was too little degree of adaptation in the marketing strategy and as a result the Japanese consumers could not relate to the concept. Though Ikea did not succeed in expanding on the Japanese market in the 1970’s, in the second round Ikea made use of learning and past international experience. Before entering the market for the second time Ikea, realising that the level of psychic distance between the Swedish and the Japanese is high, spent five years on research in order to understand the cultural differences and get more market specific knowledge reducing in that way the level of uncertainty. The gained market specific knowledge contributed to understanding of consumers’ lifestyles and needs, which led to a conclusion that a higher degree of adaptation is needed on the Japanese market. Remaining a global brand and using a rather standardized approach worldwide, Ikea adapted the marketing mix to the special features of Japanese market and consumers. It made the marketing program relevant for the Japanese and contributed to the success.

It can be concluded that internationalization on the Japanese market was a big challenge for Ikea. Learning from this experience and acquiring the international know-how from satisfying ones of the most demanding customers in the world, Ikea gained extra skills to conquer other distant markets in world.

Characters: 49688 – 22.5 pages

6. Bibliography Asian info n.d. Summary of Japan’s economy. Cited from (01.05.2009) http://www.asianinfo.org/asianinfo/japan/pro-economy.htm Bjorkman, I. & Forsgren, M. (1997). The nature of the international firm. Copenhagen: Reproset. Capell, K. (26.04.2006). Ikea’s New plan for Japan. Cited from (01.05.2009) http://www.businessweek.com/globalbiz/content/apr2006/gb20060426_821825.htm

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Dahlvig, A., Kling, K. & Goteman, I. (2003). Ikea CEO Anders Dahlvig on International Growth and Ikea’s Unique corporate culture and brand identity. The academy of management executive, vol.17,no.1, pp. 31-37 De Mooij, M. (1998). Global marketing and advertising: Understanding Cultural Paradoxes. California: SAGE Publications. Encyclopedia of nations n.d.Japan. Cited from ( 05.05.2009) http://www.nationsencyclopedia.com/Asia-and-Oceania/Japan.html Hollensen, S. (2001). Global marketing: A market responsive approach. (2nd edition). Ikea group corporate site n.d., About the Ikea Group. Cited from (08.05.2009) http://193.108.42.168/?ID=25 Ikea group corporate site n.d., Ikea group stores. Cited from (28.04.2009) http://www.ikeagroup.ikea.com/?ID=11 Ikea n.d.. About Ikea. Student info. Cited from (27.04.2009) http://www.ikea.com/ms/en_GB/about_ikea/press_room/student_info.html Itim international n.d. Geert Hofstede Cultural Dimensions. Cited from (01.05.2009) http://www.geert-hofstede.com/ Japan fact sheet n.d., Japans economy in an era of globalization. Cited from ( 30.04.2009) http://web-japan.org/factsheet/pdf/04Economy.pdf Jetro Japan External Trade Organization n.d., Attractive sectors. Retail. Cited from (10.05.2009) www.jetro.go.jp/en/invest/attract/retail/retail2009.pdf Johanson, J. & Vahlne, J.E. ( 1977) The internationalization process of the firm – a model of knowledge development and increasing foreign market commitments. Journal of international business studies, vol. 8, no.1, p. 23 Kotler, P. & Keller, K. (2006). Marketing Management. ( 12th edition). United states of America: Pearson Prentice Hall. Lane, G. (09-10.2007). Failed businesses in Japan: a study of how different companies have failed, and tips on how to succeed, in the Japanese market. Cited from (28.04.2009) http://findarticles.com/p/articles/mi_m0NTN/is_73/ai_n21081525/pg_4/ Lewis, E. (28.03.2005). Is Ikea for everyone? Cited from (10.05.2009) http://www.brandchannel.com/features_effect.asp?pf_id=256 News Gate NY n.d .. Ikea confident as new store opens in Japan. Cited from (01.05.2009) http://newsgateny.net/site/news/newsfile.php?titolo=Ikea%20confident%20as%20new%20store%2 0opens%20in%20Japan&persona=Anders%20Dahlvig

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Public 360 n.d. Twenty richest countries per capita (GDP), june 2007. Cited from (12.05.2009) http://public.data360.org/pub_dp_report.aspx?Data_Plot_Id=183 Snow, J. (12.04.2006) Ikea Funabashi. Cited from (13.05.2009) http://gridskipper.com/archives/entries/056/56578.php Sousa, C. & Bradley, F. (2006). Cultural Distance and Psychic Distance: Two Peas in a Pod? Journal of international marketing. Vol.14. no 1, pp 49-70. The Local n.d. (16.04.2006) ”Size matters as Ikea returns to Japan”. Cited from ( 09.05.2009) http://www.thelocal.se/3566/20060416/ Wijers-Hasegawa, Y.(25.04.2006). Sweden’s Ikea back in Japan after 20-year hiatus. Cited from ( 30.04.2009) http://search.japantimes.co.jp/cgi-bin/nb20060425a1.html

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