Table of Contents
Review of the Situational Analysis
Previously analysed possibility to open a modern distribution store of the IKEA Group branch in the largest city of Abidjan in Côte d’Ivoire has proven to be quite interesting. In general review, it is necessary to state that the Ivory Coast is a gradually developing country with frequently increasing number of investments and potential business opportunities. According to the information provided in the World Bank report, regarding the economic development of Côte d’Ivoire, it is important to mention that the country is considered to be the second largest economy in West Africa with a steady GDP growth, open policies for international businesses, and a strategic intention to become an emerging country by 2020 (World Bank, 2015). Such a frequently developing state of economy sets possibilities for international companies to enter the forming market and establish their position towards national competitors. Concerning this research, the possibilities of market entry are quite suitable for a company such as IKEA Group.
The chosen retailer focus of the respective organisation is mostly related to the modern furniture and décor elements, directed mostly to the middle income consumer households (in different countries the target segments differ). The IKEA trademark is considered to be one of the most noticeable brands of furniture sellers in the world. This is due to the international focus of the company, which is presented in more than 40 different countries. Moreover, some stores can be found even in the African continent (Egypt). The international segmentation strategy of IKEA Group differs from country to country, however, the basic GDP (PPP) is in Côte d’Ivoire amounting to $ 2,900 (as compared to Egypt, which is $11,100) (CIA, 2014), where the basic standard of living and the current trademark segmentation should be based on low and middle cost products.
The competitors that can be a threat to IKEA are international retailers, resellers of Chinese furniture products, and some native furniture producers. The most important ones are
- Roche Bobois (French based retailer);
- Natuzzi (international Italian based furniture manufacturer);
- Spanish based furniture manufacturers such as Actiu, Ofifran, Soher, Curvasa – members of the Spanish National Association of Furniture Manufacturers & Exporters (Mueble De Espana, 2014);
- Resellers of Chinese furniture such as BMA Furniture, Mitfarm International Ltd, Sun enterprises Ltd, F&G International etc.
The competitor’s perceptual map, based upon the price speciation and quality of products, can be seen in Appendix A, Figure 1. “Competitor’s perceptual map”.
Market Entry Mode
Considering the four main aspects (resource availability, overall control of the company, general risks, and returns from entering the market, demonstrated in Figure 2. “Entry choice factors for IKEA” of the Appendix A) that influence the direction, in which the company will enter the market, IKEA’s choice would be the sole venture. (Agarwal, Ramaswami, 1992) Due to the fact that IKEA is an already established international company with great experience working in different countries and with different societies, it does not need to focus on joint venture mode. The reason is that its brand is already recognised, and the current governmental regulations do not consider severe regulations regarding the operations of foreign companies in the country. Another option, exporting mode, could have been a good choice in case of a diversified network of dealers. However, due to the international strategy of IKEA, the company practices opening its own stores in the chosen countries. Such a strategy of entering the market may involve more risks than the exporting mode, but the possibility of achieving a leading position in the market place and a chance to capture a greater segment of the customers justify such a decision. Furthermore, sole venture, gives an opportunity to establish production lines in Côte d’Ivoire (Agarwal, Ramaswami, 1992). This option could be quite beneficial in the long-term due to the location, which is close to the unique resources (developed wood processing industry) and labour force. Consequently, sole venture is best option suited for IKEA’s Côte d’Ivoire market entry.
IKEA’s Aims and Objectives
By previously mntioned possibilities of entering the market of Côte d’Ivoire, it can be clearly noted that there are great opportunities for IKEA to develop its business. According to their consideration, the company can set the following objectives regarding this new market:
- Establish the first IKEA store in one of the premises of the Abidjan city by the beginning of 2016
- Achieve the leading position in targeted segment among potential competitors by the end of 2017
- Develop a market strategy based on previous customer evaluation to provide the required products in the suitable way to the potential customers
- Establish a production plant for a new line of manufactured furniture, specifically from Côte d’Ivoire wood recourses.
- Develop the store networks across the country to increase the profits.
Target Market and Strategy
According to the general strategy of offering quality products at cheap prices established for all countries of its operations, the company uses a basic set of factors for segmenting the potential market. Such factors include income level, age differences, family life cycle, lifestyle, etc. Analysing carefully these features regarding the market of Côte d’Ivoire, one may conclude that IKEA can focus its products on two segments of the customers.
The first one is characterised as young people, aged approximately 24 – 35 who have a good level of income (related to the middle class in the country). Such customers are college students or young adults who have obtained an apartment, created a family, etc. Their desire to maintain a modern lifestyle in their home is minimalism with practical and malty-task furniture, but with high standards of quality. Such customers mostly work in the service sector (IT specialist, computer specialist, business consultants etc.).
Second group of customers can be characterised as people for whom the price is important. Their main desire is to obtain a product that costs less than most of the substitutes on the market, however, still maintaining a reasonable quality level. Such customers are aged between 25 – 45, who have already bought an apartment or constantly rent one. These people have in most cases a working profession, for example, agriculture, woodcutter, construction worker, etc.
The basic strategy regarding these two segments will be the same as in other countries, namely focused on low and middle budget consumers. The company tries to attract them through simple creative design, appropriate quality for a reasonable price, and a focus on fresh and creative ideas related to the interests of the native social groups. This is the strategic idea that should be used for development of the marketing mix elements.
Marketing Mix Decisions
The marketing mix of IKEA is quite a unique feature of its success. Due to its numerous products, the company has obtained a wide range of customers. IKEA provides diversity in different ways.
First, the company has a great number of products that are meant for the implementation of different tasks, starting with plant pots and ending with bedroom and kitchen furniture. Secondly, IKEA has wide range of different styles and designs. Both of these features are combined in a way that every customer can find something that suits his needs and desires. (Zubareva, 2014). According to this internationally recognised feature of the company, IKEA should continue to support the same policy regarding their products in Côte d’Ivoire. Moreover, considering the native preferences in furniture, corresponding measures should be provided so that customers could obtain, among the variety of designs accepted in other countries, a certain line of furniture seen more commonly in the country. However, considering purchasing power of the customers living in Côte d’Ivoire, most of the presented products should correspond to the targeted segments’ characteristics.
One of the most important features, which realisation required much effort and time from IKEA, is the price policy. According to its general strategy, the company offers prices that are below the completion. This approach is used worldwide. IKEA has assigned the issue of the assemblage of its products to the customers themselves. Specific design due to which the consumers can easily assemble the parts themselves provided the possibility of reduccing labour, shipping, and storage costs for the company and, consequently, lowering prices for the buyers (Zubareva, 2014).
The price policy regarding the store in Côte d’Ivoire should be based according to the general strategy. Low prices generate interest in the products among those groups of consumers that do not relate to the target segments. Such a possibility allows attracting new potential customers. Additional actions can be implied regarding price reduction in order to enforce a stronger competitive advantage, such as establishment of production facilities in the country. The products, which are produced and sold directly in the country require less expenses and, consequently, can reduce the prices of IKEA furniture inside the country. However, such actions can lead to the reduction of products exported to Côte d’Ivoire from other countries-producers of IKEA furniture.
IKEA developed its strategy even further and made the decision to relocate its stores to remote places outside the urban areas. Due to low prices of furniture, the customers were willing to travel to the outskirts of their towns to visit the IKEA stores. This provided possibility to reduce building expanses regarding new stores for the company (Zubareva, 2014).
Côte d’Ivoire is a new market for IKEA and a store, which is located at a distance from the potential customers even with an affective promotional campaign, should not be the exact choice for placement. However, going against the general strategy of the company, it is more important to follow the general rules of marketing. A store that is places in a regularly visited area can receive a greater recognition than any possible promotional campaign and will require fewer resources to attract the customers. Placing an IKEA store in the urban area will be the right decision during the market entry period.
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In order to promote its products to the current and potential customers, IKEA is using different sorts of communication channels. Modern technologies have influenced the area of advertisement and set new standards regarding customer communication. Presently, IKEA is regularly using the possibilities of the internet to promote its furniture through email marketing, banner advertisings, brand promotions, etc. In addition, classical channels of communication (TV ads, display advertisements, catalogues, and showroom presentations) are being used quite often (Zubareva, 2014). Côte d’Ivoire promotional channels should be more focused on classical channels of communication than on the internet communication. Such a decision is justified due to the segmentation strategy mentioned above: the number of people in the first segment is more involved in the usage of the internet. However, their number is lesser than that of the second target segment, which is more responsive to the classical promotional strategies.
International Marketing Monitoring
It is worth noting that that the information presented above regarding the decided strategic actions directed to commence business in Ivory Coast requires a set of working managerial functions, such as organisation of the operating processes, motivation, monitoring, and measurement procedures. Due to the previously successful market entries performed in other countries by IKEA, the same system of procedures can be used. Mainly, the motivational and organisational procedures (to a certain extent) should be managed by the chosen project administration inside the country; measurement and monitoring must be assigned to the representatives from the IKEA Group’s main office. Their focus should be to analyse the effectiveness of the international strategy in Côte d’Ivoire and report to higher officials in the organisation.
Brief Recommendations for Action
- Evaluation of the cultural differences regarding Ivory Coast population to have a clearer basis for future segmentation
Measure the implementation of the stated strategy and achieved result after one year of operations in the marketplace.
- Constant strategic development and review of operations at a regular basis starting from the market entry and continuing.
- Regularly review of the economic situation inside the country in order to identify changes that can influence the industry of IKEA’s operations.