This was a massive change in strategy, as IKEA was targeting the mass market in other parts of the world. In most markets, the company uses its product catalogue as a major marketing tool.
In China, however, the catalogue provided opportunities for competitors to imitate the company's products.
The company initially tried to replicate its existing business model and products in the US.
But it had to customize its products based on local needs.
Local suppliers were banned from providing raw material and furniture to IKEA, and the company was not allowed to showcase its furniture in industry exhibitions. Today, IKEA is the world's largest furniture retail chain and has more than 300 stores globally.
In 1998, IKEA started its retail operations in China. The venture served as a good platform to test the market, understand local needs, and adapt its strategies accordingly.The challenges it faced in China, however, were far bigger than the ones in the US.As the company opened more stores from Beijing to Shanghai, the company's revenue grew rapidly.For instance, the price of its "Lack" table has dropped to 39 yuan (less than five euros at current exchange rates) from 120 yuan when IKEA first came to the Chinese market.The company plans to reduce prices further, helped by mass production and trimming supply chain costs.In this regard, IKEA's low-price strategy seemed to create confusion among Chinese consumers.The company realised this and started targeting the young middle-class population.: IKEA is known globally for its low prices and innovatively designed furniture. Its low-price strategy created confusion among aspirational Chinese consumers while local competitors copied its designs.This case study analyses how IKEA adapted its strategies to expand and become profitable in China.IKEA identified the strategic challenges and made attempts to overcome them.One of the main problems for IKEA was that its prices, considered low in Europe and North America, were higher than the average in China.