How IKEA overcame the cultural challenge?
Culture is a major factor that affects all businesses. However, for those operating overseas, it is a bigger challenge. Every business wants to grow large overnight and still, when trying to sell in foreign markets culture can become a hurdle. Culture is a factor that has an important effect on your marketing strategy. Many brands, if they have failed to win their markets then it is for they missed the cultural factor. Brands that have focused on it have seen success quicker. Culture can be a barrier; if understood and exploited well, it can be a facilitator.
The truth is that most brands hit this barrier as they expand. Suppose there is a US based brand. If it tries to set up business in China or Russia, it may need to alter its model. If it tries to replicate its US model then the biggest difficulties it will face are cultural and lingual. However, to solve cultural challenges, a deep understanding of the local culture is essential. Brands may need to alter their branding and marketing strategies to adapt to the culture they are operating in.
IKEA is a Swedish brand, founded by a Swedish entrepreneur named Ingvar Kamprad. When entering the US market, it faced a major challenge because the business model it had been using was not replicable in US. Soon IKEA realized that the local culture was a challenge and there was a definite need to adapt to it. The business model it has been using in Sweden suited the Swedish audience and not the US.
So, it altered its strategy and started selling products that were more suited to local tastes and needs. Customization solved the problem that was stopping IKEA from being successful in US. Again while trying to enter the Chinese market, IKEA faced this challenge. In case of the Chinese market, the challenge was even greater. Law was another major difficulty. In the Asian countries and particularly India and China, the challenge of bureaucracy is enormous. Redtape mostly discourages the external businesses.
To meet the challenge in China, the company had to enter into a joint venture that helped it overcome the legal barrier. After that the brand changed its pricing strategy to suit the local needs. Not just its pricing strategy, the company also changed its business style and furniture models so that they could match the local choice. The Asian customers see the Western brands with a bias and changing their perception can be very difficult. To change this perception, Western brands need to connect with the local culture. If you want to be liked, you must focus upon how a culture sees you and your brand.
So, to change the cultural perception of a brand, a culturally suitable marketing strategy is essential. IKEA started targeting the market segment that best suited its brand. It was the upper middle class. The buyers in China and India are quite price sensitive and therefore foreign companies can use their pricing strategy as a marketing tool to impress their local customers. These customers generally would not like to pay for anything like shopping bags. Taste is also an important factor influenced by culture. If you are trying to sell in the Indian market, you really need to adapt.
The models popular in Europe or Americas would not be successful in these markets because of the local culture and taste. Expansion comes at a cost and cultural challenges cannot be overcome in a day. IKEA’s China experience came in handy when it decided to enter the Indian market. In India, it has partnered with local e-retailers to generate higher sales. Challenges can also be culture specific. You do not find the same challenges or the same opportunities in all the markets. The Indian challenge is different than US. Brands have to know what changes can help them do better in a particular market. Marketing and operational strategies need to be adjusted as per the culture and region. IKEA has performed well by focusing on the cultural challenge. With its more than 450 stores worldwide, IKEA is most successful as a home furnishing brand.
For the Western brands while it may be easier to adapt their strategy and style for other western countries, it is generally difficult to adapt as per the Eastern and Middle Eastern Markets. Suppose the fastest growing economies of Asia like China and India. The Chinese market can be complex because of language and culture. Chinese is one of the most difficult languages in the world. So, is the Chinese culture which exists at a wide distance from the Western culture. To adapt, you first need to localize your business and marketing strategies to win.
Lifestyle is also a very important factor that marketers must consider when trying to enter Eastern markets. While globalization and digital technology have to an extent solved the problem still the local cultures and their understanding matters for effective marketing. The middle class in China has grown modern in taste and therefore Western styled furniture is in demand there. However, the life style and housing styles are different from western nations and cultures. IKEA adapted to these things and brought suitable styles that could fit well in the Chinese lifestyle. It also used local social media sites and micro blogging website Weibo for advertising and expanding its reach. In this way, localizing your brand is important for international success. Above everything is consistency whether in terms of business or marketing strategy. Your marketing and promotional strategy must be consistent with your mission and brand promise. Understanding the local consumers’ expectations and aspirations is good for a brand’s health. In this regard you cannot help being innovative and developing strategies and policies that favor the local consumers. Consumer focus locally and internationally has become important for brands aspiring for faster growth.