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IKEA The Japanese Misadventure And Successful Re Entry Case Solution

Solution Id Length Case Author Case Publisher
2231 1347 Words (6 Pages) Indu Perepu, Debapratim Purkayastha IBS Center for Management Research : 308-270-1
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The main reason why IKEA was not successful in Japan in the 1980s, was because of its failure to understand the needs of Japanese customers at that time. IKEA had limited exposure to international markets, and were unable to customize their offerings for the Japanese market. Furthermore, its distribution network in Japan was not well-developed, which resulted in low stocks and losses. Its supply network was also not well-established at that time, and IKEA was obtaining products from Europe, which was costly due to the geographic distance. 

Following questions are answered in this case study solution

  1. IKEA’s initial failure in Japan

  2. IKEA’s re-entry in Japan

  3. IKEA’s Entry Strategy

Case Analysis for IKEA The Japanese Misadventure And Successful Re Entry

Since IKEA’s products were priced lower than competitors, Japanese customers misconceived IKEA’s products to be low in quality, as they were low priced. Japanese were more attracted towards luxurious, high-quality furniture, and the overall Japanese economy was also growing at a steady rate. Hence, the Japanese had higher budgets and preferred to spend it on luxurious items. The Japanese were also not very welcoming of the concept of assembling their own furniture, and this concept was synonymous to IKEA’s brand name. 

IKEA failed to understand the needs of the Japanese market, and assumed that they would also be attracted to their furniture and minimalistic designs. However, Japanese culture encouraged the locals to spend on luxurious items like cars, dresses, and the like, rather than spending on furniture and decorating one’s home. 

Another reason why IKEA was not successful in Japan was because it had partnered with a local company to enter in the Japanese market. Since the beginning, the Japanese partner was not convinced that IKEA’s concept will be successful in Japan.

Various studies highlight that most brands are not successful in Japan, simply because they don’t spend enough time understanding the Japanese culture, and the mindset of Japanese customers. These customers have unique needs, and in IKEA’s case, the market just wasn’t ready for the brand at that time. Before entering into Japan, IKEA had ventured into countries that were near to its home-country. Those countries carried a similar culture and values, hence it was easier for IKEA to promote its offerings to them. Japan was the first Asian country that IKEA decided to enter in, and the main reason behind entering the market was positive economic growth of the country, as well as growing population. The management was quick in realizing that the brand was not doing well at that time, and decided to exit from Japan by the late 1980s (Stolba, 2009). Before re-entering the market, IKEA took its time in thoroughly understanding the market, enabling it to pursue strategies that suit the needs of Japanese customers. 

2. IKEA’s re-entry in Japan

After the first attempt being a failure, IKEA geared itself to enter the Japanese market for the second time in 2002. This time around, IKEA took its time in understanding the market, and altered its product offerings accordingly. Gordon Gustavsson, who had played a major role in setting up IKEA’s China store, along with Kullberg, who was living in Japan since 1988, were asked to set up the first store in Japan. IKEA decided to conduct a thorough study to understand the living conditions of the locals, what kind of homes they lived in, how they cooked food, how they stored things, how their lifestyles and routines were, and many other observations were highlighted. Hence, after gathering all these insights, IKEA formulated a more localized strategy for the Japanese market. This strategy was based on ‘small space living’, which was one of the findings of the study. It incorporated smaller furniture in its product range, rather than focusing on large-sized furniture, a style that was immensely popular in US and Europe. 

IKEA also conducted a Young Professional Program (YPP), whereby it aimed at recruiting people who were sent to Japan, to live there in order to learn Japanese culture and language. These people were then assigned the work of opening stores in 2006. IKEA also learned from its Japanese competitors, Muji and Nitori. These were local, inexpensive brands. IKEA gained experience from Nitori and created warehouses in nearby Asian countries in order to save up on additional costs (Nguyen, et al., 2018).

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