IKEA's Globalization Strategies and its Foray in China

The Chinese government allowed foreign investments in the real estate industry in the mid 1990s. As the construction of commercial and residential establishments increased, it also boosted the sales of home decoration and furnishings companies. The demand for housing increased considerably over the late 1990s and early 2000s. Increased home ownership further boosted the home improvements and decoration market. People wanted better quality products. To fill this need, many foreign home decoration and furnishings companies like B&Q entered China during the 1990s. IKEA started its retailing operations in China with the opening of its first store in Shanghai in 1998 (the store was redesigned in 2003).

IKEA faced many challenges in terms of culture and business practices, as well as the socio-economic and political conditions in China. According to Smedberg, the three challenges IKEA was facing were -pricing, high duty rates and bureaucracy. In China, IKEA's products continued to have the image of catering to high-end consumers, unlike the perception as a 'good value' buy elsewhere in world. The company found it difficult to price its products at a level where it could attract larger numbers as well as keeping the company in profit. China's high import taxes hit the company's profitability significantly...