IKEA: The Japanese Misadventure and Successful Re-entry
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Case Code: BSTR289 Case Length: 18 Pages Period: 2002-2008 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.300 Organization: IKEA Industry: Retail Countries: Japan Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
"The Japanese market and consumers were not ready for IKEA, and IKEA was definitely not ready for Japan at the time [in the 1970s and 1980s... Now we have done the major markets in the world why shouldn't we be in the second-biggest retail market in the world?"
- Tommy Kullberg, CEO, IKEA, Japan, in 2006.
"Multinational companies entering Japan often don't spend enough time to understand the nature of the competition here, which is usually fairly fierce, and the so-called unique needs of Japanese consumers. The key challenge for IKEA will be to translate their very globally successful concept, the type of design they offer and their retail format, into an acceptable Japanese way."
- David Marra, Principal, AT Kearney in Tokyo, in 2006.
"You would think that Japan would be the absolutely perfect market for IKEA. If they can crack the whole service concept... so that there is less work for Japanese shoppers, then I think they have a better chance to succeed this time."
- Elen Lewis, Business Journalist, in 2006.
IKEA Gives Japan another Try
During the second week of April 2008, the monorail commuters on the Kobe Portliner Monorail, Japan were in for a surprise. When the monorail chugged in that morning, instead of the usual grey and steel colors, the monorail's exteriors were painted in bright colors with different motifs like flowers, checks, etc. More surprises were in store as they entered and found bright and stylish upholstery and curtains inside. The revamp, they later learnt, was a part of the promotional campaign by Swedish furniture retailer, IKEA Group6 (IKEA) to publicize the opening of its third outlet in Port Island, Japan on April 14, 2008.
IKEA is one of the largest furniture manufacturers and retailers in the world and is well known for its stylish and innovative furniture designs. Almost all IKEA's products can be dismantled and packed in flat packages, making them easy to transport. IKEA began its international forays in the 1960s, and by 2008 it had a presence in around 35 countries across the world. Though IKEA was highly successful in most of its international markets, when it came to Japan, its first venture was unsuccessful. IKEA entered the Japanese market in the 1970s, and exited the country in 1986.
At that time it had entered the country through a partnership but the venture was not successful. According to Tommy Kullberg (Kullberg), former president and CEO of IKEA Japan KK (IKEA Japan), "We just were not ready to handle the very demanding Japanese market, and the Japanese customer was not ready for IKEA, and to drive things home and put it together themselves. It was a failure, no doubt about it."
IKEA decided to re-enter Japan in the early 2000s and after thorough ground work opened its first store in 2006 in Funabashi. The store was highly successful and IKEA opened two more stores, in 2006 and 2008. On re-entering the market Kullberg said, "This time we have done our homework. We have been doing a lot of market research to understand how things work in Japan."...
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