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IKEAS RE-ENTRY STRATEGY

Q1. OBJECTIVE ANSWERS:a. Learning is defined as a relatively permanent change in the behavior that occurs as a result of experience of self or others. There occurs an enhancement of knowledge, skills and expertise which are relatively permanent. Consumer learning is defined as a process by which people gather and interpret information about products and services and use this information/knowledge in buying patterns and consumption behavior. As Schiffman has put it consumer learning can be thought of as the process by which individuals acquire the purchase and consumption knowledge and experience that they apply to future related behavior. Consumer learning may be intentional, where learning is an outcome of a careful search for information; learning can also be incidental, where learning occurs as a matter of chance, by accident or without much effort. b. Consumer perception applies the concept of sensory perception to marketing and advertising. Just as sensory perception relates to how humans perceive and process sensory stimuli through their five senses, consumer perception pertains to how individuals form opinions about companies and the merchandise they offer through the purchases they make. Merchants apply consumer perception theory to determine how their customers perceive them. They also use consumer perception theory to develop marketing and advertising strategies intended to retain current customers and attract new ones. c. Demand forecasting seeks to investigate and measure the forces that determine sales for existing and new products. Generally companies plan their business production or sales in anticipation of future demand. Hence forecasting future demand becomes important. The art of successful business lies in avoiding or minimizing the risks involved as far as possible and face the uncertainties in a most befitting manner. There are two methods of demand forecasting. They are: 1) Survey methods and 2) Statistical methods

d. The absolute threshold is the minimum intensity of stimulus required to be perceived. In other words, it is the intensity amount which is needed to detect the difference between nothing and something. It is the lowest level at which an individual can experience a sensation. On the other hand, the minimal difference that can be detected between two stimuli is called the difference threshold or the j.n.d. (just noticeable difference) e. Personal Planning is a process of discovery. It is a planning process that enables individuals to be self-determining and involves recording and supporting the choices, goals, dreams and aspirations of each individual. The aim of personal planning is for individuals and family/when to create a better life for themselves (not the development of a plan). Different approaches will be required for different people. Personal plans are built on strengths, preferences and aspirations. To be useful, plans must be translated into actions. Strategic Planning is the process of deciding on the objectives of the organization, on changes in these objectives, on the resources used to attain these objectives, and on the policies that are to govern the acquisition, use and disposition of these resources. It is formally documented process for deciding what is the handful of key decisions that an organization, viewed as a corporate whole must get right in order to thrive over the next few years. The process results in the production of a corporate strategic plan. f. Domestic marketing is the selling of a companys products within a local financial market. It deals with only one set of competition and economic issues which make it more convenient to do. There are no language barriers in domestic marketing and obtaining and interpreting data on local marketing trends and consumer demands is easier and faster to do. It helps the company make decisions and develop marketing strategies that are more effective and efficient. The risks are also lesser with domestic marketing and it needs lesser financial resources. Local

markets are not as broad as the international market though and most companies are aiming at doing business globally. International marketing is the promotion and sale of a companys products to consumers in different countries. It is very complex and requires a huge amount of financial resources. Every country has its own laws on business and a company that aims at entering into business in another country must first know about them. Consumer tastes and preferences may also differ so marketing strategies must be formulated to cater to the needs of different consumers. International marketing requires more time and effort, not to mention its being very risky too. The international market is very uncertain and a company must always be ready for changes that may suddenly occur. It requires a higher level of commitment to succeed in an international market. g. When marketing a product, you realize that you can sell a product to basically anyone. Yes, you need to be sure that you have the correct demographic group, but after that point, anyone who can afford to buy your product can be included in your marketing group. But with a service, you must be more selective when choosing your potential customers. A service may be more expensive for customers in the long run because it can be used over time. This means that you need to market to a select group of potential customers who will be able and willing to afford your service. Plus, you will have to realize that you're going to be working on a close basis with these people, so you should choose a group that you feel you can work well with. Services require you to build a relationship with people and continue to develop it. When marketing products, you don't have to get to know your customer. As long as you know the basic demographics of your customer base, you're probably good to go. Chances are fairly high that once a person has purchased a product from you, you'll never have to see them again (well, hopefully they'll continue to buy your products, but you'll never have to develop a relationship with them). You don't need to have many conversations with your customers. But when marketing a service, you must come in contact with your clients and customers. In order to keep your customers, you need to continue marketing and interacting with those people. If a customer decides s/he

doesn't personally like you or your company, you may lose that customer. But with a product, a customer doesn't usually make strong decisions about you or your company. They just buy your product. With a service, you always have to be working at improving your relationship with your customers. h. Markets can be segmented on the following customer characteristics. Geographic Demographic Psychographic Behavioural

Q2. OBJECTIVE ANSWERS:a. Japanese preferred high quality materials and not the low priced
cheap ones. Japanese market preferred small furniture to fit into the small Japanese houses. This is the critical success factor for entering into the Japanese furniture industry. Japanese people also did not like the concept of self assembling furniture. They instead preferred that their home should be designed by the professional designers.

b. During those initial years, since the company did not have any
warehouse in Asia, it had to supply to its Japanese retail points from Europe, which in turn increased its costs. After failing to make an impact on the Japanese market, the company exited from Japan in 1986. It agreed that it was a strategic failure as the Japanese customers were not ready for IKEA nor IKEA was ready to handle the demanding Japanese customers.

c. In order to market a product successfully in the Japanese home


furnishing market, the company felt the necessity of establishing an effective marketing plan. For IKEA, after its initial failure in Japan, it was important to know about the market and its target audience to position itself and execute the marketing plan. Initially, the company conducted a market research programme to identify the demand for inexpensive furniture in Japan, appeal of self assembled furniture

among the Japanese people and whether the present aesthetics of the IKEA furnishing would be able to appeal them. To have an idea about the Japanese home furnishing market, the company gathered information about its consumer demography, customer preference and preferred type of the furniture. The company at first opted for focus group study, but since Japanese had highly collective culture, the study failed to achieve the desired result. IKEA conducted survey research among a sample of its target audience to gather data on Japanese market. It hosted online survey, along with surveying in stores customers. Besides the primary study, IKEA used various secondary resources to have an idea about customer and market data. Analysts commented that the company might also opt for testing out the market method. They cited the example of Toru Nishikawa, the marketing manager of Hitachi, who popularized the testing out the market method for gathering information about the market. Under this method, Toru Nishikawa observed the consumers while they were using the product. Since IKEA was known for setting up showcase rooms and furniture, it could design different rooms with different furniture to identify which would have higher appeal among the target group. IKEA had planned to develop its competitive advantage in the Japanese market through cost leadership, product differentiation and niche positioning. It was known for its competitive pricing and value for money offering. The company, following its product differentiation strategy, offered contemporary furniture at an affordable price. The companys offering, popularly known as The IKEA Concept, emphasized on cutting down costs without sacrificing the quality of the furniture. IKEA had also planned to achieve its product differentiation strategy by leveraging its product portfolio. Along with home furnishing, the company sold kitchenware, toys and plants.

d. Apart from practicing the product differentiation and cost leadership


strategies, the company started to offer its furniture in flat and stackable boxes. Analysts commented that the home furnishing giant was after all, always keen to banish as much air as possible from the

packaging. These boxes, however, helped the customers to reduce shipping costs because the flat and stackable boxes allowed more furniture to be shipped. Though IKEA was famous for its assembled type of furniture, due to high labor cost in Japan, the company planned to offer only that furniture that did not require assembling. Based on the available market research data, IKEA did the market segmentation based on different needs and customer preferences. Like other companies in the retail industry, IKEA also identified specific segments as its target customers to cater to their needs easily. Globally, IKEA targeted mostly young peoples, like small families, college students, young working professionals and low to middle income families. But In Japan, IKEAs main target group was the senior citizens, since in Japan; they accounted for maximum savings and incurred maximum household expenditure.

e. More than a decade of deflation and the emergence of discount


retailers have made Japanese consumers much more cost-conscious. It has obliterated the traditionally held view that high prices equal high quality. Japanese consumers are in the process of embracing the concept of value. The recent market shifts bode well for the chain. Ikea's modern aesthetic appeals to Japanese tastes, especially as the retailer has expanded its range to include richer and darker woods. At the same time, consumers are warming to do-it-yourself shops. I think that IKEA will be successful in its second attempt