IKEA first ventured into the Japanese home furnishing market in 1974 through a franchise arrangement with a Japanese trading company.However, it failed as financial returns were mediocre and IKEA had to withdraw from the Japanese market some years later.Despite the fact that franchising has its own advantages, like gaining foreign returns on customer-service and trade name, or keeping a limited financial commitment, etc., the franchisor is at the same time exposed to the risk of losing quality control, hence its reputation.
Seeking to sell to new markets with strategies that worked for the original market are almost bound to fail (Doyle, 2008).This is probably what happened to IKEA when it first ventured into Japan.The second time IKEA went for the Japanese Market, it changed its strategy and adopted the owned venture strategy after having taken the time to learn and thoroughly understand the market and the consumers before deciding to rebounce the business. This research took five years.This allowed IKEA to understand that the biggest challenges in Japan. One of them is to make the home a more important aspect in the Japanese lifestyle as in the Japanese culture, home furnishing is not regarded as important, hence little time is spent on decorating the home.This is why they used the Japanese traditional ‘tatami’ measures for their display rooms in their stores that incorporate a kitchen, a bathroom, a sofa that turns into a bed, and several storage areas, making their stores in Japan “the only IKEA store in the world where this is practiced”.
This approach worked out well for them.IKEA’s large scale entry is the second strategy. Like in China, IKEA went with the intention and ambition to rule the market, targeting families with kids as the most important group. Hence the substantial investment – 40000 square meters of the store, with an in-store restaurant of over 700 seats.Lastly, low pricing has managed to make their transition into the new market quite smooth.
Compared to other western furniture manufacturers, IKEA products are priced very competitively, making them very affordable for most Japanese consumers.