Abstract
This is a critique of the Marketing strategy for IKEA in Indonesia. Fortunately, said plan was recently published, and therefore is readily available for a direct assessment.
IKEA in Indonesia
Brief background
Ingvar Kamprad Elmtaryd Agunnaryd (IKEA) is so named after the founder (Ingvar Kamprad), the farm he grew up on (Elmtaryd) and the Parrish it was located in (Agunnaryd). The organization is widely established globally, however, until recently it had targeted developed nations. IKEA is a privately held in trust.
Critique of the Plan
Core Marketing/Business
Early on, the marketing plan (Please view the actual Marketing Plan. The URL is in the reference section) cites a particular strength for the IKEA furnishings line, their relatively low price. However, the deeper we go into the marketing plan, the more we realize that they are aware that their prices may not be low enough to reach the lowest classes. Key elements that are missed include that IKEA's value also lies in its generic, spare style, its conscious use of space in particular and the ability to build it yourself. Chiefly due to this marketing plan being constructed almost entirely on secondary data, the secondary data errors pepper the entire marketing plan.
The document acknowledges the current Indonesian growth rate, yet does not celebrate it. Note that 6.1% growth is rather healthy today.
The marketing plan is correct to delve into a consideration of infrastructure. However, the infrastructure that IKEA is lamenting is the familiar (European style) infrastructure. The truth of the matter is, for this country and this culture, the infrastructure is relatively muscular. Inadequate compared to most developing countries, but Indonesia must have somewhere in the neighborhood of 50 times the waterways, most urban areas (where they plan to settle) have at least base roads.
The marketing plan is equally correct in acknowledging the legal and ethical considerations on the ground. Again, everything is relative and overlooked again is this relativism. Corruption and IP law may be concerns, and should not be worries, for this is no more than most of Asia.
Then the marketing plan moves in the direction of quickly over viewing the demographic, and does so very sweepingly using the operative word diverse. From rainforest tribes to cosmopolitans, there is no question of such diversity among the people. However, in targeting only urban settings (and even the contemplation of suburban settings), this conversation would be more appropriate if one were looking to market a government agency, not a big box retail opportunity. IKEA's demographic is consistent with where they are locating.
Again, IKEA would do well to get on the ground first. This challenge of perspective persists even when contextualizing itself with competition. It is noteworthy that the majority of furnishing retailers still resides with smaller players. Much like the GDP mentioned earlier, this mention is so fleeting that one wonders if the new president and CEO Mikael Ohlsson can appreciate the full gravity of the opportunity. To underscore, this supposition of a plan continues to lean on what it does know, comparing itself to Carrefour, among others. These major otherwise focused box stores (Carrefour is analogous to WalMart in Europe) sometimes focus on groceries, etc. Despite their specialty, IKEA could go toe to toe if they so chose. Often IKEA has a food court and/or dining space. Is that the trend, to enter the Carrefour/WalMart arena? The recommendation would caution against such thoughts, at least in the initial entry phase to Indonesia.
The People
As we begin to speak of the Indonesians themselves, IKEA has fed itself some misinformation. Because Indonesians support artisans, the conclusion is that the population would not embrace do-it-yourself projects. Indonesians would embrace DIY activities, for the sake of it, as they love to express accomplishment (a very proud people). DIY is simply a concept that no one has consciously promoted yet! What a lost opportunity!
The ability to laser cut intricate lacework patterns could emulate a vast array of native furniture carving. The wealth of native fabric patterns (batik and the like) become another easy add (and an opportunity for strategic alliances on the ground).
The statement was made: “Showrooms should be designed and arranged in Indonesian style…”. It is unclear what this means. The floor plan for IKEA in Tampa would be perfect for Indonesians (who, as already indicated elsewhere in the marketing plan, and rightly so, see shopping as a weekend family entertainment).
Country specific
Toward the end of the document, the idea is floated of a secondary presence on Java. Expanding on Java would be cautioned against until after enough other major cities have been established. There is a saturation factor that is overlooked ... people on the furthest end of Java will use the Jakarta location just fine, and indefinitely. This expansion notion comes excessively soon.
Completely ignored is Sumatra Island, the fourth largest Island in the world. The capital city, Medan, in the north, is a substantial city directly affecting the top half of the island. Medan is the closest significant city to the city-state of Singapore, strategically less than an hour away by puddle jumper, just across the Malacca Straits. More strategic rationale would include Medan's proximity to Padang and Kuala Lumpur, Malaysia. The stain of secondary data persists. To cite cities such as Surabaya and Bandung, and then complain about infrastructure, would be disingenuous were it not for the innocent lack of research that is so evident.
Sumatra or not, establish small store presence in every major city first, and let the cities development of sales dictate where to expand next.
Miscellany
Do the local’s one better and accentuate IKEA's green stance - shout it out that the corporation seeks to support - not rape - the rainforest hardwoods.
Conclusion
Numerous pros and cons find themselves missed in IKEA’s marketing plan. With an eye toward a relatively collectivistic culture, aspects of IKEA’s spare look can communicate, and Indonesians would easily celebrate IKEA’s mastery of use of space.
In the metropolitan areas, the demographic is more consistent with what IKEA is accustomed to than they realize. Upper middle class and above will continue to favor the deeply carved exotic hardwoods that are the heirloom staple. The cost differential is more than made up for in the quality and longevity (and the magnificent artistry) of the native item. IKEA’s presumption disfavors the Indonesians buying acumen, and they will find their market will actually reach into the middle lower class.
There is no doubt the research being secondary has denied IKEA the wisdom being on the ground would have given them. Someone needs to forward them this document! The assessment is that much of the plan is solid, though could be rated at 75%.
References
Hartung, A. (2010, Nov. 1 2010). Growth - Dealing with Market ShiftsCould Something Go - Badly for Ikea and Its New CEO?. Forbes. Retrieved from http://blogs.forbes.com/adamhartung/2010/11/01/could-something-go-badly-for-ikea-and-its-new-ceo/?boxes=Homepagechannels
Ingvar Kamprad Elmtaryd Agunnaryd . (2009). Strategic Marketing Plan 2009, IKEA Expansion toIndonesia ((pdf) Marketing Plan). Retrieved from (publicly published internal information): http://www.google.com/url?sa=t&source=web&cd=3&sqi=2&ved=0CCQQFjAC&url=http%3A%2F%2Fherdianti.com%2FIKEA_in_Indonesia_files%2FHerdiantiW-IKEAExpansiontoIndonesia-StrategicMarketingPlan.pdf&rct=j&q=IKEA%20Indonesia&ei=8tnKTIXoMML68AbMutTtAQ&usg=AFQjCNES4FE00IJbyD5z4v79le_uf68QiQ&sig2=ssmgjPlP9LX5f5fbjFAcIg
No comments:
Post a Comment