Big in Japan -A Case Study on IKEA

Background and Purpose: Japan is a difficult market for foreign companies to stay alive in; something of which IKEA has first-hand experience. While largely successful globally, IKEA had to withdraw from the Japanese market in 1986 after 12 years of struggle. However, on the 20th anniversary of its failure, IKEA made a second attempt at the Japanese market by opening two stores, and further expanded in 2008 with three additional stores. In this thesis, I describe and explain how IKEA entered the Japanese market, why it took two decades before the second try, what was done differently to ensure market survival and to what extent the IKEA concept was adapted to local preferences. <div> <br> </div> <div> Method: The thesis is written in the form of a descriptive case study, grounded in a variety of sources. Theory was mostly found in text books and academic journals, while empiric data was collected from articles and official web sites. An interview with a project leader at the Swedish Trade Council was also conducted. <div> <br> </div> <div> Conclusions: The reason why IKEA failed to penetrate the Japanese market in the 1970s can mostly be attributed to factors regarding timing and commitment. During the absence from the Japanese market, IKEA gained extensive international experience and established a global production and distribution network. In addition, the Japanese customers changed to become more receptive to the IKEA concept. During the second attempt, large investments were carried out which signaled market commitment. It also enabled IKEA to control every aspect of its operations in detail. This all-out approach was made possible by the private ownership structure of IKEA that allows for ambitious projects that will take decades to break even. Regarding localization, the products themselves keep to IKEA's highly standardized concept. By this, IKEA can realize economies of scale and be highly competitive in pricing. The adaptations that have been carried out have mostly been centered on the in-store experience. However, stores are decidedly IKEAn even in Japan. Measures were also taken to ensure that IKEA keeps to the original concept internally, by employing Swedish people to management positions. </div> </div>