Advertising and Cultural affect to IKEA market
To expand globally by using advertisement, there is no universal meaning of an advertisement across borders. Mooij (1991) agreed that ‘Advertising, to be effective, must derive from and be part of a culture sharing the language and values of the target audiences.’ The culture analysis with Hofstede’s cultural dimensions helps to study the influence of culture on global advertising. People in different cultures show different orientations toward power distance, individualism and collectivism, masculinity, uncertainty avoidance and Confucian work dynamism (Hofstede, 1996). Each factor influence advertising in term of culture. This paper will examine focusing on 3 dimensions as below:
Firstly, power distance refers to the degree of inequality among people which is viewed as being acceptable. People in high-power distance culture expect clear directions from authority in relation to a particular action, while the cultures with less power distance is likely to make their own decision on the basis of fact and reasoning (ibid). As a result, IKEA should provide an advertisers match with the target customers in high-power distance culture with credible sources which can be an effective advertising for building global brands.
Secondly, individualism and collectivism, the individualism concerns the aims of individuals rather than group needs, person’s initiative and achievement. Individualist cultures rely on factual information for decision-making. On the other hand, collectivist cultures seek a group harmony and consensus. Gudykunst & Kim (1984) So, the advertisers should typically employ speaker strategies and should provide very specific facts that can firm each individual’s decision making for individualist people. Featuring groups and using image-based or symbolic appeals which show the social consequences of a particular purchase are highly valued acts for people in collectivist cultures.
Lastly, is that masculinity describes a society in which men are expected to be assertive, competitive and concerned with materialistic and the role of women is nurturer and child’s welfare. By contrast, a society in which the social roles of men and women overlap is the femininity cultures. In contrast, Italy, Australia and Japan are the high-rank countries in masculinity thus, the advertising marketers should concentrate on masculinity, feature ads in the way of material success for men and nurturer for women and also use personalities or celebrities as presenters. On the other hand, the personalities of presenter will be downplayed in the feminine cultures such as Netherlands and Scandinavia.
According to the Figure1 (Appendix ), the individualism is the highest aspect in Scandinavian country. For the Figure2, we can see that the level of uncertainty avoidance in Brazil is highest. So, the advertisers should understand the main cultural scheme of both Sweden and Brazil and design the effective advertising regard with its local culture preference, influenced successfully the expansion worldwide.
IKEA in Brazil
From the case study, it can be deducted that there are several attractive aspects for IKEA to invest in the area of furniture industry in Brazilian market. First of all, the furniture market in Brazil is attractively due to a big value of imported furniture and it is continues growing more and more. (IKEA Annual Report, 2002). Additionally, the labour cost is cheap compared to Europe and America.
From the market analysts, it estimated that the import of furniture especially institutional furniture such as furniture used in hospitals and hotel will increase significantly.
Moreover, the most of Brazilian furniture manufacturers are small and family-owned companies which merely specify a population in southern Brazil as a target market. For above reasons, it might be assumed that there still have large market share for foreign investors to invest in Brazilian furniture manufacturing. Some more reason is the trade liberalization started in 1990, it could be apparent that the Brazilian trade system changed to be more open and competitive. The last reason that supported IKEA to expand into Brazil is the million hectares of planted forests. As IKEA’s mission statement was stated that to be a cost leadership and to assemble “a quality product with components derived from all over the world utilizing multilevel competitive advantages, low cost logistics and large simple retail outlets in suburban areas” (IKEA Annual Report, 2002). So, IKEA should consider Brazil to be a partner because Brazil has abundance of wood supply with low cost for producing and distributing reliably. Another reason is the import tax for furniture in Brazil is low around 5-15 per cent, encouraging IKEA to integrate operations into Brazil. Due to the major end-users of furniture prefer to purchase from renowned and reliable suppliers therefore, this relation might be a hypothesized that IKEA, which is the world’s largest and famous furniture retailer can be recognized by Brazilian furniture lover and extend enormously its business.
From the centralized strategic direction through franchising, it causes certain difficulties such as the complexity of logistics system, the difficulty to respond national needs and cultural sensitivity issues, the uncontrollable franchisees, and the emerging demographic trends. So, the internationalization of IKEA strategy needs to be balanced between country level autonomy and centralized system. Since, all entry modes have both advantages and drawbacks; the trade offs between each mode is significant.
Recommendation
On deeper analysis, the best market entry mode for IKEA to re-establish its furniture industry in Brazil is strategic alliances, referred to “cooperative agreements between potential or actual competitors” (Lee and Carter, 2005). This method run the range from the joint venture which means “an arrangement where a firm is required to share equity and
control of a venture with a partner from the host country” (Lee and Carter, 2005). Establishing strategic alliance with Brazilian company has many advantages. For one thing,
IKEA benefits from the potentially Brazilian furniture competitors, interior decorators and architectures’ knowledge about competitive conditions, and culture and demographic differences since they are people who recommend styles to customers.
In other words, this entry mode helps increase the level of involvement of partner. The first point, the Scandinavian headquarter can improve technology know-how, skills and assets, the state of the art equipment, the quality standard of furniture to local company, satisfied customer demand and differentiated products. A second point that the foreign alliance who know clearly about its business condition, helps smooth the progress of entry in to Brazil market. This outcome can be seen obviously from the example of Warner Brother. In order to solve the complexity of approval process and distribution in China, Warner Brother goes into Chinese market by participating with the two Chinese partners. Then, the joint venture in China allowed Warner Brother to enter Chinese market easily, distribute film and even produce films for Chinese TV (Chang, 2004). Moreover, both foreign firm and local partner can share the fixed cost of developing new products and reduce the level of risk including the conflict with nationalization or government interference.
However, strategic alliances also have some disadvantages such as transfer technology know-how to the partner which results in the risk of unmanageable and uncontrollable of technology, and the battles between partners which bring to the bargaining power of venture collaborators (Hill, 2007). Last but not least, so as to gain the good alliance, IKEA needs to concern other three factors which is partner selection, alliance structure and the management style of the partner.
Conclusion
The conclusion to be drawn is that the centralized control by headquarter through franchising in Brazil brings to the failure of IKEA. Therefore, IKEA needs to adapt a policy and process to entry the Brazilian market by being aware of cultural and demographic
difference. Also, choosing alternatively the entry mode as strategic alliances for expanding IKEA furniture industry worldwide will convey numerously good results.
Moreover, Brazil market can be new sourcing area for IKEA to progress the furniture business. However, IKEA is required to survey market directions of furniture industry in Brazil in order to achieve business goals. In the same time, IKEA is able to adjust other marketing entry methods, such as licensing, franchising, and exporting to suit situations in Brazil. The company needs to realise that no one strategy is the best in reality.
References:
Chang, L.T. (2004), “China Eases Foreign Film Rules”, the Wall Street Journal, October 15, p. B2.
Gudykunst,W.B., Ting-Toomey, S., Stewart, L. P. (1985), “Communication, Culture, and Organizational Processes”, Beverly Hills, CA: Sage Publications.
Gudykunst, W.B. and Kim, Y.Y. (1984), Communicating with Strangers: “An Approach to Intercultural Communication”, Reading, MA: Addison-Wesley Publishing Co.
Hill, C. (2007), “International Business: Competing in the Global Marketplace”, McGraw-Hill, First published, p. 478-509.
Lee, K. and Carter, S. (2005), Global Marketing Management: Changes, Challenges and New Strategies, Oxford University Press, First published, p. 64-93 and 162-186.
IKEA Annual Report (2002),
Keegan, W. and Green, M. (2003), Global Marketing, Prentice Hall International (UK) Ltd., Fourth edition, pp.119-137 and 435-501
Mooij, M. (2004), Consumer Behavior and Culture Consequences for Global Marketing and Advertising, SAGE Publications, Inc., First Published, pp. 23-50 and183-225
Tomkins, S.S. (1984), “Affect Theory: In Approaches to Emotion”, Hillsdale, NJ: Lawrence Erlbaum.
Appendix
Figure 1. The Geert Hofstede Cultural Dimensions of Sweden
Source: http://www.geert-hofstede.com/index.shtml
Figure 2. The Geert Hofstede Cultural Dimensions of Brazil
Source: http://www.geert-hofstede.com/index.shtml