Week 8 Case

Please Follow the example case and complete the following case study.  Please note that all sections must be complete.  The key issues section is critical.  Look for the terms and concepts that we have learned and apply them to the case.  Do not define the key issues.  What in the case makes them the key issue? 

Grading Rubric:

1. Case Summary 2 points
2. Key issues 10 points
3. Personal Analysis 3 points
4. Case Questions 9 points
5. Conclusion 2 points

CASE STUDY

MARKETING THE IKEA FANTASY AROUND THE WORLD

Companies who market internationally often have to work hard to find an effective and profitable balance between standardizing their marketing strategies while still reflecting an understanding of the unique characteristics and consumer behavior present in those markets.

IKEA, the Swedish furniture and furnishings company, is a good example of a retailer trying to find that sweet spot between standardization and adaptation. Its unique mission is to “create a better everyday life for the many people,” in particular, helping consumers with “thin wallets,” to be able to afford stylish furniture and home furnishings, as the store describes its niche. The company has 370 stores in 47 countries worldwide and a goal of 500 stores by 2020. To put its international footprint into perspective, IKEA has stores in more countries than Walmart and these are more profitable than Target and Lowe’s. In Beth Kowitt’s Fortune article “How IKEA Took Over the World,” the company is recognized as having mastered one of the hardest retail challenges: selling high volumes of inventory at a consistently low price in vastly different marketplaces, languages, and cultures. How have they achieved a successful balance between standardization and adaptation in their international markets?

First of all, the company credits marketing research for much of its success. Mikael Ydholm, head of research, says “The more far away we go from our culture, the more we need to understand, learn, and adapt.” At the same time it must look for points where cultures intersect. With a focus on volume production, IKEA does not want to have to adapt its products for each country market. But it has figured out how to show the same product working into the lifestyles of different locations around the world. By visiting the homes of consumers in different countries it has uncovered the similarities and differences in how consumers around the world use and interact with IKEA products.

Through its research, IKEA pays special attention to the subtle differences that are so important in international marketing. It also takes its time to develop strategy. For instance, it’s taken the company 6 years to move into South Korea, but even with that kind of lead time mistakes were still made; for instance a map mislabeled what South Koreans call the East Sea as the Sea of Japan.

Much of IKEA’s recent international growth has been built on the growing middle-class markets in emerging markets, which was a logical step for IKEA. It has always excelled at creating a sense of fantasy for customers who visit its stores. Tom Novak describes it as a creation of “domestic tableaux and scenes from a home life we imagine living.” In his Trend and Tonic post he describes how “these fantasies of new living are crucial for emerging global powers like China, India, and Brazil who all have rising middle classes.” IKEA is carefully tracking the growth of the middle class in these markets and has opened stores in countries like Croatia, Indonesia, Thailand, and China. In fact China is the market where it is experiencing the fastest growth and which has eight of the largest stores.

Novak argues that IKEA’s minimalism translates well across cultures because its simple furniture is chic yet practical. He also suggests that Sweden as the “country of origin” for the IKEA concept may enjoy the unique ability to appeal politically or ideologically to other cultures. It may be seen as able to fill a void for international consumers who are drawn to the Western fantasy but who want to avoid Western controversy. In fact, products retain their Swedish names in markets around the world as a way to build on the positives of IKEA’s brand identity.

Although IKEA may work hard to keep a more universal product approach, when it comes to its catalogs it defers to adaptation of language and culture. The company prints 212 million catalogs a year. Kowitt reports that catalogs come in 32 languages and 67 versions, which enables the company to do a better job of reflecting local customers and customs. Photo shoots for the catalogs are all done in a studio in Sweden where an employee is responsible for making sure that shots taken of each room set-up are appropriate and culturally sensitive for each of the different catalog versions being produced. For instance, they want to ensure that the Taiwanese catalog doesn’t feature glass products from mainland China and that Israel’s catalogs don’t picture Persian rugs.

The company admits that it has made cultural faux pas in the past with its catalog, like photoshopping women out of catalogs for Saudi Arabia and removing a lesbian couple from a version for Russia. IKEA Communications officer Kajsa Orvarson says, “We have done mistakes, but we are becoming more and more aware of how to improve and to share our values.”

DISCUSSION QUESTIONS

1. CS 14-1Discuss how IKEA’s approach has helped you to better understand the debate that exists between standardization compared with adaptation for international markets.
2. CS 14-2Compare and contrast two countries according to the Hofstede cultural model using the online tool at http://geert-hofstede.com/countries.html. How might this tool help a company like IKEA do a better job of marketing in each country?
3. CS 14-3The text talks about the difference between low and high culture. Is IKEA trying to position its brand to be one or the other? Would this be different depending on the country location?

format to follow

WEEKLY CASE INSTRUCTIONS

This assignment is due by midnight on Sunday, at the end of each week. No late assignments will be accepted without advance permission from the instructor.

On every case assignment you must meet the minimum standards for depth and organization. Any case analysis that is under 500 words (not counting title and references) will receive a zero. Each case also must have a minimum of 3 outside references, not counting the textbook.

Below is a Sample Case Analysis.  This sample gives you a clear example of how the required case analysis format should be delivered. Follow this format in your analysis.

Do not use the Key Marketing Issues used in the sample case. Each case will have its own set of Key Marketing Issues which you will choose based on the details of the case content and the class reading. Follow this format on all 8 case analyzes.

Sample Case Assignment Analysis Format

MRKT 5000 Online Course

(Instructional notes in red)

(Your name here)

Can Pepsi make Pepsi One the One? (This is a case from a previous edition of the Marketing text – not currently in your text book. This is only a sample analysis to demonstrate analysis format only)

CASE SUMMARY:

Pepsi One is an innovative product launched in the market by PepsiCo to keep the image of innovation, fast movement, and competitiveness.  The case includes the steps of a new-product development process.  Emphasizing the launch of the product and the ways that Pepsi One is getting more familiar to the target market.   Pepsi One is becoming a successful product by getting more market share from the main competitor Coca-Cola.

(Each case to be analyzed will be read from the text, with specific questions assigned)

KEY MARKETING ISSUES

• Line extension – Development of a product that is closely related to existing products in the line but meets different customer needs.  Pepsi One is a product that tries to differentiate itself from the normal diet products, to reach different target markets.

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• Product modification – Change in one or more characteristics of a product. Pepsi changed the sweetener to acesulfane potassium (ace K) to create the Pepsi One.
• Aesthetic modification – Changes to the sensory appeal of a product.   Pepsi tried to appeal as a not a new diet drink but a new way of tasting a soda.
• New-product development process – A seven-phase process for introducing products: Idea generation, Screening, Concept testing, Business analysis, Product development, Test marketing, Commercialization.  The PepsiCo performed all phases of new-product development in order to ensure the product would succeed in the market.
• Product differentiation – Creating and designing products so that customers perceive them as different from competing products.  Pepsi One tries to differentiate itself being the only low calorie drinks that taste exactly as a regular drink (Pepsi).
• Product design – How a product is conceived, planned, and produced. 
• Styling – The physical appearance of a product.   Pepsi One omits the word “diet” and even the word Pepsi, is secondary to the thick, black lettering of the word “One”.
• Product positioning – Creating and maintaining a certain concept of a product in customers’ minds.  Through advertising the company tried to keep the idea of the product in customer’s minds.

(These are the issues in this particular case – each case will have a different set of Key Issues)

Personal Case Analysis

I learned that Pepsi One was a product created by a modification of an existent product “Pepsi Diet”.  The product modification was the sweetener used.   A new taste of cola was added to the appeal for a low calorie soft drink.  By trying to differentiate Pepsi One from a classic Diet product, PepsiCo shows its innovative style and gain market share from Coca-Cola.

CASE QUESTIONS

1-    Is Pepsi One a new product, a modified product, or a line extension?  Explain your answer.

Pepsi One is a new product, line extension and a modified product.  Pepsi changed the sweetener to acesulfane potassium (ace K) to create the Pepsi One and tried to be unique by being a low calorie soft drink, which tastes a regular soft drink.

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2-    In what way is Pepsi One positioned?

Pepsi One was positioned by including characteristics that target market most desires.  Understanding the diet aspect of Pepsi One helped attract an unusual market segment for a diet drink:  cola-loving males in their 20s and 30s. The product is not made to compete head to head with Diet Pepsi.

3-    Over the years, PepsiCo has had a number of product failures.  Evaluate PepsiCo management’s decision to introduce Pepsi One?

PepsiCo was launched just after test indicated consumers liked its taste as much as its creators did.  In extensive home-use tests, almost 70 percent of Pepsi One tasters reported they would purchase the product again.  To differentiate Pepsi One from the horde of diet soft drinks, PepsiCo focused on the product’s taste, which is almost indistinguishable from the taste of sugared soft drinks.

CONCLUSIONS

The company that wants to be competitive needs to be innovative and always introduce new products in the market.  PepsiCo used line extension of its Diet products to create Pepsi One.  Pepsi One is a product modification as well, which was consisted of in changing the sweetener to acesulfane potassium (ace K).  This aesthetic modification provided the product differentiation that appealed to customers as product with low calorie that tastes as a regular soft drink.  The different product design that included change on the styling never seen before, helped to position the product among the cola-loving males in there 20s and 30s.  By being innovative Pepsi One is guaranteeing its position on the soft drinks market, taking some market share from its big rival “Coca-cola.”

Works Cited

(Each analysis must include a minimum of three outside references, not counting the text or references from the case subject directly)

Bramhall, Joe, “Pepsi Inc”, Hoovers, http://www.hoovers.com/xm-holdings/–ID_60656–/free-co-factsheet.xhtml

“Choosing a soft drink”, Soda pop.com Click & Learn:  http://www.pepsicity.com/rpsm/edOid/105548/rpem/ccd/lookLearn.do

Deitz, Corey, “Learn the Difference to Make the Best Choice For Yourself”, Your Guide to softdrinks, December 29, 2005, Pepsi and Coke Comparison Chart 

http://pop.about.com/od/satelliteradio/a/blsatcomparecht.htm

Company Profile, “Pepsi, Inc”, February 10, 2006, NAMC Newswire, http://www.newswire.com/companyprofiles/xmsr.html

Insight from Standard & Poor’s, S&P Boosts Pepsi to Strong Buy, BusinessWeek online, February 9, 2006, http://www.businessweek.com/investor/content/feb2006/pi20060209_35961.htm?chan=tc