This is the final individual assignment for Marketing Management subject in post-graduate level. This assignment received a High Distinction mark.

Executive Summary or Download Full Report

The purpose of this document is to provide an in depth look into Inter IKEA Systems B.V. (hereafter IKEA) current business strategy and Indonesian home furnishing market in order to assess the feasibility and provide strategic marketing plan for IKEA to enter Indonesian market.

Key to this plan is the opportunity presented in emerging markets like Indonesia would balance IKEA’s weakness of biased sales towards Western European market that is currently afflicted by global financial crisis.

Macro and micro environment analysis suggest Indonesia is an attractive market for IKEA. However, attention should be paid to inadequate infrastructure, widespread corruption and lack of IP law enforcement.

Indonesia’s furniture and furnishing market is very fragmented, open and moderately competitive. Competition is expected to intensify with emerging modern chained furniture and furnishings stores and grocery hypermarkets selling low-cost furniture. Growth rate is predicted to be 4% between 2009-2013.

Due to the significantly lower income level compared to IKEA’s key markets, it is suggested that IKEA pursue only upper middle income class and above. In these income brackets four market segments are identified. They are Educated Single, Young Family, Mature Family and Business Customers. Demographic, geographic and needs of each segment is identified.

Key customer behaviours are do-it-yourself (DIY) concept has not yet been embraced and visiting shopping centres is viewed as a form of entertainment activity.

To create and increase brand awareness, make products affordable and appealing for Indonesian market and capture 0.5% of market share in 5 years, the following marketing mix is suggested:

  1. Product: Limited localisation of product; product selection and display imitate IKEA’s franchise Malaysian stores; provide assembly and delivery service options.

  2. Promotion: Using internet in the beginning to build hype and conduct marketing research; mass media such as television and lifestyle magazines are keys to reach target markets in Indonesia; catalogue should be adjusted to Indonesian style homes and using local models; financing and loyalty reward program need to be considered.

  3. Place: Open display store in shopping malls first before opening a full-scale store in major cities such as Jakarta, Surabaya, Bandung and Yogyakarta.

  4. Price: Continue using Good-value strategy and defend it aggressively; to make the products affordable and appealing for Indonesian market, IKEA should try lowering cost, hence price, every year by gradually shifting production source to local.

Initial investment needed is US$31 million. With a sustained growth rate of 25%, it is expected that IKEA will capture 0.5% of market share in the 5th year and break-even at early 7th year of operation.

It is recommended for IKEA to capitalise on developing market to balance out its global sales by expanding into Indonesian market by using strategies that were already a success in China, such as shifting to local production and make limited, but effective and appropriate product localisation. However, IKEA should start by opening a small display store in shopping malls first before opening a full size IKEA store. This move should be accompanied by continuing market research and ‘hype-building’ promotional activities, through the internet. Yearly review on profitability and cost should be conducted.

IKEA in Indonesia: Strategic Marketing Plan

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