building international marketing plan bringing ikea to vietnam market

The IKEA enterprise considers the geographicaladvantages of the market it will enter - Vietnam, as well as economic, legal,technological, and material supply factors, especially about wo

IKEA OVERVIEW

COMPANY’S MISSION STATEMENT

IKEA's mission is: To create a better everyday life for the many people To do that, IKEA provides customers with a wide range of useful, beautifully designed furniture products at affordable prices.

PROFILE

IKEA is an international company specializing in the design of semi-assembled furniture, home appliances and accessories, it is the largest furniture retailer in the world IKEA was founded in 1943 by a 17-year-old Swedish man named Ingvar Kamprad IKEA has quickly become a global leader with 392 stores in 48 countries, scattered across all continents.

IKEA products are designed in a simple way, in line with the spirit of the world's No.

1 furniture company: Design for everyone IKEA has both high-end products but still focuses on designs that can reach all consumers, whether people with middle income or rich can choose to buy their favorite items at the store IKEA products Ikea designed each interior part separately and provided instructions for customers to assemble and complete the item in the simplest and fastest way However, depending on the needs of customers who need help, Ikea company will also offer installation service packages to help customers save time and effort.

VIETNAM COUNTRY

COUNTRY’S RELEVANT HISTORICAL DEVELOPMENTS

Scale of the economy is growing rapidly

During the past 35 years, Vietnam's economy has achieved an impressive growth rate. People's living standards both materially and spiritually improved markedly, in 1985 the average income per capita was only 159 USD/year, by 2020 it will reach about 2,750 USD/year.

In 2020, in the context of the Covid-19 pandemic, Vietnam remains a reliable destination for investors with a total FDI capital of 28.5 billion USD.

With impressive import and export turnover, Vietnam ranked 22nd in the world in terms of turnover and export capacity, 26th in terms of international trade.

Develop in harmony with socio-cultural development

Vietnam's poverty reduction has made impressive achievements The poverty rate nationwide has decreased from 58% in 1993 to 22% in 2005; 9.45% in 2010, 7% in

2015 and less than 3% in 2020 (according to the multidimensional poverty line).

The position of Vietnamese universities has been raised in the Asia and world rankings, in 2019 ranked 68 out of 196 countries in the world, up 12 places compared to 2018 For the first time, Vietnam There are 4 higher education institutions in the top 1,000 best universities in the world.

Deep international integration, increasingly enhanced position

Vietnam has established many strategic economic partnerships; actively build the ASEAN Community in 2015 and complete the domestic market more fully according to WTO commitments Up to now, 71 countries have recognized Vietnam's economy as a market economy, including Vietnam's major trading partners.

Since joining the WTO up to now, Vietnam has signed 15 regional and bilateral FTAs and is negotiating two FTAs with other partners The FTAs that Vietnam participates in cover most of the continents with nearly 60 economies with a total GDP accounting for nearly 90% of the world's GDP, including 15 G20 members and 9 out of 10 economic partners - Vietnam's largest trade belongs to the three largest economic centers in the world, namely North America, Western Europe and East Asia Therefore, the participation and implementation of FTAswill bring great opportunities for Vietnam, positively impact economic development, improve national competitiveness, businesses and products

Vietnam is also an active, active and responsible member of international organizations Vietnam has participated in the Association of Southeast Asian Nations

(ASEAN), the Asia-Pacific Economic Cooperation (APEC), and the United Nations' organizations, making active and ongoing contributions becoming a country with an increasing position and role in the region, respected by the international community.

In addition, Vietnam has been trusted to be elected to important UN bodies, such as the Human Rights Council for the 2014-2016 term, the UNESCO World Heritage Committee for the 2013-2017 term, and the Council for the 2013-2017 term United Nations (ECOSOC) for the 2016-2018 term.

According to statistics of the Vietnam Chamber of Commerce and Industry (VCCI), the average annual consumption of high-end furniture in the country reaches more than 2.5 billion USD In which, 80% are interior products imported from European countries, 20% are products of Vietnam Along with the average economic growth rate of more than 6%/year, the consumption in the field of interior design of Vietnamese people in the coming time is estimated to increase even more Therefore, European businesses coming to Vietnam this time also come from the assessment that the interior design market in Vietnam is very potential.

In the past 10 years, the growth rate of Vietnam's wood processing industry is among the most dynamic in the world; become the 7th largest wood and furniture producer, the 2nd largest exporter in the world.

Vietnam's wood and furniture processing industry has had a remarkable growth in the past 10 years, but in the process of development, it also revealed many limitations such as the ability to control raw materials, the quality of machinery and equipment , labor productivity need to be overcome soon to ensure sustainable development.

Domestically, wood exports are also in the group of 10 items with the largest export turnover, the trade surplus ranks third among items, creating jobs for more than half a million workers.

Currently, Vietnam also has large artificial wood factories of foreign corporations such as Sumitomo (Japan) in Long An or a joint venture between Vietnam Rubber Industry Group and Dongwha Group (Korea) in Binh Dinh Phuoc.

Vietnam's wooden furniture export turnover in 2018 reached 9.3 billion USD ranked second in Asia and fifth in the world The domestic wood processing market is extremely vibrant with the presence of nearly 4,500 enterprises Bringing jobs to nearly half a million workers Also according to EVBN's analysis Currently, Vietnam's furniture market is mainly focused on export and leaving the home field open Much of the domestic market is a playground for imported goods originated mainly from China, Malaysia, Thailand.

According to information from the Handicraft and Woodworking Association of HoChi Minh City (Hawa) In 2018, the total value of furniture consumption of the

Vietnamese market reached about 4 billion USD And according to the statistics of the Italian Trade Office in Vietnam, it also shows Vietnam's average demand for wooden furniture is currently more than 21 USD/person/year Calculating, the scale of domestic furniture consumption in 2018 has reached about 4 billion USD In 2018, Vietnam spent nearly 500 million USD to import furniture It is expected to continue to increase in the coming years.

THE NATIONAL BUSINESS ENVIRONMENT

Vietnamese, also known as Vietnamese or Vietnamese language, is the language of the Vietnamese people and the official language in Vietnam This is the mother tongue of about 85% of the Vietnamese population along with more than 4 million overseas Vietnamese.

According to Ethnologue, Vietnam has 110 languages listed, including Vietnamese and two marginal languages, Mandarin and French Of the living languages, 93 are native languages and 16 are not.

Besides the national language, we have 15 hours of development, 45 hours of health, 42 hours of difficulty and 6 hours of dying Currently dying languages have between 20 and 300 speakers. b) Culture

A culture that upholds traditional family cultural values

The family is the cell of society Traditional family culture: respecting the elderly, loving children, upholding marital love, respecting mother's rights Children must be filial to their parents Brothers and sisters must stick together and help each other in times of trouble and difficulty Traditional family cultural values are expressed in social relations such as calling the elderly grandpa, grandma, uncle, aunt, etc., while the younger ones are brothers, grandchildren, and children.

A culture that emphasizes the role of women

In Vietnamese culture, the image of women is highly valued and holds a worthy position in traditional cultural activities, especially in places of worship.

Open culture, adapting to world cultures

Vietnam is located in the western Pacific Ocean, east of the Southeast Asian peninsula, south of China, north of the Southeast Asian archipelago Shown through the diversity in home decoration in the style of the East, the West, c) Religion

According to the government's 2019 National Population and Housing Census report, there are about 13 million religious adherents, accounting for 14% of the population.

In which, Roman Catholics account for 45% of the total number of religious followers in the country, Buddhism accounts for 35% of the total number of religious followers in the country, Protestantism accounts for 7% of the total number of religious followers in the country. d) Population

As of December 31, 2021, the population of Vietnam is estimated at 98,564,407 people In 2021, the natural population growth rate is positive because the number of births exceeds the number of deaths by 912,801 people The sex ratio in the total population of 0.997 (997 men per 1,000 women) is lower than the global sex ratio. Below are the key figures for Vietnam population in 2021:

(Source: https://danso.org/viet-nam/) e) Population growth rate

After 10 years, from 2009 to now, the population of Vietnam has increased by 10.4 million people The average annual population growth rate in the 2009-2019 period is 1.14%/year, slightly down from the previous 10 years (1.18%/year) f) Age structure

As of early 2017, it is estimated that Vietnam has the following age distribution:

Picture 2.1: Age’s distribution in Vietnam

Orange: From 15-64 years old yellow: Over 64 years old

Population data by age (estimate)::

● 23,942,527 adolescents under 15 years old (12,536,210 boys / 11,406,317 girls)

● 65,823,656 people aged 15 to 64 years (32,850,534 men / 32,974,072 women)

● 5,262,699 people over 64 years old (2,016,513 men / 3,245,236 women) g) Ethnic makeup:Vietnam is a unified nation state, with 54 different ethnic groups In the territory of Vietnam, the majority of Kinh people (about 87% of the population); The remaining 13% is the population of 53 ethnic groups. Each ethnic group has different cultural identities, expressed through economic and cultural activities of ethnic groups h) Education attainment and literacy:

+ The literacy rate of people aged 15-60 in Vietnam reaches 97.85%, of which the age group 15-35 reaches 99.3% fully able to read and write, by 2020.

+ According to the rankings published by the EF English Proficiency Index (EPI) (2020), Vietnam ranks 13th out of 24 in Asia, 65/100 countries and regions in terms of English ability The two cities with the highest English proficiency in Vietnam are still Hanoi and Ho Chi Minh City. However, compared to the rest of the world, this score is still in the low proficiency group. i) Urban/ rural composition: Urban people account for 37.7% of the total population, about 37 million people, the majority of Vietnam's population still live in rural areas, accounting for about 62.3% of the total population j) Family Structure: In Vietnam, there are two types of families In today's digital age, the modern family dominates.

+ Modern family (nuclear family): small family consisting of two generations Emphasize individuality and allow each family member a relatively large amount of free space to develop Previous generations do not have much influence on the following generations, increasing the gap with previous generations both in terms of geography and cohesion

+ Traditional family: Multigenerational family, families usually have three generations including grandparents, parents and children Previous generations have a great influence on the next generation.

In addition, with great changes in economy, society and international integration,new forms of marriage and family that favor individuality tend to increase The study shows that 38.5% of respondents accept celibacy - this level is higher accepted in women and social groups with many modern characteristics; 28.4% have the need and desire to cohabit before getting married; 58.3% do not support cohabitation This ratio shows that in Vietnam, the group of people who still follow the traditional pattern in marriage, although still accounts for a high proportion, is not nearly as absolute as in the previous traditional society k) Differences between roles of men and woman:

In Vietnam, by 2020, 70% of women will join the labor force Senior management positions held by Vietnamese women account for 27%, higher than the world average However, female workers are still concentrated in low-income occupations And more than 50% of Vietnamese women are still victims of domestic violence.

In Vietnam, women make up more than 57% of the country's unemployed adults, according to the NGO CDI Another study by the International Labor Organization (ILO) and Navigos Search Company showed that, out of 12,300 online job advertisements between November 2014 and January 2015, one-fifth required gender , of which 70% required candidates to be male Men are targeted for specialized, high-tech jobs or jobs that require a lot of travel While women are often employed for office and administrative jobs.

- Type: Socialist with the mechanism of having only one political party to lead is the Communist Party of Vietnam.

+ General Secretary: Nguyễn Phú Trọng

+ Prime Minister: Phạm Minh Chính

+ President of the National Assembly: Vương Đình Huệ

Vietnam is a country with a stable political background Experts from the EIAS Institute highly appreciated Vietnam's stable political situation as well as its impressive economic development in recent years, especially after the Covid-19 epidemic was brought under control The maintenance of economic growth in the context of the Covid-19 pandemic is an outstanding example of Vietnam's stability under the leadership of the Communist Party of Vietnam and the administration of the Government of Vietnam With the unified direction from the central to local levels, the entire political system of Vietnam has stepped in and mobilized the participation of the entire people, creating a high consensus in the whole society to implement strong anti-epidemic measures, mobilizing large resources in a short time for epidemic prevention and control Under the leadership of General Secretary Nguyen

Phu Trong, Vietnam has achieved healthy economic growth and many achievements after the pandemic.

According to the Index of Economic Freedom 2021, published by the American Heritage Foundation, the Vietnamese economy belongs to the group of "moderately free" economies Free), an increase of 2.9 points and an increase of 15 places compared to 2020 Vietnam ranks 17th out of 40 economies in the Asia-Pacific region and its overall score is higher than the average of the country region and the world.

Vietnam's economy has been gradually improving in terms of the free index since

2011 Strong GDP growth over the past five years has reflected this improvement, driven by the manufacturing and processing industries export direction.

All land is owned and managed by the state, but since September 2018, the government has issued land use right certificates for 96.9% of land in Vietnam.

The highest personal income tax is 35% and the highest corporate income tax is 22%. Other taxes include value-added and property taxes The overall tax burden is equal to 18.6% of total domestic income Government spending has amounted to 28.3% of GDP over the past 3 years, and the budget deficit has averaged 4.7% of GDP Public debt is equivalent to 57.5% of GDP.

Investors are required to meet investment conditions of WTO commitments, international treaties on investment that Vietnam has signed or acceded to and domestic laws.

MARKET AND SIZE POTENCIAL

Table 2.2: Gross domestic product in Vietnam

Actual Previous Highest Lowest Dates Unit Frequency

+ The Red River Delta has a total population of more than 22.6 million people, the monthly per capita income is approximately 5 million VND, of which Hanoi is the place with the highest per capita income in the region.

+ The Northern Midlands and Mountains have a total population of about 12.5 million people, the monthly per capita income is about 2.7 million VND The province with the highest average income is Bac Giang province.

+ The North Central and Central Coast regions have a total population of more than 20.2 million people, with a monthly per capita income of about 3.4 million VND In which, the place with the highest average income is Da Nang city.

+ Central Highlands has a total population of 5.8 million people, per capita income is 2.8 million VND/month Lam Dong is the province with the highest average income in this region.

+ The Southeast has a total population of about 17.9 million people, and the per capita income is approximately 6 million VND/month The province with the highest average income in this region is Binh Duong province.

+ The Mekong Delta has a total population of 17.2 million people, the monthly per capita income is about 3.9 million VND In this region, the place with the highest average income is Can Tho city.

Labor force: total in Vietnam was reported at 56151046 in 2021, according to the World Bank collection of development indicators, compiled from officially recognized sources Vietnam - Labor force, total - actual values, historical data, forecasts and projections were sourced from the World Bank in September of 2022.

Inflation rate: Annual inflation rate in Vietnam fell to a three-month low of 2.89% in August 2022 from 3.14% in July, due to a softer increase in transport prices (8.94%). compared to 15.22%) Prices continued to rise for food and catering services (3.30% vs 2.98%), housing and construction materials (1.40% vs 1.13%) and textiles and footwear sandals and hats (2.05% vs 1.84%).

Table 2.3: The State Bank of Vietnam quoted the central rate of VND versus

USD on 08/31/2022 Central rate of VND versus USD Exchange rate

Unemployment rate: Unemployment Rate in Vietnam decreased to 2.46 percent in the first quarter of 2022 from 3.56 percent in the fourth quarter of 2021

Major import/exports: In 2020, Vietnam is the 16 th economy in terms of total exports and 18th in terms of total imports Data from the General Department of Customs,VIFOREST said that the export turnover of wood and wood products in May 2022 was estimated at 1.55 billion USD, up 7.9% compared to May 2021 Generally in the first 5 months of 2022, the export turnover of wood and wood products is estimated at7.15 billion USD, up 6.9% over the same period in 2021 Vietnam has advantages in cost, price and source of raw materials and is even expected to be the center of the world's furniture.

Distribution of wealth: The income of population groups increased from 3.1 million VND/month/person in 2016 to 4.2 million VND in 2020, but the income growth rate of the poorest group is always lower than that of the richest group, so the gap between rich and poor increasingly increasing However, income inequality between classes is decreasing as the GINI coefficient decreases from 0.431 in 2016 to 0.373 in 2020.

Picture 2.3: The GDP distribution across economic sectors of Vietnam

Radio of private-to-public industrial ownership and trade restrictions: The value- added tax on imported furniture is 10% of the value of the first imported goods of Vietnam (CIF value) Furniture import tax will depend on the type of furniture and the origin of the furniture.

The number of social network users in Vietnam is nearly 76 million Social networks, movie applications and messaging are the most popular types of applications that Vietnamese users use.

● Facebook and Youtube are also the two applications that users spend the most time with, accounting for 25% and 12% of the time, respectively,when used on mobile phones.

Picture 2.4: Most used mobile social networks

● For messaging apps: Zalo has overtaken Facebook Messenger to become the most popular messaging app, accounting for 6%-7% of usage time.

● Another social network, Instagram, was even surpassed by Tiktok in this survey when accounting for 4% of usage.

Social media remains an important channel for discovering a new product In particular, the popularity of videos on social networking sites increased by 7% compared to 2020, accounting for 22% of the proportion of online discovery channels in 2021. b) Television (TV)

In urban areas, time spent on TV (Coverage x Frequency) is 17% higher than the second largest channel, which is online.

Online channels currently account for 43% of the total time spent using traditional channels by main shoppers in Urban 4 cities and 27% in Rural.

According to statistics, Vietnam has about 19 million TVs and each year increases by

1 million new TVs Therefore, when broadcasting advertisements on television, advertising messages are able to reach about 60% of households c) Landline phone ownership

According to Newzoo's statistics, Vietnam is ranked 9th in the list of countries with the most smartphone users in the world Accordingly, in 2021, Vietnam currently has 66.9 million smartphone users, with coverage reaching 68.2%. d) Internet users: The number of Internet users in Vietnam is nearly 70 million, (accounting for more than 70% of the population). e) Billboard

It is difficult for Billboard in Vietnam to cross the usual safe line to break through and become unique because of advertising laws in Vietnam due to legal barriers such as:

● The size of outdoor billboards is clearly regulated by law.

● All statements on advertising need to be certified by an authorized unit

● Advertising materials are limited by law

Technological development level of the industry: Currently, the woodworking and furniture manufacturing technologies used by Vietnamese companies are too traditional and outdated Most raw wood materials are brought directly to the shaping stage without any processing technology such as burning wood at a temperature suitable for the characteristics of each type of wood Therefore, wooden furniture when encountering water, high humidity environment, long time will be easier to expand and break than imported wood furniture.

Investment by enterprises and the state in the application of science and technology development: A project to develop a sustainable and effective wood processing industry in the period of 2021 - 2030 Formation of 5 industrial forestry zones high technology, selectively attracting investment, prioritizing projects producing products with high added value, advanced technology, saving energy, raw materials, fuel, materials, and being environmentally friendly Encourage the development of research centers to design wooden products in accordance with the needs, culture and tastes of consumers.

COMPETITIVE ENVIRONMENT

Following the trend of simple but no less sophisticated, luxurious, especially modern interior design and increasing the utility of the product is what the brand creates.

JYSK Furniture first appeared in Vietnam in 2015 and develops more and more diversely with more than 1500 different furniture products.

Jysk's products are special because of outstanding features such as: Minimalist design, maximized functionality, increased applicability, reasonable price.

In addition, the company always has many discount programs in batches and seasons to encourage customers to choose to use products that are both beautiful and multi- functional at extremely reasonable prices.

Hoa Phat furniture brand is one of the leading furniture brands in Vietnam, is one of the large enterprises, leading enterprises in the field of furniture, Hoa Phat's product lines are highly appreciated for their quality product quantity, product design.

Hoa Phat is not only strong in providing a variety of furniture with diverse styles for industrial and general purposes as well as a large number of home furniture models with many prices to suit the needs of customers each customer group.

Customers and consumers can easily access Hoa Phat's products almost anywhere with the enterprise's wide distribution strategy.

Jang In is one of the leading furniture brands in Korea, with a history of more than half a century of existence and development At the same time, this is also a famous furniture brand with product lines that are good for users' health In Vietnam, Jang In is still one of the leading furniture brands chosen by Vietnamese consumers.

With the values of nature and people as the core, Jang In's products are always designed with an aesthetic design that is suitable for the environment and highly practical Besides, with the leading brand in furniture technology.

Jang In's customer groups often have mid-range or higher incomes due to the location of the stores, which are often located in locations such as shopping malls.

Retail furniture stores in Vietnam

Shops selling traditional wooden furniture in Vietnam

Products and services that competitors are offering:

- Hoa Phat Furniture is a large corporation in many fields, especially in the field of furniture, Hoa Phat furniture has an extremely diverse product portfolio: Hoa Phat Home Furniture Product Line; Hoa Phat School Furniture Product Line; Product Line of Construction Furniture – Hoa Phat Public Area; Medical Furniture Product Line Their current positioning in the market: Focused, solid and effective

- Jysk is an international retail chain from Denmark that specializes in providingNordic Living and Interior decoration solutions - Scandinavian Living The product portfolio is diverse: from Shelves / Cafe Table / Table / Dining Chair /Bed Frame to Small Furniture / Shoe Cabinet / Wardrobe Their current positioning in the market: Beautiful, Quality, Modern Scandinavian Nordic style

- Jang In Furniture is one of the leading furniture companies in Korea, with a history of more than half a century of existence and development Wide range of products: Jang In sofa / Jang In bed / Jang In wardrobe / Dining table set / Tea table / TV Their current positioning in the market: Aesthetic design is suitable for the environment and highly practical

The opponent's strengths and weaknesses:

- Strengths: Furniture companies such as Jysk, Hoa Phat Furniture or Jang In Furniture are all companies with diverse furniture product lines Like Jysk, the product is often Nordic style, both Jysk and Hoa Phat Furniture company have quite reasonable prices for a variety of users; or Jang In Furniture with high- class designs, made from high-quality natural wood or PVC.

- Weaknesses: However, the products of the above competitors are still made from metal materials, or the design of Hoa Phat's interior is not eye-catching; and products of Jang In Furniture, because of its high-end design, the price will also be higher than the common shops.

IKEA promotes flexible, customizable and composable furniture designs The combination of affordability and sustainability is key to this success Ikea's interior style is quite suitable for the consumption needs of young people.

IKEA CO has its own uniqueness in both design and execution of its cost leadership strategy To monitor costs, to win the market competition, IKEA CO developed three approaches: a modular approach to furniture design, limited service, and a global logistics and production management system Modular Interior Design Methodology and the “Ikea Effect” To save costs, IKEA CO abandoned the popular method by which sellers assemble furniture for their customers and came up with their own modular approach to furniture design: dividing furniture into designed modules and separately manufactured and easy to assemble When customers buy IKEA furniture, they should assemble it themselves More importantly, the modules can be assembled into furniture of different styles and different uses, not only saving costs but also giving customers a unique opportunity IKEA will also apply its cost leadership strategy when entering the Vietnamese market.

Products in retail stores of IKEA CO As the product is real, customers can touch and feel the product directly, helping to promote the customer experience and save on selling costs.

Layout products in real space (helps customers imagine what the product will look like if placed in a real space)

IKEA CO Use professional designers to design products to meet different customer requirements well Meanwhile, IKEA CO Regularly consult with their customers for opinions and advice, thereby providing fresh thinking for their future product design and development.

IKEA products are of high quality at the same price as the competition, or produce a regular quality product at a lower price than the competition.

Brand Manifesto: "Let's make life better every day for everyone"

Target customers: Those who belong to Gen Y (25-35 years old) and Gen X (35-47 years old) They can be newly married couples, or single people who need to buy furniture to decorate their home at a reasonable price In addition, customers can also be those who want to change and redecorate the furniture in their house.

SWOT

- IKEA attracts all types of customers by maintaining a low price strategy for furniture products IKEA's model is based on volume - mass production ensures low prices from suppliers and thereby offers low prices to buyers.

- IKEA's furniture products are always innovated continuously, easy to assemble and use.

- IKEA has an extensive supply chain network, they have effective control over the supply chain and professional delivery processes to maintain their ability to supply their products to retailers and customers.

- Customers present at the store will always be guided enthusiastically by the staff through actual models and product showrooms, giving customers a unique experience when coming to IKEA's booth IKEA also has loyalty programs whereby the company can understand the needs of all its customers, which allows it to easily define its target segments and create products that are tailored to them fit.

- IKEA is aiming to limit the use of raw materials using only renewable recycled materials in its products in order to protect the environment The company still produces and provides customers with products that can last a long time

- IKEA has strong marketing policies, a bold content strategy, is a pioneer in AR and VR applications in the furniture business, providing customers with a realistic view of which products will fit into the space their life

- Customers often have difficulty in assembling furniture products because there is no support from technical staff.

- Businesses that want to keep production costs low have negatively affected product quality

- Although IKEA has many stores around the world, its reach to customers in small cities is still limited IKEA stores are only available in major cities or towns in various countries Therefore, it is difficult for customers who are far from cities or towns to experience IKEA products directly.

- Expansion of business to countries with developed economies

- Businesses can develop online sales channels to save operating costs New technologies allow customers to visualize in three dimensions what they order online

- Create sub-brands to reach new customer segments (Creating sub-brands to reach new customers segment)

- Fierce competition from rivals can reduce IKEA's market share, besides, increasing inflation reduces purchasing power, significantly affecting business operations and increasing production costs.

- Customers are increasingly concerned about the environment in developed countries It's also why companies should invest in sustainable materials to appeal to a population that is increasingly sensitive to environmental issues.

ENTRY MODE SELECTION

From the analysis above, it can be seen that there are several attractive aspects for IKEA to invest in the furniture industry in the Vietnamese market.

IKEA has a lot of experience in studying culture as well as consumer behavior before entering a certain market For the Vietnamese market, a Southeast Asian country,although there are many cultural similarities with China, there are also many differences Through research on Vietnamese culture, geography and consumer behavior, IKEA is able to penetrate Vietnam with a wholly owned subsidiary strategy instead of having to order online and wait a long time to be able to receive goods from abroad sent back with quite high shipping costs.

IKEA will set up a branch in Vietnam, 100% owned and controlled by IKEA. Established by completely new construction including factory, office and equipment,

Vietnam is a country with a quarter of its territory being mountainous, with great potential for providing good quality raw materials for IKEA to produce high-quality furniture for consumers This is one of the reasons for IKEA to use a wholly owned subsidiary to enter Vietnam Besides, labor cost in Vietnam is cheap compared to Europe, America and South America In other words, Vietnam has a significant comparative advantage over other exporting countries because it has good quality raw materials with low cost and flexible labor.

- This expansion strategy allows IKEA to have full control over operations such as marketing, logistics and decision making in Vietnam to meet their standards.

- All profits will go to IKEA as it has full control over all operations With a wholly owned subsidiary, IKEA can receive 100% of the profits generated in Vietnam.

- By adjusting to a wholly owned subsidiary, IKEA is able to gain location recognition and economic experience when the company is adopting a transnational strategy As a result, IKEA can make the entire decision to manufacture products that are customized to the wishes and needs of local customers.

- Help IKEA reduce the access of competitors to its advantage Do not reveal your technology and competitive advantage to others as IKEA oversees all subsidiary activities alone.

- It is very costly for the company and can lead to serious financial risk if unsuccessful.

- IKEA must bear all costs and high risks when setting up factories, shops and retail stores operating in Vietnam.

- There are political risks of entering into the market whole in the form of nationalization threats or corruption and bribery.

TARGET MARKET

2.7.1 Describe the target segment in Vietnam

Table 2.4: IKEA's customer target segments

Demographic Age 25 to 35 (Gen Y) 35-47 (Gen X - Y)

Occupation Office worker, freelance, content creator

Junior high school graduate or higher and awareness of western style.

Married and starting a family, no children

Full Nest I, youngest child under six The most home-related items in the Full Nest phase 1.

Full Nest 2 families with children 6 years and older

Full Nest 3, the children have grown

A large portion of Parents are more likely to buy luxury furniture items

Information: Explore online via website, social media, internet.

Care and consider: See reviews from others,

Realizing the need to redecorate the homeInformation: Explore online via website, compare ikea products to those on e- commerce platforms; influenced by social networks and influencers

Evaluate: Go to the showroom by motorbike and compare the products with the information they find

Purchase: Order online or choose a delivery service internet.

Care and consideration: See reviews from close relatives (wife, husband, children), influenced by reviews of acquaintances who have purchased goods

Evaluation: Visit the showroom by personal vehicle and compare the products with the information they know.

Purchase: Choose a delivery service or deliver the goods themself

Occasion Decorating the family's apartment

Self-designing: decor of their choosing to match whatever they want to portray themself

Convenient and affordable of durable furniture

Want to design or arrange the interior of their own homes.

Self-Design: the decor they choose to match whatever they want to portray their home style

Want to design or arrange the interior of your own house.

Social class Middle and upper class

Lifestyle Upholds a minimalist lifestyle: simplicity, modernity

Advocates of the environment, and they try to live in an eco-friendly way

Activities, Interests, and Opinions (AIO)

Likes a common living space such as a living room or kitchen.

Relaxing activities, collective entertainment in the living room, kitchen or outdoor space

2.7.2 How Ikea's strategies in Vietnam differ from Europe's

Table 2.5: The differences of IKEA’ strategies between Vietnam and Europe

Good quality, stylish furniture at price so low that everybody can afford it

Good quality, Western-styled as aspirational brand for the middle class population

Product Stylish, functional product and home furnishing

Slight modification to product to suits the local market and reflect Vietnamese apartment & rental size

Furniture rental service for the segment of customers who often move

The suburbs, next to highways so that access by car is easy

.Location in the inner city but not as central as An Phu New Urban Area because of the large rental area with lower cost than the center, convenient for personal vehicles.

Near the big shopping mall Mega market, Vincom mega mall - location with high shopping demand

Price Low cost Affordable prices

Promotion Ikea catalog is the main promotion tool

Advertising on Vietnamese social media (facebook, Tiktok), Online Marketing (Wedside, SEO), Advertisement, Sale promotion

Logistics Product are sources and make in developing nations like China, Malaysia and then shipped to Europe

Raw material and product are sourced locally Ikea also built factories in Hanoi and Binh Duong to avoid high import taxes

MARKETING OBJECTIVE

Target the first 2 years after entering the market:

+ Strengthening the position of the product in the market after successful penetration.

+ Increasing investment in technologies as well as quality raw materials to reduce production costs down to 20% of the consumer products.

+ Improving the design and quality of products to bring consumers the best products, in accordance with the tastes and buying behavior of Vietnamese consumers.

+ Completing the production plan of 10 million furniture products or more, annual revenue increased by 5% on average and there was no shortage of goods.

+ Building a factory in Binh Duong in the second year to be able to supply IKEA factories and stores in Asia.

MARKETING STRATEGY

IKEA has always come up with unique ways to cope up with the dynamic business environment The product line of IKEA includes the following items in its product portfolio:

● Tools & hardware and safety products

The company’s product range is around 10,000 products and around 2000 new products are launched every year It still has managed to keep its prices under control and it all lies in the company’s strategy and its excellent management system The above-mentioned products have further extensions and varieties as the product list at IKEA never ends.

IKEA has become the world’s leading expert on DIY as a result of its unwavering commitment to understanding their customers For decades, IKEA has successfully engaged its customers and has delivered on its vision of creating a better life for its customers.

People tend to value a product more when they’ve been involved in its creation Not only are Ikea customers an integral part of the company’s product design and development process, moreover, Ikea customers are actively involved in the creation of their product by having to assemble it themselves.

However, in some countries where customers find it hard to assemble the product themselves, IKEA provides a home service when the staffs will help customers do the job.

IKEA is all about the economy of scale, larger scale means one can get more discount from suppliers, transport systems are much more efficient, manufacturing process can be pretty much fully automated, which further reduces cost That is why their range of products is nearly the same around the world, which small variations in size/color/names, all supplied from a few factories.

Logistics is an indispensable part of the product design, production and sales process.

In the process of designing home products, designers also need to pay full attention to the logistics and transportation links of the home, thus reducing the consumption of logistics costs The flat-panel packaging mode adopted by IKEA can greatly reduce the occupation volume in the home transportation process, thereby reducing the number of transportation times and effectively reducing the waste of resources and air pollution caused by the transportation of household products.

However, not all IKEA products can be transported in a flat-package mode, which requires IKEA designers to fully consider the logistics costs in the later stages of product development and design In addition, IKEA has established an outsourced manufacturing plant on a global scale, so that it can also obtain local materials during the production process, which leads to a significant reduction in packaging manufacturing costs and transportation costs.

Picture 2.5: The impact of packaging on the supply chain

From the perspective of the appearance, IKEA will also be delicate and meticulous as an important design concept, and each product of IKEA can be enjoyed as an artwork, which is the most unique place for IKEA product design

IKEA's product design process is also very functional, and also through the design of the white space to highlight the product features.

+ Environmental Protection Concept in Material Selection

As people's awareness of environmental protection continues to increase, they also tend to be more sustainable in the consumption process In IKEA products, recyclable materials such as wood, cotton, metal and glass are also used to meet the environmental protection needs of consumers.

Wood is a commonly used material in home design In the process of product design, IKEA will design the wood of the original exhaust gas into a new home by compressing, pulverizing and direct cutting without changing the materials of the home product Fabrics such as sofas, carpets, and pillows in household products can be re-programmed after disinfection to achieve recyclability.

❖ Pricing strategy a Competitive-based pricing

IKEA uses a Competition-Driven Pricing strategy IKEA products are priced lower than competitors in the market today. b Low valuation

The products of traditional manufacturers are first designed and then manufactured, then priced according to the different costs and profits of the products designed, and then the process sells IKEA's process is to swap the first two, first calculate cost and price, then do design and development, then sell.

The advantage of cheap labor and low cost of raw materials is one of the advantages in Vietnam that helps IKEA implement a low pricing strategy. c Psychological pricing

- Price ending in number 9: This is the pricing strategy adopted by IKEA first in Sweden and extends to every country where IKEA has stores This is a symbol of IKEA's low-cost concept People and even Vietnamese people often read from left to right and tend to emphasize the numbers on the left rather than the right Create a feeling of cheapness for consumers All product ending prices at IKEA are 9, so buyers can just look at the first or second number and make a decision Products will be priced ending in 9, or 99, such as VND 199,000.

- Reference price: When setting a new price, IKEA will set the previous price.

When consumers estimate the price of a product to decide if they consider it a good deal, they need to check the price with several references If the new price has some reference, people might think the current price is a good deal based on the reference they were given Therefore, IKEA offers new product prices for reference and has great appeal to customers.

Picture 2.6: Psychological pricing d Product mix pricing: IKEA uses product bundles Let's say if someone wants to set up a new office, IKEA provides all the essential products by lumping them together at a reasonable price.

2.9.3 Promotion Strategy a Establish advertising objective in Viet Nam Country

Brand image: Create a consistent image of Ikea Vietnam as a place that provides modern, European style furniture at an acceptable price.

Awareness: Increase awareness of the Ikea brand and products After 6 months reaching 43% rate in the target market After 1 year increases 35% compared to the original.

Information: Attracting media attention and providing information to target customers about the leading Swedish furniture brand that is about to enter Vietnam to open its first store. b Create an international budget

The primary budgeting methods include: 5% percentage of sales

The budget will be determined by a percentage of Ikea's sales in the first 1 year. For example, if expected sales are VND 100 billion, and the percentage of advertising and marketing budget is 5%, the budget will be 5 billion. c Choose an Advertising Agency

- In-house Marketing team: Create promotional campaigns, discounts.

- Outdoor Advertising Agencies: Choose WPP Group as the largest representative of international agency groups in Vietnam In Vietnam, WPP has 7 advertising subsidiaries: ADK, Bates CHI&Partners, Grey, JWT, Ogilvy

FINAL RECOMMENDATIONS

Evaluation

About Pricing strategy: IKEA will continue to implement its pricing strategies in the

Vietnamese market Maintain a low price strategy and use psychological pricing to attract consumers Pricing lower than competitors and maintaining good product quality are strengths that help IKEA compete with furniture brands in the Vietnamese market.

About Promotion strategy: will be evaluated in two areas: attitudinal effects and consumer behavior.

● Brand recognition: refers to the ability of Vietnamese customers to correctly distinguish Ikea products when choosing Customers will be easily recognized through the featured graphics (logo, yellow, blue), showroom layout, even furniture style More broadly, when customers are mentioned ikea, they will immediately think of wooden furniture and beds, of that brand Awareness helps to show more accuracy and decision to buying behavior.

● Recall of the advertisement: Evaluated by store traffic The percentage of customers who come directly to Ikea Vietnam stores to visit and feel the furniture corresponding to those appearing in TVC increased by 46% after 2 months of the campaign.

About Distribution strategy: Because it is a direct channel, IKEA needs a large investment budget Enterprises will need to invest in construction, rent a warehouse system, recruit a transport team, a sales team, and take care of customers This tactic helps businesses control their brand image very well and easily build a loyal customer community.

IKEA Home furnishings