IKEA Expansion to Indonesia - Strategic Marketing Plan 2009 - BUSM1534 Marketing Management Herdianti Wisesaputri (S3100622) MBA - October 2009
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Strategic Marketing Plan 2009
IKEA Expansion to
Indonesia
BUSM1534 Marketing Management
Herdianti Wisesaputri (S3100622)
MBA - October 2009
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 1 of 20Executive Summary 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 balances IKEA’s weakness of biased sales towards Western European market that is currently afflicted by global financial crisis. Macro and micro environment analysis suggest that Indonesia is an attractive market for IKEA though 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 furnitures. A growth rate of 4% for period of 2009-2013 is predicted. Due to significantly lower income level compared to IKEA’s key markets, it is suggested that IKEA pursue only upper middle income class and above. In this 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 are 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. IKEA to Indonesia – Strategic Marketing Plan 2009 Page 2 of 20
2. Promotion: Using internet in the beginning to build hype and conduct marketing research; Mass media such as television and lifestyle magazines is the key 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 stores in major cities such as Jakarta, Surabaya, Bandung and Yogyakarta. 4. Price: Continue using Good-value strategy and defend it aggressively; To keep the products affordable and appealing for Indonesian market, IKEA should try lowering cost, hence price, every year by sourcing gradually shift production locally. Initial investment needed is US$31 million. Using a sustained growth rate of 25% it is expected that IKEA will capture 0.5% of market share in year 5 and break-even at early year 7 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, it is recommended that IKEA 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 to Indonesia – Strategic Marketing Plan 2009 Page 3 of 20
Table of Contents
Executive Summary 2
Table of Contents 3
1 Introduction 5
1.1 Aim and Purpose 5
1.2 Background of Inter IKEA Systems B.V. 5
1.2.1 IKEA in Asia 5
2 Current Marketing Situation 7
2.1 Overview of Indonesia 7
2.2 Macro-environment Situation 7
2.3 Micro-environment Situation 8
2.3.1 Home Furnishing Market in Indonesia 8
2.3.2 Customer Segmentation 10
2.3.3 Customer Behaviour 11
3 SWOT Analysis 12
4 Proposed Marketing Strategy 13
4.1 Marketing Objectives 13
4.2. Marketing Mix 13
4.2.1 Product 13
4.2.2 Price 13
4.2.1 Promotion 14
4.2.2 Place 14
4.3 Implementation and Budget 14
4.4 Financial Analysis 15
5 Recommendations 16
References 17
Appendix A. Financial Assumptions and Calculations 20
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 4 of 201 Introduction
1.1 Aim and Purpose
The purpose of this document is to provide an in depth look into IKEA’s 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.
Financial assumption are based on IKEA’s news reported figures of average investment
on each store and growth rate of similar business in Indonesia, constant economic
growth rate and sustained interest rate are also assumed. Another limitation is all data
used in this document are secondary data.
1.2 Background of Inter IKEA Systems B.V.
Founded in 1943 (IKEA, 2009a), privately held IKEA is the biggest home furnishing retailer
in the world (Bhatia & Kenna, 2009; Euromonitor International, 2009a). As of 2009 there
are 296 IKEA stores in 36 countries/ territories (IKEA, 2009b).
The cornerstones of IKEA vision, business idea and concept are low prices (IKEA, 2009c;
Euromonitor International, 2009a). IKEA offers a wide range of functional home furnishing
products with simple Scandinavian design “at prices so low that as many people as
possible can afford them “ (IKEA, 2009d).
The company targets customers looking for value and is willing to do some work
themselves, e.g. self-transporting and self-assembling the furniture, for a better price. The
typical IKEA customer is young low to middle income family.
1.2.1 IKEA in Asia
Asia accounts for less than 3% of IKEA total sales (IKEA, 2009e). Currently IKEA Group
has 7 stores in China and 5 stores in Japan, with other 13 Asia stores managed by
franchisees (IKEA, 2009f).
Ikano Group operates IKEA stores in Singapore and Malaysia (Ikano Group, 2008). Ikano
Group plans to expand to Thailand, Indonesia, Philippines and Vietnam in the future
(Rungfapaisarn, 2009).
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 5 of 20IKEA’s Asia expansion has not been smooth. Its first Japan expansion failed in the 1980s (Carpell, 2006). The second Japan, together with China, expansion was more successful. Some scholars has attributed this success to IKEA’s organisational learning and market adaptation abilities (Chaletanone & Cheancharadpong, 2008; Johansson & Thelander, 2009). Especially in China, Johansson (2009) observed that local market does not share IKEA’s affordable for everyone image as the rest of the world due to much lower income level in comparison to Western market. Hence, other than striving to continuously lower its prices in China, IKEA also adjusted other aspects of its marketing strategy, i.e. offering delivery and assembly services (Johansson & Thelander, 2009). IKEA to Indonesia – Strategic Marketing Plan 2009 Page 6 of 20
2 Current Marketing Situation
2.1 Overview of Indonesia
Indonesia is populated by approximately 240 million with GDP of US$914.6 billion (2008
estimation) growing at 6.1% in 2008 (CIA, 2009a).
2.2 Macro-environment Situation
Macro-environment analysis suggested that Indonesia is an attractive market for IKEA.
Indonesia maintained a stable economy despite global economic downturn and a
preference towards modern retail stores exists. However, attention should be paid to
inadequate infrastructure, widespread corruption and lack of IP law enforcement as they
increase barriers to entry and expansion. Additionally, diverse culture, shopping habits
and wide use of television and mobile media can be useful for entering this market. See
Table 2.1 for more details.
Table 2.1 – Indonesia PEST Analysis
Economy • Despite facing global financial crisis, Indonesia’s economy is stable and progressing.
This is due to stability in political climate and sound fiscal policies.
• GDP per capita is US$3,900 (2008 est.) this is low if compared to IKEA’s key markets
(Western Europe and US).
• Labour cost is low. It means Indonesian does not do DIY furniture assembly as it is
cheap to hire carpenters but also there is a potential to source production locally,
lowering cost.
Social and • Diverse culture exists, although majority of population is Muslim, there are also
Cultural influential and wealthy Chinese minorities. This influences consumer seasonality, such
Factors as in Ramadhan green colour may be popular, while during Chinese New Year red
colour with Chinese year animal symbol can be a seller.
• Indonesian likes to shop and trip to malls is approached as a form of entertainment
activity.
• There is trend that Indonesians shift to prefer modern retailer stores than traditional
markets.
Technological • Inadequate infrastructure can hinder logistic and property development.
Factors • Usage of media such as television and internet is growing.
• Usage of PDA (e.g. Blackberry), promoting mobile media, is growing rapidly,
especially in big cities.
Political and • Corruption is still widely pervasive.
Legal Factors • Intellectual property law is not strongly enforced this can be especially problematical
when combined with availability IKEA’s yearly catalogue and low labour cost.
Source: CIA, 2009a; Euromonitor International, 2009b.
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 7 of 202.3 Micro-environment Situation
2.3.1 Home Furnishing Market in Indonesia
Furnitures and furnishing sales value in Indonesia was estimated at US$1.36 billion with a
growth rate at an average of 9.2% per year for 2003-2008 period. This growth is due to
the rapid development of property market, especially in major cities such as Jakarta and
Surabaya (Euromonitor International, 2009c).
This market is very fragmented, open and moderately competitive. Approximately 3% of
market share are held by 3 leading firms, Garant Möbel Indonesia (GMI), Home Center
Indonesia (HCI) and Graha Vinoti Kreasindo (GVK), the rest are shared by other small firms
(Euromonitor International, 2009c). Figure 2.1 illustrates the leading company shares
history by value for period 2004-2008 and Table 2.2 details brand shares by value for the
period 2005-2008.
Figure 2.1 - Indonesia Furniture and Furnishings Stores Company Shares by Value
2004-2008, excluding other small firms share
2.00%
1.8%
1.75%
1.6%
1.50%
1.3%
1.25%
1.00%
0.8%
0.75%
0.5% 0.5% 0.5% 0.5%0.5%
0.50% 0.4% 0.4% 0.4% 0.4%
0.25%
0.2%
0.1%
0%
2004 2005 2006 2007 2008
Garant Möbel Indonesia Home Center Indonesia
Graha Vinoti Kreasindo
Source: Euromonitor International, 2009c.
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 8 of 20Table 2.2 - Indonesian Furniture and Furnishings Stores Brand Shares by Value
2005-2008
Brand Company 2005 2006 2007 2008
Furnimart Garant Möbel Indonesia - 0.6 0.9 1.1
Index Home Center Indonesia 0.2 0.4 0.5 0.8
MER Furniture
Garant Möbel Indonesia 0.5 0.7 0.7 0.7
Center
Vinoti Living Graha Vinoti Kreasindo 0.5 0.5 0.5 0.4
Others 98.8 97.8 97.4 97
Source: Euromonitor International, 2009c.
GMI owns two brands targeting different market segments: MER Furniture Center, for
middle and upper income customers, and Furnimart, for lower to middle income
customers. GMI continued to extend its market leadership in 2008. Furnimart outlet
number grew rapidly in 2008, to lead furniture stores in outlet numbers. Growth was aided
by significantly lower starting capital required to open a Furnimart outlet compared with
MER Furniture Center (Euromonitor International, 2009c).
The Index brand, owned by HCI, saw the largest increase in value share in 2008. Index
achieved this with its “one-stop shopping for all furnishings needs” concept, it is the
largest modern furniture and furnishings store in Indonesia, with average selling space of
almost 5,000 square metres, five times others furnishing stores. Index also co-branded
with Citibank for a payment by instalments scheme, and offers a loyalty scheme with
introducing Index Reward card (Euromonitor International, 2009c).
Competition is expected to intensify with emerging modern chained furniture and
furnishings stores (e.g. Index and new entry Habitat) and grocery hypermarkets (e.g.
Giant, Carrefour) also selling low-cost furnitures (Euromonitor International, 2009c). The
effect of grocery hypermarkets are expected to be stronger, influencing stores targeting
lower to middle income consumer.
Euromonitor International (2009c) predicted a growth rate of 4% for period of 2009-2013,
supported by rapid property development and strong demand for houses and
apartments. These trends are expected to continue given the young median age in
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 9 of 20Indonesia and young average age at which people get married, making the bulk of
Indonesian population young and married (Euromonitor International, 2009a).
2.3.2 Customer Segmentation
Due to significantly lower income level and differences in demographics compared to
IKEA’s key markets, it is suggested that IKEA pursue only upper middle income class and
above. These segments are more likely to be familiar with IKEA brand and have the
purchasing power for current IKEA products. The following further segmentations within
this income bracket emphasise in demographic as “consumers wants and demands often
vary closely with demographic variables” (Kotler et al., pp. 230-321, 2009) and
geographic variables as it is important for IKEA to identify where to start its entry to
Indonesia.
Table 2.3 - Proposed IKEA Indonesia Market Segmentation
Educated Single Young Family Mature Family Business
Customers
Descripti Early to Mid 20s, well Late 20s to early 30s Middle aged adults Using furniture for
on educated and has just of age, they own their and 2 or more teen working offices.
started working. Most homes, have 0 to 2 age children, usually
live with parents, young children. live with extended
however the ones that Practicality and style is families (e.g.
live by themselves important for grandfather and
usually live in customers in this grandmother)
apartments or rented segment.
property.
Location Major cities Jakarta, Spread all over Spread all over Concentrated in major
Bandung, Surabaya. Indonesia, however Indonesia, however cities, Jakarta, Bekasi,
census data from 2005 census data from 2005 Tangerang, Bogor,
suggest that Jakarta suggest that Jakarta Surabaya and
and its surrounding and Surabaya has the Bandung.
has the most most population for
population in this age this segment
category.
Other May look for style Balance between style Looking for functional Expect services such
character rather than function and value is important, furniture is their as assembly and after
istics
and have limited may expect assembly priority. Also, the sales service. Need
expense allocation for service. adults in this family are personal contact.
household goods. in the peak of their
income
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 10 of 20Educated Single Young Family Mature Family Business
Customers
Needs Stylish and value for Stylish furnitures, Furnitures that can Value for money
money furnitures, multi-functionality as accommodate more professional styled
doesn’t mind to accommodate than 4 people, furnitures, looking to
assembling by future addition in the assembly service, buy in bulk and get
themselves, furniture family, furniture functional design, can discount.
accommodating 1-2 accommodating 2-4 pay higher price for
person. people. quality.
Sources: Central Intelligence Agency, 2009a, 2009b; Data Statistik Indonesia, 2009;
Euromonitor International 2007, 2009a, 2009b,
2.3.3 Customer Behaviour
Based on Euromonitor International (2009a) report, Indonesian customer shops for
household goods in specialists shops. Furniture is most often purchased from
independent furniture shops. Specialist retail shops are expected to remain as a dominant
distribution channel for household goods. However a few chains have emerged, usually
located in shopping centres (Euromonitor International, 2009a).
Do-it-yourself (DIY) concept has not yet been embraced as tradesmen services are still
very affordable. However, expenditure on hardware and DIY products did increase, albeit
slowly, reaching US$ 547 million in 2007 (Euromonitor International, 2009a).
Additionally, visiting shopping centres are viewed as a form of entertainment activity often
done on the weekend by all members of the family (Euromonitor International, 2009a).
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 11 of 203 SWOT Analysis Table 3.1 outlines IKEA’s current strengths, weaknesses, opportunities and threats (SWOT) analysis. Key to this plan is the opportunity presented in emerging markets (e.g. Indonesia) balances IKEA’s weakness of biased sales towards Western European market. Table 3.1 – IKEA’s SWOT Analysis Strengths Weaknesses • Strong brand image • Too focused on Western Europe A well established brand combining a distinct IKEA sales remain significantly focused in style with reputable affordability. Hence, it has a Western Europe, a mature market currently broad and loyal consumer base, helping it affected by considerable economic problems. survives in tough economic condition. • Downside of distinctiveness • Broad geographic reach IKEA’s success in establishing a strong brand IKEA stores are established in many countries, image and distinctive offer could reduce its shielding it from local market downturn. capacity to adapt should consumer trends turn • Adaptability to market and strong global against its unique brand image and design. strategy as proven by success in China and Japan Opportunity Threats • Emerging markets • Difficult economic conditions China, India and Indonesia with growing middle Though IKEA is more strongly positioned than its class, increasing purchasing power, young competitors, its business is still being threatened median age and growing economy, can support by lower purchasing power and poorly IKEA’s large-scale stores and help balance to performing housing markets in IKEA’s key spread out global sales. markets. • Internet retailing • Increasing competition from supermarkets Strong brand and established delivery infra- Retailers in US and European market such as structure place it in a strong position to exploit Wal-Mart and Tesco, pose notable threats to the expansion of internet retailing, driven by IKEA’s low-price positioning. This is further increased access to the internet and trends enhanced by the development of internet towards convenience in IKEA’s key markets. retailing. Sources: Chaletanone & Cheancharadpong, 2008; Euromonitor International, 2009a; Johanssen & Thelander, 2009. IKEA to Indonesia – Strategic Marketing Plan 2009 Page 12 of 20
4 Proposed Marketing Strategy
4.1 Marketing Objectives
• Create and increase brand awareness
• Make products affordable and appealing for Indonesian market
• Capture 0.5% of market share in 5 years
4.2. Marketing Mix
Armstrong and Kotler (2006) stated that marketing mix is a set of controllable strategic
marketing tools–product, price, place and promotion– that firm uses to produce the
response it wants in the target market. The following marketing mix are based on IKEA’s
successful entry into China market, as both market provided similar challenge of distant
culture and lower purchasing power, however several adjustments for this specific market
were also made.
4.2.1 Product
Product selection wise, IKEA should follow what Malaysian franchise store sells, as the
market in this two countries are similar. Showrooms should be designed and arranged in
Indonesian style and sectioned with market segmentation presented in section 2.3.2 in
mind.
For localisation, it is suggested that IKEA do not produce a new product altogether for
this market, instead do slight alterations. This will lower localisation cost and it has been
proven successful in the Chinese market (Ying, 2005). Market seasonality such as
Ramadhan and Chinese New Year can be a good inspiration for alterations.
Customer needs and behaviours considered, it is important that IKEA offers delivery and
assembly services. As IKEA will not be affordable for everyone, its products’ modern
design and the fact that it is a global brand can project an upper class image to the
market, hence the availability of such services is important to maintain perception of
value.
4.2.2 Price
IKEA should keep its Good-value strategy pricing, which entails medium to high product
quality at a low price (Kotler et al, 2006). To keep the products affordable and appealing
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 13 of 20for Indonesian market, IKEA should do as they did in China, try lowering cost, hence
price, every year by sourcing gradually shift production locally.
Aggressive low price-good quality strategy can appeal to Indonesia lower income
population, hamper competitions, and build customer preference in this market.
4.2.1 Promotion
Promotion’s objectives are to build awareness and liking towards IKEA brand and
products. For this, promotion needs to start well before store opening. Integrated
Marketing Communication (IMC) channels should be used are mass communication
(television and mass media) and internet communication. Internet can be used to build
hype and survey the customers on they’re wants and needs, this is a low cost way to
build awareness.
To appeal to the two families segments, tag lines such as “Family living space” or
“Functional together” can be used for marketing IKEA products in Indonesia. IKEA
catalogue should be adjusted to Indonesian style, this can be done by using local model
or style the rooms in Indonesian styles.
Co-branding with a popular bank for financing, and loyalty offer using reward card, similar
to Index’s strategy, is also suggested as it can help build and maintain loyal customer
base in Indonesia. Financing option is especially attractive for ‘Educated singles’
segment.
4.2.2 Place
Analysis reveals Jakarta as the most ideal city to enter, for potential future expansions
cities like Surabaya, Bandung and Yogyakarta are suggested.
Before opening a large-scale store, IKEA should first open display stores in shopping
malls. This is less costly and can be a good opportunity to familiarise with what
customers want or need. This helps build brand awareness.
4.3 Implementation and Budget
Table 4.1 provides implementation and budget for 5 years ahead.
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 14 of 20Table 4.1 Marketing Strategy Implementation and Budget
Time Activities Budget
Year 1 • Market research and location research. US$300,000
• Use internet to make a hype and do marketing research and
begin building customer database.
• Research sourcing channel for furniture production.
Year 2 • Build IKEA display store in shopping mall. US$700,000
• Continue building customer database and get in touch with
customer.
• Begin building IKEA stores.
• Build furniture sourcing infrastructure in Indonesia.
• Medium advertising, aimed at creating brand awareness.
Year 3 • Do review on display stores and customers’ satisfaction before US$15,000,000
continue on year 3 plan
• Opening of first IKEA store
• Begin production in Indonesia furniture production lines
• Heavy advertising, aimed at increasing brand awareness, build
preference and getting maximum sales. Use Internet when
possible but mostly using mass media.
Year 4 • Review performance on previous year before continue on year 4 US$10,000,000
plan.
• Ongoing marketing research is suggested.
• Continue market penetration, promotion should focus on brand
advertising.
• Research on location for second store.
Year 5 • Review performance on previous year before continue on year 4 US$5,000,000
plan
• Ongoing marketing research is suggested.
• Opening of second IKEA store, probably in Surabaya or
Yogyakarta city.
4.4 Financial Analysis
Initial investment needed to open first store and sustain operation until year 5 is US$31
million. Using a sustained growth rate of 25% it is expected that IKEA will capture 0.5%
of market share in year 5 and break-even at early year 7 of operation. For more details on
financial analysis please refer to Appendix A.
IKEA to Indonesia – Strategic Marketing Plan 2009 Page 15 of 205 Recommendations IKEA should capitalise on developing market to balance out its global sales, currently it focused too much in economic difficulties afflicted Western European market. IKEA can do this by expanding into Indonesian market, that has been analysed as attractive and open. IKEA can penetrate into the market using strategies that were already successfully done in China, shifting to local production and make limited, but effective and appropriate product localisation. It is suggested that IKEA should build a network of supplier and production lines in Indonesia. This will both keep the local customers satisfied with IKEA offerings, by pushing prices lower, and strengthen IKEA’s global network of low cost suppliers. However, it is recommended that IKEA ‘tests the waters’ first, 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. If review is positive IKEA should consider expansion to other cities in Java Island. IKEA to Indonesia – Strategic Marketing Plan 2009 Page 16 of 20
References Euromonitor International 2009a, Inter IKEA Systems BV in retailing, Euromonitor International, viewed 4 October 2009, . IKEA 2009c, Our low prices, IKEA, viewed 4 October 2009, . IKEA 2009d, Our business idea, IKEA, viewed 4 October 2009, . IKEA 2009e, IKEA group in figures, IKEA, viewed 4 October 2009, . IKEA 2009f, IKEA group stores, IKEA, viewed 4 October 2009, . IKEA 2009a, Our history, IKEA, viewed 4 October 2009, . Bhatia, M. & Kenna, A. 2009, IKEA has slowest sales growth in more than a decade, Bloomberg.com, viewed 5 October 2009, . IKEA 2009b, IKEA group stores, IKEA, viewed 4 October 2009, . Ikano Group 2008, The Ikano Group: Where we come from, Ikano Group, viewed 4 October 2009, . Rungfapaisarn, K. 2009, Ikano Group: Ikea mega-stores coming here soon, The Nation – Business, viewed 4 October 2009, . Central Intelligence Agency 2009a, The world factbook: Indonesia, Central Intelligence Agency, viewed 4 October 2009, . IKEA to Indonesia – Strategic Marketing Plan 2009 Page 17 of 20
Central Intelligence Agency 2009b, The world factbook: Country comparison – Population, Central Intelligence Agency, viewed 4 October 2009, . Carpell, K. 2006, Ikea’s new plan for Japan, Business Week, viewed 5 October 2009, . Chaletanone, W. & Cheancharadpong, W. 2008, ‘Internationalization of IKEA in the Japanese market and Chinese markets’, School of Sustainable Development of Society and Technology. Johansson, U. & Thelander, A. 2009, ‘A standardised approach to the world? IKEA in China’, International Journal of Quality and Service Sciences, Vol. 1, No. 2, pp. 199-219. Euromonitor International, 2009b, Indonesia: Country pulse, Euromonitor International, viewed 10 October 2009, . Euromonitor International 2007, Indonesian young population as key driver to consumer market growth, Euromonitor International, viewed 10 October 2009, . Euromonitor International 2009c, Furniture and furnishings stores - Indonesia, Euromonitor International, viewed 10 October 2009, . Data Statistik Indonesia, 2009, Indonesia census data 2005: Number of population by sex and age group, Data Statistik Indonesia, viewed 10 October 2009, . Yu, W. 2008, IKEA plans $60m for Tianjin store, China Daily, viewed 11 October 2009, . IKEA to Indonesia – Strategic Marketing Plan 2009 Page 18 of 20
Bangkok Post 2009, SF set to bring IKEA to Thailand - First store planned at B10bn Mega Bang Na, Bangkok Post, viewed 12 October 2009, . Business Week 1997, IKEA’s new game plan, Business Week – October 6, 1997, viewed 12 October 2009, . Ying, P. 2005, ‘Marketing across cultures: A case study of IKEA Shanghai’, Centre for East and South-East Asian Studies, Lund University. Armstrong, G. & Kotler, P. 2006, Marketing: An Introduction, Prentice Hall, New York. IKEA to Indonesia – Strategic Marketing Plan 2009 Page 19 of 20
Appendix A. Financial Assumptions and Calculations
1. Investment for opening 1 IKEA store and all supporting marketing and organisational
activities in Indonesia is estimated at $31 million. This figure is based on news figures
of IKEA investment in its Asia stores, as listed below
• Thailand store, proposed as the biggest IKEA store in Asia Pasific, THB 3.5 billion
(US$ 102 million) (Bangkok Post, 2009).
• China: Dallian store $20 million, Shanghai store $10 million (Business Week, 1997),
Tianjin store $60 million (Yu, 2008).
2. Revenue stream are estimated to be growing at 50% in the third year, as a full-size
IKEA store is opening and will grow at 25% for year four, this is a pessimistic growth
rate based on similar market (China) growth rate and growth of similar business in
Indonesia and 40% in year five as IKEA opens the second full-size store. The base
revenue is estimated at 0.2% of market value (US$ 2.6 million), for the second year of
investment as display store opens. This is a pessimistic estimation, considering IKEA
plan to gain around in its first year in Thailand, a similar size market with Indonesia
(Bangkok Post, 2009).
Table A.1 Estimated Revenue Stream (in US Dollars)
Year 1 2 3 4 5
Revenue $0 $2,600,000 $3,900,000 $4,875,000 $6,825,000
Growth 50% 25% 40%
Market Share 0.19% 0.29% 0.36% 0.50%
3. At a sustained growth rate of 25%, break-even point will be at early year 7.
Table A.2 Estimated Break-Even Point (in US Dollars)
Year 1 2 3 4 5 6 7
Revenue $0 $2,600,000 $3,900,000 $4,875,000 $6,825,000 $8,531,250 $10,664,063
Growth 50% 25% 40% 25% 25%
Left to
$31,000,000 $28,400,000 $24,500,000 $19,625,000 $12,800,000 $4,268,750 -$6,395,313
Break-even
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