IKEA Marching Into China

  
 
Global sales of the furniture group IKEA was about US$11 billion in 2002 and five years ago IKEA opened 2 trial stores in Beijing and Shanghai. Later, it set up offices in Hongkong, Shanghai, and Shenzhen and the company has been reportedly doing well in China over the past few years.
Company sales in China reportedly reached yuan 500 million in 2001 and according to company estimates, it will continue to attract sales as the proportion of China's middle class grows. In the not so distant future the size of China's domestic furniture market will be as big as the whole Europe's.
IKEA has a 4 prong strategy for China: setting up commercial offices, opening stores, establishing procurement centres and investing in setting up factories. It is reported that IKEA has invested US$60 million to build Asia's biggest furniture market in Shanghai (area 36 000 square metres). The company president is on record as saying the company also plans to set up 2 new stores every year in China. The coastal cities and developed inland cities will be its main focus. Currently the company's commercial office in Chengdu City, Sichuan Province plans to procure furniture valued at yuan 4 million every year.
In April this year the company also invested US$180 million to build an industrial area in Shanghai's Song Jiang and establish IKEA's production base in China. Today furniture companies in China have become IKEA's biggest trading partners and 30% of IKEA's products are made in China. Most of the raw materials also come from China so that product prices are competitive.