goes to MEXICO

1
goes to MEXICO

• Becky Stavitzki
• Erin Tidwell
• Matthew Linden
• James Swanson
• John Woodruff

2
Economic Cultural Environment

• Low unemployment rate
• 3.8 in 2004
• Average of 2.6 over the last 4 years
• Strong Population Growth
• New home development
• Localized affluent populations
• Five times higher per capita consumption and
  wages in northern states

3
Political, Trade, and Legal Environment

• Open to Foreign Direct Investment
• Looking to decrease trade dependence on US
• Not many aggressive foreign investors
• safety issues, corruption, needed social and
  economic reforms
• Attractive opportunity for low competition
  coupled with the fragmented nature of the
  industry

4
Hofstedes Dimensions

• High Uncertainty Avoidance
• Collectivist Culture
• Highly Masculine Culture
• High Power Distance

5
Marketing Segmentation

• Geographically
• Northern Parts of Mexico, Sinaloa
• Foreign Direct Investment
• Higher wages
• Increasing trend in purchasing furniture

6
Market Objectives

• Achieve overall low-cost leadership in the
  industry
• Market products that are differentiated
• Focus on market segments for growth in cost
  and/or differentiation
• Obtain 20 of overall market share within first
  year

7
Targeting

• Emphasis on Family and Religion
• Households as Target Market
• Purchasing Decisions as a group

8
Positioning

• We will follow IKEA protocol by using the
  Globalization strategy
• Bold colors and unusual designs will set IKEA
  apart from Mexicos bland furniture
• In-store playrooms vocal point of Mexican
  expansion

9
Product Decisions

• Same products offered world-wide
• Competition- scene through variety of outlets-
  mass merchants, specialty stores and variety
  stores
• Language on packages and directions
• Focus on family oriented products

10
Promotion

• Create awareness through advertising and public
  relations
• Demonstrations, work shops, trade shows, etc.
• Educate Mexican consumers about IKEA and the
  products they offer
• Media types, scholarships, donations, aide,
  sponsoring functions, special events, and
  charities.
• Retain loyal consumers through incentives and
  satisfaction
• Customer loyalty card and a chance to apply for
  an in store credit card both which will provide
  customers with discounts and savings

11
Pricing Decisions

• Mexicans average 5.11 (45.95 pesos) for border
  areas, 4.22 (37.95 pesos) for industrial areas,
  3.98 (35.85 pesos)
• Mexico is also currently on a 2.8 annual rate
  increase which will also help their economic
  stability.
• Direct cost (Sinaloa, Mexico)

12
Placement and Distribution

• Entry Mode Licensing
• Franchise
• The objective of Inter IKEA Systems B.V. is to
  increase the availability of IKEA products
  through world-wide franchising of the IKEA
  concept.

13
Franchising

• Franchise will pay 3 of yearly sales to IKEA
  Systems B.V.
• Also pays startup costs
• Must meet Net Worth requirement set by IKEA
  Systems B.V.

• Corporate headquarters responsible for
• catalogues and promotional advertising
• Training and operational support

14
Manufacturing

• Where
• Mexico
• Why
• To reduce shipping costs
• Low production costs
• How
• IKEA has several low cost manufacturers located
  worldwide

15
Intermediaries

• Materials are purchased
• Least expensive manufacturer produces product
• Transported to Retail location
• Sold to customer

16

• Thank You For Your Time!