1. IKEA vs. Carrefour
What platform will work the best in Sub-Saharan Africa?
Nick Abbott
Alex Cardelle
Danielle Rossi
Daniel O’Sullivan

2. Target Countries:
Cameroon
Ghana
Kenya
South Africa
Tanzania

3. Advantages of an IKEA Platform
• Flat-packing distribution • IKEA’s global brand concept of
techniques reduce costs providing “Scandinavian
• Designs all products in Sweden furniture at Asian prices” has
but utilizes suppliers in India proved easily adaptable and
and China to manufacture culturally acceptable
products worldwide
• Customers browse lightly
staffed showrooms, collect
product choices,
load/transport themselves, and
self-assemble at home –
keeping costs at a minimum

4. Advantages of a Carrefour Platform
• Store formats include
hypermarkets, supermarkets,
discount stores, and
convenience stores
• Stores offer a wide-range of
products food and non-food
and services. One-stop-
shopping experience

5. Economic Environment

6. Business Environment
• South Africa and Ghana have the most efficient legal environment of
the 5 countries
• Cameroon, Kenya, and Tanzania have low ratings of gov’t
effectiveness, political stability, regulatory quality, and IP protection
• Kenya and Tanzania possess large trade barriers to entry such as high
tariff rates and business costs of crime

7. Business Environment

9. Retail Environment
• Cameroon’s government has implemented supportive retail polices
such as tax incentives and exemptions for mass-consumed products
• Central banks in Kenya and South Africa have kept lending rates low
to influence growth
• Ghana’s government has been working to increase FDI with greater
democratic reform
• South Africa and Ghana had the strongest retail environments
because of high urbanization rates, higher consumption rates and
healthy level of competition in retail, all important factors for
Carrefour and IKEA.

11. Cultural Environment
• All 5 countries exhibit • Each of the 5 countries
high-context attributes places family at their
• Ghana’s power distance is highest priority
the highest at 73% - • South Africa’s culture is
lowest is South Africa at the most materialistic
43% • Businesses are
• South Africa has the hierarchical
highest individualism at • African culture is very
60% - the rest of the traditional
countries are around 20%

12. SOUTH AFRICA + IKEA
Why we chose this combination

13. South Africa
• High income demographics of major cities –
Johannesburg/Cape Town GDP per capita of $31,500
(PPP)
• Very low tariff rates (6.3% for wood/paper products)
• Pertinent, reliable infrastructure for
importation/distribution
• Most “westernized” of the countries and would be a
good fit for western firms such as IKEA

14. IKEA’s Unique Strengths in South Africa
• Already increases in consumer demand for IKEA
• South Africa is a young nation and IKEA typically
targets young families with modest incomes
• No similar firms in South Africa that specialize in
modestly priced, trendy, ready-to-assemble furniture

15. IKEA’s Unique Strengths in South Africa
• Vertically-integrated structure allows IKEA to
be its own supplier
• Low capital investments needed – will open
only a few warehouses in select urban areas

16. Detailed Entry Plan
IKEA to South Africa

17. Franchising
• IKEA has successfully franchised in other emerging
markets such as Eastern Europe, Russia, and the
Dominican Republic
• No incentive or government requirement to find local
partner in South Africa
• High failure rate of international strategic alliances is
an unnecessary risk

18. Target Consumer
• IKEA will target middle and upper classes in urban
areas
• Middle classes value upward mobility and buy
products based on convenience and quality
• Upper classes value pragmatic products, are brand
conscious, and are typically located in urban areas
• Young families who value low priced, quality furniture
have the most viability as consumers

19. Product Development
• In order to be successful in South Africa, IKEA will have to adapt
its store model to actively serve specific South African needs
• South African homes are smaller than those in western nations
which means IKEA needs to carry products that will fit the
reduced square footage
• Extensive tool sections will reduce shopping trips by allowing
consumers to buy everything they need for assembly
• In order to cater to the multilingual country, IKEA will provide
sales persons able to meet the needs of varying customer
language.

20. Management Strategies
• Decentralized organization with centralized corporate
culture to be passed on through management training
• Important that IKEA pass on the company philosophy
which is key in providing a consistent image worldwide
• IKEA managers need to consider problems for more
than one national group of employees
• IKEA will need to make adaptations of the domestic
model to motivate workers. This may require
managers to be more involved in the personal lives of
workers such as living arrangements.

21. Promotion Strategy
• Today, consumers in South Africa are easier to reach
due to a huge increase of mobile phone use
• IKEA’s promotion strategy will focus on wide use of
mobile phone advertising
• Furthermore, the use of m-commerce and the up-rise
in internet retailing via mobile phone will allow IKEA
to reach South African consumers effectively

22. Promotion Strategy
• South Africa may not respond to advertising the same
as in developed markets
• Studies in South African single-female households
suggest purchasing behavior is affected by their
perceptions about their independence and their
cultural beliefs and sensitivities.
• IKEA will need to connect its company and its
products to consumers and win the hearts of the
people

23. Competition
• South African furniture retail market is concentrated
and is dominated by a small group of retail chains – JD
Group, Lewis Group, Ellerine Holdings, and OK
Furniture
• IKEA will compete using price leadership strategies,
given its competency in cost-efficiency by leveraging
its superior supply-chain management abilities

24. Other Considerations

25. Other Pursuable Markets
Business/Office Supplies
• Large increases in FDI and increases in start-ups
• Quality, low-cost office furniture will be in demand
• Only minor adjustments in store layout
• IKEA already has experience in market
• Operation will not cannibalize other markets within
IKEA

26. Conclusions
• South Africa, especially its cities of Johannesburg and
Cape Town, would offer IKEA an exceptional
opportunity in entering the African continent.
• The income-viable populations within Johannesburg
and Cape Town suggest sufficient market size to
support a store in each
• Both cities contain sufficient highway infrastructure
to support the projected daily attendance to the
stores

27. Only the beginning!
• South Africa is only the foot in the door to future
operations in Sub-Saharan Africa (long term)
• Next step: Ghana?

28. Questions?