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For a truly global experience, try stepping off the streets of Shanghai into one of IKEA's largest outlets. Though the first item you see may have been made in China, it was more likely made in Vietnam, or if it is a piece of furniture, in Europe.
IKEA Group, a franchisee of Inter IKEA Systems BV, entered China in 1998 when it opened its first store in Shanghai. IKEAs mainland China stores belong to the IKEA Group and operate as joint ventures. (IKEA Hong Kong and IKEA Taiwan are separate franchisees.)
A new, redesigned Shanghai store opened in 2003, replacing the original outlet. At 33,000 m^sup 2^, the two-story Puxi district outlet is four times larger than the first store and is now IKEAs second-largest in Asia, after the one in Kuala Lumpur, Malaysia. Shanghai's new IKEA, which attracted roughly 80,000 visitors on its opening day, offers more than 7,000 products and features a 170 m^sup 2^ children's playground and a 500-seat restaurant.
IKEA opened its first Beijing store in early 1999. A second Beijing store is currently under construction in the city's northern Chaoyang district, and the company plans to enter Shenzhen after 2005. IKEA expects to have 10 large stores up and running in China by 2010.
Important to this physical expansion, of course, is revenue expansion. After lowering prices nearly 10 percent, IKEAs China sales rose 35 percent in 2003. Sales were Lip 50 percent in the first three months of 2004 alone.
In fiscal year 2003, PRC factories produced nearly a quarter of IKEA's goods; the company aims to produce more than a third of its goods locally in the next four years. In early 2004, 66 percent of the company's merchandise was produced in Europe, 31 percent in Asia (mainly Vietnam), and 3 percent in the United States. In China, IKEA currently uses 362 suppliers and employs several hundred thousand employees, directly and indirectly.
Who shops at IKEA?
Ulf Smedberg, marketing manager of IKEA China, described IKEA's mission as "to provide smart solutions for homes by implementing three criteria: good design, functionality, and low price." But, he explained, "When IKEA first entered China, the store was considered too expensive for its target consumers-young, professional couples-and the company lowered its...