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FranchiseManagementofInternationalizedHouse-furnishingIndustry—CaseStudyofIKEA’sWorldwideExpansion1Chapter1Introduction1.1ContextWiththerapiddevelopmentofeconomy,franchiseemergesastheproductofmodernindustrialrevolution.Asinnovativewaysoforganizationandmanagement,thefranchise,originatedfromtheU.S,quicklyspreadoutworldwidesimplybecauseitcanbepracticedbeyondrestrictionsofcountries,cultures,andindustries.Statisticsindicatethattherewerenearly16,000franchisesystemsinoperation,withtheirpartners’amountto160million.TheglobalfranchisingindustryhasasaleofmorethanonetrillionU.S.dollarsannually,providingasmanyas20millionjobs.China,beingincreasinglyattractiveintheinternationalfranchisemarket,isnowlookingforopportunitiestoinvestinprofitablefranchisingprograms(中国投资咨询网,2007中国特许经营业研究咨询报告,URL:).In2004,China’stop100franchiseenterprisesachievedatotalsalesvolumeof496.8billionyuan,rising39%comparedwiththatof2003.Employeesinfranchisingcompaniesreached810,000,increasedby27%fromthe640,000ayearbefore.Andin2005,thesalesvolumecontinuallyflowsupto236.53billionyuanfortheformerhalfyear,grownby29.9%fromthatof2004(中国投资咨询网,2006年中国连锁经营行业分析及投资咨询报告,URL:).FranchiseManagementofInternationalizedHouse-furnishingIndustry—CaseStudyofIKEA’sWorldwideExpansion2FranchisinginChinahasbeenescalatedintotheeraofhigh-speeddevelopment,albeit,manyproblemsalsoexistbehindtheprosperoussurface.Culturecollision,laggingadministrativestrategiesandinefficientlogistics,challengedthefranchisesysteminChina.Forthehouse-furnishingindustryespecially,themarketisstillfarfrommature.WiththepurposetopromoteChinesehouse-furnishingindustries,thisstudytriestoexplorethesuccessfulworldwideexpansionofthefamousSwedenfurnitureretailer—IKEAanditsimplicationswhichChinesehouse-furnishingindustriesmightbenefitfrom.1.2SignificanceoftheStudySinceWTOgaveitsadmissiontoChinafiveyearsago,Chinahasgraduallyopenedwideritsmarketstomorefields,house-furnishingindustryparticularly.WhenIKEAfromSwedenopenedtheforthchainsupermallinChengdulastNovember,itsretailvolumeinChinaimmediatelyamountsto1.6billionyuan(丁鹏飞,许凤婷，2006).Itssuccessfulfranchisingmanagementrendersanewpromisingwaytodevelophouse-furnishingindustry,especiallyforthosewhoarealsointheprocessofworldwideexpansionandtowardstheinternationalmarket.Throughchainstoresandfranchising,enterprisesengagedinhouse-furnishingmayfindtheiraccesstotheinternationalmarketmoreeasily.However,inthisprocess,risksalsoby-produced.Thus,atheoreticalanalysisoffranchisemanagementandthecasestudyofIKEAwilldefinitelyoffersomehelpforthosewhowouldliketodevelopinhouse-furnitureindustrytogainabetterunderstandingoffranchisemanagement.ThestudymayprovidesomehindsaswelltothosewhoevenwouldliketoadoptthispromisingwaytodeveloptheirownbusinessFranchiseManagementofInternationalizedHouse-furnishingIndustry—CaseStudyofIKEA’sWorldwideExpansion3whenfacinginternationalopportunities.ByaninsightfulstudyofIKEA,theaddressofthestrategiesofIKEAadaptedinmarketing,logistics,price-controllingandcultureinthispaperareboundtobefruitfulexperiencetofranchisemanagementforboththepotentialcustomersandtheprospectiveChinesehouse-furnishingenterpriserswhointendstoseekopportunitiesininternationalmarkets.1.3ShapeofthePaperThisdissertationwillbedevelopedinsevenchapters.Chapter1,theIntroductionpart,whichwillbeinitiatedbyintroducingthecontext,researchproblems,andsignificanceofthestudy.Chapter2isfunctionedtodefineandcategorizecharacteristicsoffranchisemanagement.Thischapteralsopresentatentativeanalysisoftheadvantagestoboththefranchisersandthefranchisees.Chapter3willpresentananalysisofsomefactorssuchasmanageableandunmanageablefactorsthatimpactonthehouse-furnishingindustry.Chapter4willmainlyfocusontheanalysisofmarketingstrategiesofIKEA.Itsuniquelogistics,culture,etc.,whichcontributemuchtothesuccessofIKEA.Chapter5willstatethecurrentsituationofChinesehouse-furnishingindustryandpinpointssomeinspirationsformIKEA.FranchiseManagementofInternationalizedHouse-furnishingIndustry—CaseStudyofIKEA’sWorldwideExpansion4TheconcludingchaptergeneralizesthesecretofIKEA,inspirationsfromIKEAtoChinesehouse-furnitureindustriesandsometentativesuggestionsaremadetothosewhoaregoingtotakefranchisemanagementininternationalmarkets.FranchiseManagementofInternationalizedHouse-furnishingIndustry—CaseStudyofIKEA’sWorldwideExpansion5Chapter2CharacteristicsofFranchiseandItsAdvantagesThischaptermainlydiscussesthedefinitionandcharacteristicsoffranchiseandtheadvantagesoftakingthefranchisingsystemasawaytoexpandmarketinternationally.Someuniquemanagementconceptswillalsobegivenproperattentiontosoastogeneralizesomefruitfulimplicationstohouse-furnitureindustries.2.1DefinitionAccordingtotheInternationalFranchiseAssociation(IFA),franchiseisacontractualrelationbetweenfranchisorandfranchisee.Asperthecontract,thefranchisorprovidesauniquebusinessconcession,guidanceandassistanceintheaspectofstafftraining,organizestructuringwhilethefranchiseemakece