Swedish IKEA Group known as the world’s largest home furnishings retailer started a business in China in 1998. IKEA’s China expansion plan developed by its top level policymakers was open to the media after seven year operation in China. As a whole the strategy of IKEA in China is to establish stores, set up factories and build logistic.

① Establishing stores by itself

IKEA chooses sites, buys lands and establishes stores by itself (not by renting mode) in China. Currently IKEA has established three stores in Shanghai, Beijing and Guangzhou respectively. It invests around US$60 million to US$100 million in each store with a business area of 30 000 square meters. The group plans to invest around US$350 million to US$700 million to establish seven stores in China by 2010 and its total sales will reach RMB10 billion.

The new store in Siyuanqiao had been open for business in the spring of 2006. It was invested US$100 million and was IKEA’s second biggest store with an occupying area of 43000 square meters, following just the Stockholm shop in Sweden (55000 square meters). A IKEA branch in Chengdu of Sichuan Province will be open by the end of 2006.

② Setting up furniture production bases

IKEA has set up its furniture production bases in Tianjin, Shanghai and Chengdu City. Dalian IKEA Furniture manufacturing Co., Ltd had broken earth in 2005 which was IKEA’s largest furniture manufacturing base in China. The total investment of this project was US$20 million. The Middle and high grade tables and chairs will be mainly made. 90% of the prophase products will be exported to international market. The project will be completed and operated by September 2006 and its output value is predicted to be US$30 million.

In addition, IKEA plans to further expand its production scale in China and transfer its furniture production bases in Europe (the monthly incomes of European workers in furniture factory is about RMB20 000 ) to East China, North China, Northeast and Southwest China step by step because labor costs in China is much lower than that in Europe and China’s furniture industry has been developing rapidly in recent years.

③ Building logistics distribution centers

IKEA implements procurement nationalization strategy and up to now IKEA has built seven procurement centers in China. The statistics shows that IKEA purchasing volume in China has made up 20% of its global total in 2004 which China has replaced Poland as its largest procurement country. IKEA has 370 suppliers in China and it is predicted that IKEA purchasing volume in China will make up 20% of its global total in five years. China has been IKEA’s largest supplying base in the world. 30% of IKEA’s products are made in China.

IKEA invested US$180 billion to build Asian largest logistics distribution center in Shanghai Songjiang industrial zone in 2003 due to its large purchasing volume in China. In addition, IKEA also plans to build a logistic hinge in the Asia and Pacific region and has invested US$150 million to build its largest logistics distribution center in Fengxian District of Shanghai. Up to now IKEA has accumulatively invested US$400 million in Shanghai and Shanghai has become IKEA’s world’s largest logistics distribution center.

It is estimated that the storage capacity of IKEA in China will exceed 300 000 cubic meters and the storage capacity of IKEA in the Asia-Pacific region will exceed 650 000 cubic meters by 2010.

It has been reported that the proportion of China’s to the world’s total consumption value of home furnishings is 3.8% and China will be the second largest consumer market by 2014, only next to the USA.

The total consumption value of China’s home furnishings will climb to $3.7 trillion and make up 11 percent of the global total over the next eight years, according to a Credit Suisse report. At the current rate of growth, China s household spending will surpass Italy s in 2006, France s in 2007 and Japan s by 2014, the report said. IKEA’s sales revenue in China grew 21% in 2005 and its proportion of purchasing volume in China also rose to 80%.