I. Introduction
The retail industry in Hong Kong Special Administrative Region has also been cause to experience many changes for the precedent years. With the beginning of the region’s return to Chinese rule in addition to the spate of noxious viruses like bird flue and SARS are among the key changes that HKSAR has lasted in the previous years. With the exception of other industrial and commercial entities that have emerged in the Hong Kong market, the region’s furniture industry has made known its resiliency alongside the indicated changes. The furniture industry of the HKSAR has made wide-ranging developments in its performance in both the manufacturing and exporting segment. An internet study on the general performance of the furniture market is revealed by . (, 2005) It indicated that the furniture manufacturing industries in Hong Kong has been flourishing in the international field. With the selling abroad of household, office and kitchen furniture, the furniture industry has not only been observed as a key player in the global scene, it has similarly assisted in producing accessible employment for the local area. Nevertheless, there seems to be an inadequate description on the retail industry in the region. Companies seeking to enter the HKSAR market will be without any form of background information on the industry, especially the culture that surrounds it. This is especially true when a company intends not only to do business but establish a firm base in the said area. This paper intends to examine the retail industry in Hong Kong with the use of culture as a determinant of the company’s success, particularly to the client-company context. In order to analyze the Hong Kong market, the discussions will be using specific theories on culture, particularly of Hofstede and Ronen and Shekar.
II. IKEA Experience: Hong Kong and Sweden Company Background
The company is a major player in the international furniture company with branches and subsidiaries in several countries in Europe and the rest of the North American region. The environment to which the country intends to enter is going to be discussed in the later part of the paper. Moreover, they also intend to employ a workforce coming from the local population in order to acquire the favor of the buyers in the said region. The following discussions are based on the articles made on the said companies. IKEA is not a publicly owned company, thus, data from an annual report from the company itself would be unavailable. However, statistics from its global website will be used to take into consideration the performance of the organization.
A. IKEA Sweden
The humble beginnings of IKEA, the globally recognized furniture store, in Sweden in 1947 might have never expected that they would gross a total of 14.8 billion Euros by the year 2005. (, 2002, 103;, 2006) Being the base and headquarters for operations of the company, IKEA Sweden concentrates more in making and building their merchandise as opposed to focusing on sales in the Swedish market. It has employed over a thousand employees in areas such as furniture production, print media, and design activities held by the company. (, 2002, 105) This is just in the area of alone. However, Sweden still possesses 8% of the top countries with regards to product sales. At the same time, it is at the top countries with 9% of the total purchasing rate internationally.
B. IKEA Hong Kong
The IKEA stores in Hong Kong started as early as 1975 and was later bought by The Dairy Farm Company Ltd in 2002. (2006) It has three stores that take on over three hundred thousand square feet. The IKEA model is anchored on establishing and offering an extensive variety of home furnishing products that are elegant and functional with reasonable rates which a lot of individuals will be able to meet the expense. Albeit IKEA is an international organization and makes the most of the media by building up its advertisings, however its major competitor, Pricerite, has survived for a longer period. Therefore, the former is more recognized in the administrative region than the latter.
III. Product Features and Characteristics
The company is a major player in the international furniture industry. Among their major products that it offers includes office, household and kitchen furniture. Office furniture products include desks, cabinets, and other items found within the office environment. On the other hand products under the household and kitchen category are basically those utilized in an ordinary dwelling. Basic products like beds, wardrobe, couches, tables and the like are among the products that the company offers in the market.
IV. Industry and Cultural Characteristics
In the current trends of globalization and internationalization, the issue of culture is necessary for companies and organizations seeking to compete in the international setting. Commercial and business activities have been attributed to the emergence of cultural globalization. ( 2003, 205) Similarly, it in these stated factors that allow organizations to obtain cues and clues on how to address particular situations in specific locations as they do business. ( 1998, in , 2003. 205) Some studies even pushes the envelope in saying that companies are even compelled to take on these differences in culture in order to adapt to the different demands of the consumers in the international scale. The following seminal works emphasizes the concept of culture as the major indicator of the overall performance of a firm. Moreover, the theory of cultural sphere will be used to take into consideration the environment surrounding the furniture industry in Hong Kong.
A. National/Regional Sphere 1. Regional Sphere
Hong Kong has been one of the most ought after markets in the Asian region. Geographically speaking, the said area has been strategically positioned in the middle of the shipping routes. (, 1998, 346) In the context of the mainland, Hong Kong is situated in such a way that the Pearl River estuary passes through its territory. ( 1997, 738) With the presence of world-class harbors and ports, Hong Kong indeed has been one of the most lucrative markets in the Asian region. Traditionally, the laws that govern the land are based on the principles encouraging investments. ( 1997, 701) After the reunification process, the special administrative region still possess the same legal climate that encourages investments, however reforms on the context of patents, copyrights, and trademarks have reinforced this investor-friendly aspect of Hong Kong. (p703)
2. National Sphere
The seminal work of (1984 in 1994, 53) on culture has been used in the study of international marketing for the past decades. It has been used primarily as a set of indicators on how individuals on a specific culture react on particular sets of situations. The model of (1984) is indicated below.
The concept of power distance is focused on the level of equality present in a particular society. This means that this measures the manner in which wealth is distributed in a society. (1999, 10) indicated in their book that Hong Kong is classified as a high power distance culture. This is similarly supported by the study of (2000, 9). According to the study of (1984 in , 1994) societies with high power distance index that power and wealth are significant factors in society to the extent that it has inherently allowed these elements to develop within. This means that social mobility is not likely in the case of Hong Kong.
Hofstede indicates individualism as to the level on which a culture regards the individual or collective elements of their society. More specifically, this measure how they consider collective or individual accomplishments and how they deal with interpersonal relationships. Recent studies show that Hong Kong society has a rather collectivist culture. ( 2003, 241) This means that the culture surrounding interpersonal ties is considerably tighter in the context of Hong Kong. There is an unwritten yet understood responsibility that each and every Hong Konger has on his/her comrade.
In this context, masculinity describes the level on which a society regards masculine roles and achievement. Moreover, this shows how gender is regarded in the said society. The recent work of (2001, 433) indicated that Hong Kong society acquired a high dimension of masculinity in their culture. This shows that the major structures of the society in Hong Kong are dominated by male. Needless to say that Hong Kong has a high level of gender differentiation present in its society.
This dimension measures the level to which the individual s on a society regards uncertainty and ambiguity. The study of (1999, 12) indicated that Hong Kong has a low uncertainty avoidance in its culture. This means that Hong Kong people are keener on acquiring risks and is open to the idea of change in situations. Given this attribute, Hong Kongers have a greater tolerance to ambiguity and uncertainty.
Hong Kong is said to have a strong long-term orientation. (1999, 12) This indicates that commitments are highly regarded in such cultures. Similarly traditions are similarly deemed important in such societies. (1999, 12) added that the persistent and thrifty attribute of the Hong Kong population have this effect on the orientation of the individuals towards their economic activities.
The work of (1985, in , 1996) indicated that specific countries have the tendency to cluster together particularly with regards to the similarities of their culture. They indicated eight country clusters: Anglo; Germanic and Nordic; Latin European and Latin American; Near Easter; Far Eastern; Arab; and Independent. Hong Kong is categorized under far Eastern cluster. This means that the said state possess a culture that has high power standard, low uncertainty avoidance, very collective, and masculine. In considering the work of and the classification of totally complement each other.
B. Industry 1. Consumer Behavior
The buying behavior of people often entails how a product or merchandise performs in the market. The response of the public to these specific kinds of products will similarly show how long it will stay in the market. To some extent the modern consumer is characterized as powerful in the market because not only that they now the value of their money, they are also informed and educated in making their choices. ( 2002, 12) According to (1998, 275), the Chinese consuming public possess decision making behaviors similar to what (1990, 134) indicated as brand conscious. This means that these consumers’ decision tends to be more oriented to purchase products that are well-known brands regardless of the high price. They tend to equate high price with high quality. These studies also established that the said consumers value high quality considering they claimed that their findings indicated that it is among the top factors that identified their respondents. Moreover, the study of (1998, 275) indicated that the Chinese consumers are more price conscious as compared to the results of the other studies indicated here.
2. Sources of Competitive Advantage
The economic integration of Hong Kong, one of the top capitalist regions in the Asian region, to the remaining communist superpower is rather unprecedented in recent history. ( 1997, 701) Though it has been under the British rule for several years, earlier works indicated doubts regarding the possible repercussions of the hand-over in the Hong Kong economy. However, (1997, 730) indicated even before the hand-over that the environment to which Hong Kong is usually related to will continue to be favorable for international investors. This means that the financial outlook of the Hong Kong economy will continue to be appealing for investors and businesses alike.
Another source of competitive advantage is the availability of skilled employment in the country. (, 1997, 701) Nevertheless, there is an apparent inequality in the context of gender within the workforce. ( 2002, 69) Normally, this is reflected in the employment positions and earning between male and female employees in the administrative region. Even so, companies seeking operations in this area will have access to skilled labor.
3. Rate of Technology Change
The rate of change in technology in the Hong Kong environment is considerably at par with its counterparts in the international setting. Initiatives taken by the administrative region has been significantly aggressive. Early attempts to attune the population with IT applications in the academe has made it possible for the Hong Kong students be more adept in this area. ( 2003, 269)
4. Nature of Product and Market
In accordance with the yearly report of one of Hong Kong’s top furniture corporation, there has been an immense influx of travelers in 2004. (, 2005) This denotes that there is a boost in the opportunity of instilling consumer confidence and fashioned a new demand in the retail sector of the administrative region. Nonetheless, it is still obvious that price sensitivity still subsists and is incessantly holding back the development of businesses based in Hong Kong. (, 2005) This sensitivity actually has been brought about by the meager economic fundamentals that have been embedded in the HKSAR for the past years.
5. Regulation and Intervention Hong Kong has constantly been supposed as a stronghold of commercial activity and capitalist ventures in Asia even before it has been given back to Chinese Rule. However, regardless of the rather firm communist values present in the central government in China, it has allowed the Special Administrative Region to carry on with its past trade and commercial actions. ( 2004) This nonetheless has been restricted eventually by the Chinese government provided the unimposing performance of the leadership of the autonomous region. Together with this cutback of liberties, the Hong Kong government has to likewise deal with the changes in economic status as presented by lethal viruses such as SARS. This evident danger triggered unemployment for over a period, in conjunction with some level of resistance to the changes of Chinese rule, in due course brought about discontent. ( 2004) The central government reacted to this cry be permitting the Hong Kong population the right to elect their own head. Correspondingly, the central government has similarly permitted the free flow of mainlanders to the administrative region by reducing the restrictions and cheering on mainlanders to splurge their money in the administrative region. (, 2004)
C. Company
Hong Kong is essentially a predominantly Chinese society which still has considerably stronger familial ties. ( 1995, 83) This attribute even goes as far as the context of business. Small and medium sized businesses in the administrative region are commonly run by families. And being a predominantly Chinese society, it is still subjected to specific attributes. A study of (1997, 5) indicated that the Hong Kong companies that are governed by Chinese families operate through an amalgamation of interpersonal relationship which relies on personal trust. In this context, decisions are made such that consultation from family members and other components in a company’s social circle is commonplace. Thus, trust is therefore plays a huge factor in the decision making process in companies of Hong Kong.
D. Professional
The employment pool of Hong Kong has been considered as highly skilled. (1997, 701) With the environment of Hong Kong being conducive for investment, it is not surprising that the administrative region acquire foreign direct investments, thus creating employment to the Hong Kong public. ( 1997)
1. Education in Hong Kong
Basic education in Hong Kong has acquired the British system of six years in primary, three in junior secondary, two years in senior secondary, and two years additional compulsory matriculation on university examinations. (, 2003, 137) However, the changes brought about by the handover to Mainland China have triggered several reforms in education particularly in the aspect of mother tongue instruction and restructuring of the past 6+3+2+2 structure. (p138) The reforms in the Hong Kong curriculum entail the development of a more generalist perspective in the context of basic education in the special administrative region.
On the other hand, there are also specific policy initiatives that the Hong Kong administration intends to carry out. The Design and Technology subject is added in the curriculum in Hong Kong schools. ( 2003, 21) This subject is comparable to technology education programs that are normally seen in US curriculums. With these subjects infused in the educational system, the future workforce of the region is subjected to problem solving training that will assist them in the future.
E. Functional
Hong Kong is among the most technologically superior societies with computer literate residents. ( 2003) In observing the major competitors in the furniture retail industry, Pricerite and IKEA, they both possess their individual websites where product data other company facts is accessible. Some other companies in the said region have similarly started employing the Internet as a means to market their goods. This denotes that shopping online is, to a particular level, a standard in the region. (, 2004) So it is feasible for retail companies to employ the internet as an ally to acquire much more of their industry’s market share.
The products that are offered in the furniture retail industry in Hong Kong are seemingly interchangeable and indistinguishable. Both of the major companies tend to the needs of the consumer with regards to the office, household, and kitchen furniture. Though the products that are sold by both companies could not be considered a commodity there are certain furniture sectors that tend to different sales channels thus ensuring a constant/regular number of buyers in the said industry. ( 2005) This shows that that the individual buyers in the retail sector are not the sole source of revenue of these companies. Though the buyers in the industry could well demand for a lower price from these companies, they don’t have the sufficient power to force these companies to take on their demands. This is supported by a report of TDC concerning the export of furniture from Hong Kong. The table below summarizes the performance of the region
Table 3. Performance of Hong Kong Furniture Exports
-
2003
2004
2005 (Jan – Sept)
Value
(HK$ mn)
Growth
(%)
Value
(HK$ mn)
Growth
(%)
Value
(HK$ mn)
Growth
(%)
Domestic Exports
21
+15
42
+98
12
-59
Re-Exports
7,677
-13
6,491
-15
3,433
-33
Of Chinese Mainland Origin
7,331
-14
6,278
-14
3,237
-34
Total Exports
7,699
-13
6,533
-15
3,444
-33
By Market:
2003
2004
2005 (Jan – Sept)
Share (%)
Growth (%)
Share (%)
Growth (%)
Share (%)
Growth (%)
US
66.3
-18
61.8
-21
48.8
-48
Japan
11.4
-3
13.2
-2
17.1
-6
EU
5.9
-5
7.4
+5
10.2
-3
UK
2.5
-13
3.3
+13
4.1
-14
Germany
0.8
-4
0.8
-17
1.3
+5
France
0.6
+10
0.8
+14
1.0
-10
Chinese Mainland
6.2
+22
5.6
-23
8.7
+9
Australia
1.7
+18
2.1
+2
3.3
+14
Canada
2.8
-22
2.6
-21
2.6
-32
By Category:
2003
2004
2005 (Jan – Sept)
Share (%)
Growth (%)
Share (%)
Growth (%)
Share (%)
Growth (%)
Seats & Parts of Seats
23.2
-4
26.5
-3
24.6
-41
Wooden Furniture
52.6
-20
45.0
-27
44.6
-32
Metal Furniture
8.6
-8
8.7
-14
10.4
-17
Plastic Furniture
0.3
-46
0.5
+39
1.3
+93
Other Furniture
6.1
-14
7.0
-3
4.6
-59
Parts of Furniture
1.5
-11
1.8
-1
2.0
-16
Mattresses
7.7
+8
10.6
+17
12.5
-16
V. Conclusion and Recommendations A. Conclusion
In looking at the discussions above, it appears that the use of culture has a significant effect on the way companies do business. Take the company presented here for example; being in the furniture industry, they are able to design furniture that would be able to cater to the needs of the Hong Kong market. Given the data above, it stated that Hong Kong has a very high discrepancy between the rich and the poor. Another fact indicated above is that the Hong Kong culture, regardless of the metropolitan setting, still possesses that collective trait. In this manner the designs of their products could be as modern as they want, however, the designs should similarly acquire the necessary traditional functionality that the Hong Kong household requires. The company should similarly create a name for themselves not only with their products but also through the imbedding their brand in the consciousness of the public. Relating their product with traditionally credible individuals or institutions may trigger the consumers’ dimension for long term orientation.
B. Recommendations
The findings above indicate several indications of the market based on the buying behavior of the public in Hong Kong. The said studies presented above claimed several generalizations regarding the buying behavior of every nationality. Along with these generalizations includes the possible opportunities for the companies on how these attributes could work to their advantage. These features of the market behavior and consumption will ultimately help the companies operate in such a way that they complement the needs of the public based on these attributes.
1. Build up the Brand Reputation of the Company
Considering the brand’s reputation is a big part of the buying behavior of the public. This means that branded products in this context is considered as among those considered as the highest quality in the market because they have to make sure that they have a strong hold on their market share. ( 1994, 373) Taking this into context, it is more likely that these branded products are pricier as compared to the other products made by the other players in the industry. Based on discussions above regarding the buying behavior of the public, it appears that the price of the item is negligible provided that its brand has a reputation in the market of having high quality.
This is an opportunity for the companies to take into consideration the possibilities of this attribute. They have to establish that they could indeed heed to the demands of the public with regards to the qualities of the products. They could also differentiate their products with the others in the market by instituting a more functional attribute to their merchandise. On the case of the new entrants in an industry, what they want to do is to establish a brand name first and equate themselves to high-quality products. Being a new player in the market, they may have trouble competing with the branded products because the said branded merchandise have already created a name for themselves and equated their brand to economic status, elegance and the like. On the case of local manufacturers, they could similarly take advantage of this opportunity by making joint ventures on these branded companies. In doing so, they are able to use an established brand without to contend with the trouble that new entrants face in entering the market.
2. Use advertisement and other marketing strategies to create a foundation to acquiring a grater market share
The findings above indicated that brands with strong hold in the market are able to acquire a greater market share as compared to its competitors. This means that the popularity of the brand have a great impact on the number of sales and revenue earned from the market. And according to one study, the reputation and popularity of the brands also depend on the country of origin of every company. ( 1997, 361) Country image is important in this aspect; brands made from specific countries not only denote quality but also exude the image of prestige.
In this context, companies should take into consideration and constantly monitor their intangible assets. (1997, 361) These intangible assets include brand loyalty and brand popularity. This will work if they create a strong brand by constantly reminding the public of their product line through advertisements and other marketing campaigns. A good illustration would be the advertisement of Nike where they use local sports heroes to market their products to the public. ( 2004, 185) Not only did Nike presented an image of excellence in the context which the local market could relate to, they have also utilized the strength of their brand to exude quality and resilience as required by the sports activities carried out by the local sports heroes.
3. Get closer to the consumer by establishing stores in commercial areas
Another aspect present in the findings above is that the modern consumers tend to adhere to a buying consumption where they treat it as a leisure activity. Leisure shopping is apparently brought about by the emergence of shopping malls and department stores all over the world. ( 2001, 7) This shows the opportunity for companies. This indicates that much of the consumption that takes place on the part of the buying public occurs in these areas: the malls and department stores.
It would be advisable for these companies to strongly consider taking up commercial spaces in malls and department stores in order to effectively market their product line. In some ways acquiring shop space in such areas not only allows the consumer easy access to the products of a company, it also serves as a means to advertise the products to the public. Thus, department stores and malls are thus an effective instrument for the companies to get closer to their buying public.
VI. References
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