IKEA to India 1

INDIAAlisa Park

Marketing 4400: International Marketing

Doctor Furick

Georgia Gwinnett College

May 4, 2015

TABLE OF CONTENTS

Executive Summary 5Chapter One: General Portions of Paper I 6

IKEA to India 2

IKEA: an Overview 6Company Profile 62014 IKEA Statistics 6Business Model 6Global Sourcing Strategy 7Competitive Advantages / Core Benefits 7

Socioeconomic Environment 8Overview of India’s Economic Environment 8Economic Indicators 9

India’s GDP per capital PPP 9India’s middle class 9India’s labor force 9Composition of India’s GDP by sector of origin 9Tourism in India 10India’s inflation rate 10Implications of economic indicators for IKEA India 10

India’s Economic System 10Implications of India’s economic system for IKEA India 11

Trade Bloc Memberships 11India’s Degree of Economic Development 12

Political Environment 12India’s Political System 12

Market Environment 13Cultural Environment 14

Power distance 14Uncertainty avoidance 14Individualism / collectivism 15Masculinity / femininity 15Long-term orientation 15

Chapter Two: Marketing Plan Guidelines 16The Marketing Opportunity for IKEA in India 16Overall Objectives 18

Mission Statement and Vision Statement 18Corporate Objectives 19Financial Objectives 19

TABLE OF CONTENTS

Marketing Objectives 20Long-Term Objectives 20IKEA’s Basic Business Philosophy 20

Entry Strategy: Greenfield Foreign Direct Investment 20S.W.O.T. Analysis 21

IKEA to India 3

Strengths 21Renewable energy 21Appeal to the masses 22Recognizable brand 22

Weaknesses 22Opportunities 23

Demand for IKEA’s products 23Low cost strategy 23Trade blocs 23Growth in internet usage 23Tourism 24Governor in favor of foreign investments 24Operational profitability 24

Threats25

Land acquisition difficulties 25Terrorism 26Government restrictions 26Other 26

Target Segments 26Implications of demographic indicators for IKEA India 28

Customer Analyses 29The Swedish Customer 29The Indian Customer 30

The IKEA Product 31Product Mix 31Product Strengths and Weaknesses 31Product Life Cycle Management and New Product Development 31Brand Name, Brand Image, and Brand Equity 32The Augmented Product 33

The IKEA Price 33Place 34

Geographical Coverage 34TABLE OF CONTENTS

Distribution Channels 34Physical Distribution and Logistics 35Location of IKEA India 35

Promotion 36IKEA India’s Competition 37

Competition Comparison 37Expected Outcomes 37

IKEA to India 4

Forecasts 38“Success” Defined 38

Conclusion 38References 39

IKEA to India 5

Executive Summary

IKEA was founded in 1943, selling basic household goods at discounted prices. In 1947

the company began selling furniture. In 1958 IKEA opened its inaugural store in Sweden. IKEA

is the world’s most prominent furniture retailer, operating 361 stores in 42 countries. The IKEA

brand is currently valued at $12.5 billion. IKEA’s product line includes low cost, unassembled

home and office furniture, and household products.

Looking to expand into new countries, IKEA is considering to make a greenfield foreign

direct investment in India. If the plan is followed through, IKEA’s first Indian retail store will be

built in Hyderabad, the capital of the state of Telangana. A total of twenty-five retail locations

will be established over the next ten years. The company will also invest in supply chain

infrastructure to support the success of its retail operations. By 2020, IKEA will double its

current sourcing in India.

In India, IKEA will be targeting the domestic middle-class, residing in cities. Hotels and

other businesses will also be targeted.

The IKEA price in India will be comparable to prices in other developing countries, such

as China. Unique methods will be taken to aid in lowering the cost beyond the company’s usual

reduction of 30 to 50%.

IKEA India will be promoted through the dispersement of company catalogs;

establishment of a website for the Indian Market, which will be linked to IKEA’s homepage; and

other traditional methods of promotion including magazine ads, billboards, television ads,

product placement in television, and radio ads.

The following is a marketing plan, detailing IKEA’s intensions in India.

IKEA to India 6

CHAPTER ONE: GENERAL PORTIONS OF PAPER I

For our marketing plan, we are looking to take the multinational, IKEA, to India. The

following analyses of IKEA and India will show the anticipated investment to be a promising

choice.

IKEA: an Overview

Company Profile

IKEA is a multinational group of companies founded in 1943, by Ingvar Kamprad of

Sweden. Kamprad’s current role in the company is as a “senior advisor to the foundations which

control the empire.” (Reuters, 2012) As the world’s largest furniture retailer, IKEA currently

operates 361 stores in 42 countries. (IKEA, 2015) The company retails more than 10,000

products to its worldwide, multi-segment customer base.

2014 IKEA Statistics

In 2014 the IKEA brand was estimated to be “valued at $12.5 billion.” (Forbes, 2014)

IKEA’s 2014 yearly earnings exceeded “30.1 billion euros [in revenue from its] retail sales,” or

$33.7 billion. (IKEA, 2015) IKEA employees fulfill a wide variety of functions, including

“purchasing, distribution, wholesale, retail, range, support functions and [more].” (IKEA, 2009)

IKEA employs a total of “164,000 co-workers,” or employees. (IKEA, 2015) Customer traffic

included “1.6 billion IKEA website visits” and “821 million IKEA store visits.” (IKEA, 2015)

By the end of 2014, IKEA’s established retail stores consisted of a total of “10.5 million m2.”

(IKEA, 2015)

Business Model

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IKEA’s “business idea is based on [a] partnership with [their] customer. “ (IKEA, 2013)

Manufacturers and IKEA’s designers work closely together to create furniture, in “smart ways.”

(IKEA, 2013) Before production begins, IKEA’s buyers search suppliers, in many areas across

the globe, who offer the “most suitable raw materials.” (IKEA, 2013) When purchasing raw

materials, IKEA “buys [both] in bulk [and] on a global scale” in order to achieve the lowest cost.

(IKEA, 2013) Those savings are then passed on to their customers in the form of lower retail

prices.

IKEA’s business model is designed in a way that brings suppliers and customers together.

Specifically, IKEA “creates a relevant offer at a genuinely low price...by shortening the distance

between the needs of [their] customers and the possibilities of [their] suppliers.” (IKEA, 2013)

IKEA develops a price offer to its customers based on cost of “materials[, production]

techniques[, available] suppliers and industries[, possible] combinations[, and] large volumes.”

(IKEA, 2013)

Global Sourcing Strategy

Key to minimizing costs, IKEA utilizes a global sourcing strategy in order to maximize

their “internal production efficiencies.” (Olsson, 1996) To date, IKEA owns no manufacturing

facilities. IKEA products are manufactured by suppliers who are spread out across the globe and

who often are “located in low-cost nations.” (Olsson, 1996) IKEA carefully chooses suppliers for

each product who are located within “close proximity to [the required] raw-materials and [who

also have] reliable access to distribution channels.” (Olsson, 1996) IKEA’s suppliers all

“produce highly standardized products intended for the global market.”

Competitive Advantages / Core Benefits

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IKEA is both a cost and a price leader in the furniture industry. “Low costs in all

operations are prerequisites for the lowest prices. They give big volumes in sales and long-term

profits for IKEA and suppliers.” (IKEA, 2013) Large scale production, in combination with low-

cost purchasing, leads to lower operational costs, which leads to lower prices for the IKEA

customer. “IKEA's designers begin, rather than end, with a price.” (Collins, 2011) IKEA

continuously focuses on “finding simple solutions and saving on every method, process or

approach adopted.” (IKEA, 2015) For example, IKEA uses ‘co-workers,’ or employees, in their

catalogs instead of models. (Collins, 2011) Many of IKEA’s competitors are unable to compete

with the company’s low prices and minimized business expenses and production costs.

IKEA’s value chain, unique to their company, has been modified in a way that

contributes to their cost leadership strategy, “by integrating the customer in the process and

introducing a two-way value system between customers, suppliers, and Ikea's headquarters.”

(Olssan, 1996)

IKEA’s consumers supply transportation, information and knowledge through feedback

requested by the IKEA design team, labor required to assemble products, and their time. The

primary role of IKEA’s consumers are to “create value” for their products, “not to consume

value.” (Norrmann et al, 1993) IKEA’s suppliers play part of the role of a traditional customer,

“receiving technical assistance from Ikea's corporate technical headquarters through various

business services.” (Norrmann et al, 1993)

Socioeconomic Environment

Overview of India’s Economic Environment

In late 2013 and early 2014, the Indian government passed an economic reform policy

which helped to boost their economy’s growth rate, after a period of stalling in early 2013. (CIA,

IKEA to India 9

2015) According to Country Reports, the Indian economy is expected to “expand at rates above

5.0% over the near term.” (COUNTRY REPORTS: INDIA., 2014) Looking ahead to the fiscal

year 2015/16, “India's growth” is expected to “ris[e] further to 6.3%[.]” (Lloyd’s, 2014)

Economic Indicators

India’s GDP per capita PPP. The GDP purchasing power parity per capita was

estimated to be $4,000 in 2013. The GDP purchasing power parity was estimated to be $4.99

trillion, also in 2013.

India’s middle class. According to the most recent data, for 2015, middle class

citizens earn between Rs. 3.4 lakh to Rs. 17 lakh ($5,490 - $27,450) annually. Currently, 259

million Indians earn a middle class income. This number is expected to increase to “37.2[% of

the total population] by 2025...” (India Tribune, 2015) Much of the middle class resides in urban

areas, many in cities where IKEA stores will be built. IKEA will be able to “cash in on India’s

growing urban middle class.” (IKEA Group, 2014)

India’s labor force. The CIA’s 2014 estimate for India’s labor force totaled “502.2

million”, placing their labor force the second largest in the world. (CIA, 2015) 31% of the total

labor force has service occupations, while 24% have industry occupations. (CIA, 2015)

Composition of India’s GDP by sector of origin. Industry accounts for 24.2% of

India’s GDP, while services account for 57.9%. (CIA, 2015) History shows us that developing

economies first experience an acceleration in industry, or manufacturing, while their services

sector lags behind. Economic development in India has proven to be unique. India’s service

sector outpaces the rest of their economy. “As a result, share of manufacturing in GDP—which

is responsible for generating mass employment in most rapidly developing economies—has

remained largely unchanged.” (COUNTRY REPORTS: INDIA., 2014) This trend is not

IKEA to India 10

expected to change in the near future. In the most recent years, India’s “manufacturing sector has

reignited;” however, with foreign direct investments from foreign firms stagnating, the growth of

that sector will continue to be outpaced by the services sector. (COUNTRY REPORTS: INDIA.,

2014)

Tourism in India. Tourism in India is an important industry in terms of its contribution

towards the country’s economic growth. India ranks in “third [place] among countries with the

fastest growing tourism industries.” (WTTC, 2013) India’s tourist industry “is predicted to grow

at an average annual rate of 7.9% from 2013 to 2023.” (WTTC, 2012)

India’s inflation rate. The inflation rate for consumer products is declining. The

country’s 2013 estimate equalled 10%, while India’s 2014 estimate fell to 8%. (CIA, 2015)

Implications of economic indicators for IKEA India. While India’s GDP per

capita, purchasing power parity totals a low $4,000, the urban middle class earns well above this

figure. In developing economies, IKEA focuses heavily on the middle class. The population of

India’s middle class is much higher than in other countries where IKEA has proven to be a

success. Locating stores within India’s largest cities will also guarantee access to much of India’s

labor force. With IKEA India planning to invest in the building and operation of retail stores, the

investment of tremendous amounts of capital into much needed supply chain infrastructure, and

dramatically increasing sourcing from within the country, both the government and the people of

India will support their efforts.

India’s Economic System

India’s economy is quickly “developing into an open-market economy.” (CIA, 2015)

Many of previously state-owned enterprises are becoming privatized as the government relaxes

its foreign trade and investment regulations. For example, “foreign investment inflows to India

IKEA to India 11

rose sharply to $29.4 billion during April-July 2014, from $3.48 billion in the same period a year

earlier.” (Lloyd’s, 2014) Overall, India typifies one of the world's most auspicious developing

economies. Past and current impediments to economic growth will be attenuated. The Indian

government, aware of the need to create a “globally competitive economy” and of the expansion

of its skilled, domestic workforce, are actively reforming old economic policies, and adding new

ones. (COUNTRY REPORTS: INDIA., 2014) “[T]he future of reform, privatization,

deregulation, and infrastructure spending over the medium term remains largely positive.”

(COUNTRY REPORTS: INDIA., 2014)

Implications of India’s economic system for IKEA India. India’s movement

towards an open-market economy is of dire importance to IKEA India because of their practice

of a global sourcing strategy. IKEA India will be importing many raw materials and goods into

the country from others both in the region and from Europe. The ease of moving these goods will

be vital to the proper and efficient functioning of IKEA India’s supply chain.

Trade Bloc Memberships

International trade is of great importance for the well-being of India’s economy. India

obtained membership to the World Trade Organization in the year 1995. (COUNTRY

REPORTS: INDIA, 2014) The country is attempting to establish trade agreements with China,

Japan, South Africa, the European Union, and the Gulf Cooperation Council (GCC).

(COUNTRY REPORTS: INDIA, 2014) India is currently a member of each of the following

trade blocs:

1. India Bhutan Free Trade Agreement;2. India Korea Free Trade Agreement;3. India Singapore Economic Cooperation;4. SAFTA Trade Agreement (South Asian Free Trade Area);5. India Free Trade Agreement with member MERCOSUR states; and an

IKEA to India 12

6. exemption of customs duty on certain goods when imported into India from Malaysia, Singapore & Thailand.

India’s Degree of Economic Development

The World Bank reiterates much of what has been discussed thus far. India’s economic

growth is speeding up, once again, “aided by growth in investment and exports.” (World Bank,

2014) The services sector is, by far, the strongest sector, contributing the greatest amount to

GDP. The Indian government is increasing its own investment into the country’s infrastructure.

“Activities related to construction, electricity, gas and water supply grew robustly and demand

for capital and basic goods increased.” (World Bank, 2014) In addition to IKEA India, other

foreign investors have increased their capital flows into the country. Multiple sources, including

the World Bank, expect India’s inflation rate to continue declining. India’s stock market has also

been strong, outperforming other markets in region. “India’s long-run growth potential remains

high due to favorable demographics, relatively high savings and policies and efforts to improve

skills and education, facilitate domestic market integration, and incentivize manufacturing

activities.” (World Bank, 2014)

Political Environment

India’s Political System

India’s government is a federal republic. The law system is that of common law and is

based on the English model. The government is divided into multiple branches, each having

unique responsibilities. Many industries in the country that were previously state-owned are now

being purchased and operated by the private sector. Economic and business policies continue to

be deregulated. The Indian government, in 2012, relaxed several investments restrictions, now

allowing international single-brand retailers to establish wholly-owned subsidiaries within their

borders. (CIA, 2015) In May of 2014, the pro-reformist Bharatiya Janata Party (BJP) came into

IKEA to India 13

power. The party’s landslide victory gives insight into the majority of citizens’ view of foreign

businesses. They are welcoming of foreign multinationals’ investments into their country,

including operational investments and investments made towards improving India’s

infrastructure. This new government, and new country sentiment, will help to improve potential

growth by restarting the reform momentum. This, in turn will help to accelerate foreign

investments into the country.

Market Environment

According to industry estimates, the “Indian home and furnishing market is estimated to

be around...1.2 lakh[, or...] $20 billion.” (IKEA Group, 2014) The Indian home and furnishing

market is segmented into several categories, one being furniture. “The furniture segment

accounts for about half” of the total market. (IKEA Group, 2014) International brands have

found their way into the market through the method of importing, but there are currently no

international single-brand retailers operating as wholly-owned subsidiaries in the country. There

is a “strong demand for international brands and lifestyle products” in India. (IKEA Group,

2014) IKEA’s Scandinavian aesthetic and modern design would prove to be unique in a market

where many buyer options have a strong Indian influence. While the Indian population may

place a lower interest in the appearance of their furniture, the functionality of furniture is of great

importance. Functionality is one of the top focuses of IKEA design teams.

The furniture industry in India is presently in the Consolidation Stage. If, after opening

retail locations, IKEA proves to have made a successful investment, other single-brand retailers

may follow suit. The “performance of the industry” is still being measured, to some extent, “on a

brand-by-brand basis.” (Nigudkar, 2011)

Cultural Environment

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India is a high-context culture. Common traditions, shared history, and other similarities

characterizing in-groups help to explain situations, instead of the mere use of words. The Indian

culture “promote[s] group reliance [and] support.” (Nishimura, 2013) IKEA would benefit from

localizing their advertising, including both televised advertising and the website that will be

created for consumers in India, “using more local and cultural images and verbiage” to attract

consumers. (Nishimura, 2013)

According to The Hofstede Centre (2015), India scored the following: 77 in power

distance, 48 in individualism, 56 in masculinity, 40 in uncertainty avoidance, 51 in pragmatism,

and 26 in indulgence.

Power distance. India’s high score in power distance indicates that, in a work setting,

relations between managers and employees are formal. Employees expect their managers to give

clear directions and make all final decisions. Negative feedback is only given in a top-down

direction. Employees do not give negative feedback to managers. Income equality is widely

accepted. In turn, “managers rely on their employees’ obedience.” (Hofstede Centre, 2015)

Uncertainty Avoidance. India’s uncertainty avoidance, or risk tolerance, score

indicates that imperfection is accepted and tolerance for the unexpected is high. In India “there is

a saying that ‘nothing is impossible’...so long as one knows how to ‘adjust’.” (Hofstede Centre,

2015)

Individualism/collectivism. India’s individualism score fell within a medium range,

showing that there is mix of individualistic and collectivistic traits. In the work setting

employees are loyal to management and management offers an “almost familial protection.

Hiring and promotion decisions are often made based on relationships.” (Hofstede Centre, 2015)

Hinduism is the dominant religion in India. Hindus belief that each individual is “responsible for

IKEA to India 15

the way they lead their own lives and the impact it will have upon their rebirth.” (Hofstede

Centre, 2015)

Masculinity/femininity. India is a masculine society where success and power are

fully displayed. Even though many of the religions practiced in the country teach humility,

“visible symbols of success are very important” both at home and in the work place. (Hofstede

Centre, 2015)

Long-term orientation.The culture of India is pragmatic, with a preference towards

long-term orientation. This characteristic is a product of the religious influence in the country,

specifically the concept of ‘karma’. Time is unimportant and processes that are preplanned are

likely to be altered at each step that is executed, because decisions are made in reaction to

present circumstances.

Common values shared in India include cooperation, group harmony, modesty, dignity,

placidity, patience, generosity, indifference to ownership, indifference to saving, indifference to

work ethic, moderation in speech, careful listening, and careful observation. (Sebastian-Morris,

2012) It is important for individuals to avoid being “singled out” and “placed in a position above

others”; but looking to “improve one’s own individual performance” is accepted. (Sebastian-

Morris, 2012) In other words, because Indian’s value conformity, they hold negative views

towards competitive attitudes. As described by the Hofstede Centre, the needs of a group are

more important than those of individuals, and Indians most often focus on achieving group

harmony. “Boasting and loud behavior that attract attention to one’s self [in regards to personal

accomplishments] are discouraged.” (Sebastian-Morris, 2012) However, showing others the level

of success reached by oneself can be expressed in terms of material possessions owned by the

individual which are put on display. Due to Indians valuing placidity, they often avoid verbally

IKEA to India 16

expressing discomfort, frustration, and even those positive ideas that would lead to change.

Nonverbal forms of communicating emotion are more common. India’s indifference to

ownership means that they are not people who are “interest[ed] in acquiring [a multitude of

unnecessary] material goods.” (Sebastian-Morris, 2012)

Similarities and overlap exist between IKEA’s list of values and Indian values previously

described. IKEA’s list of values include “humbleness and willpower, leadership by example,

daring to be different, togetherness and enthusiasm, cost-consciousness, [having a] constant

desire for renewal, and accept[ing] and delegat[ing] responsibility.” (IKEA, 2014)

CHAPTER TWO: MARKETING PLAN GUIDELINES

The Marketing Opportunity for IKEA in India

As stated before, IKEA’s product begins with price. Customers are integrated into the

process of doing business, meaning IKEA can adapt and build products specific to a customer’s

needs, taste, and price range. Currently, IKEA offers 9500 home furnishing articles, all designed

in Sweden to be functional, stylish, and low priced (IKEA, 2014).  Ikea is currently in 27

countries and territories generating annual sales of more than 28.7 billion euros (IKEA, 2014).

With 315 IKEA group stores around the globe, the business welcomed 716 million visitors to its

stores. Currently, 80% of IKEA’s sales are in Europe, with North America making up 15% and

Asia and Australia contributing 5% (IKEA, 2009). With 31 trading offices in 26 countries, IKEA

works with 1300 suppliers around the globe. Purchasing is largely in Europe which makes up

67% of purchases, with Asia at 30%, and North America at 3% (IKEA, 2009).

India is the seventh largest country in terms of area in the world. (mapsofindia 2015)

India is surrounded by water on there sides making it very accessible to trade routes.  The

Himalyan Mountain range forms its border to the north with China. There are many different

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landforms ranging form deep valleys to extensive plains and a number of islands. (mapofindia

2015)  India is divided into several different physical units. The Great Mountains of the north is

the first.   This is comprised of the himalayan mountains to the north and northeast.  This divides

the country form the tibetan plateau. (mapofindia 2015)  The Indo Gangetic Plain, this is very

India’s three major rivers are located. The three major rivers are the Ganges, Indus, and

Brahmaputra.  This region is located in northern and eastern India and the plain is divided into

four divisions. (mapofindia 2015)  The third unit is the Peninsular Plateau.  This region is

characterized by shallow valleys and round hills and divided in to three regions. (mapofindia

2015)  The Coastal Plain spans from the Arabian Sea in the west to The Bay of Bengal. The Thar

Desert is another region.  It is one of the largest deserts in the world .  This desert also spans into

Pakistan.(mapofindia 2015)  The final region of India is its islands.  There are two major island

groups in India.  One is located in the Arabian Sea.(mapofindia 2015)

Consumer spending can be divided into two different categories in India, regular

spending and lifestyle spending.  Regular spending includes basic necessities of life. such as

food. clothing and shelter. (ICMR 2007).  Lifestyle spending includes things like cars, computers

cell phones and internet.  Ikea Furniture could fall in both categories but really belongs in the

Lifestyle spending category.  People need furniture for their homes but the type of furniture Ikea

offers could be considered more of a luxury than a necessity.  There are a number of factors there

are affecting consumer spending in India some of which are, growing income levels, which in

turn allows the population to have more disposable income, changing attitudes towards

consumption, changes in prices, the availability of credit and credit cards, increased literacy,

growing brand consciousness and rapid urbanization. (ICMR 2007)  All of these factors are

reasons why India is such an attractive market for IKEA to enter. Shopping habits in India are

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rapidly changing.  This is due to the growth of disposable income, the relative increase in a

younger population and a general change in attitude towards shopping. (ICMR 2007)  The

emphasis on shopping has changed from price consideration to design, quality, trendiness, and

brand name. (ICMR 2007)  Age also plays a major role in consumer behavior in India, for

example people age 20-25 spend more money on electronics, home goods, and movies while

people 45-50 spend more on vacations. (ICMR 2007)  In the future India is expected be the

powerhouse in Asia in terms of growth in consumption, wages, and GDP. (ICMR 2007)   

Overall Objectives

Mission Statement and Vision Statement

Our business idea supports this vision by offering a wide range of well-designed,

functional home furnishing products at prices so low that as many people as possible will be able

to afford them.

The IKEA product range focuses on good design and function at a low price. It offers

home furnishing solutions for every room in the home. It has something for the romantic at heart,

the minimalist and everyone in between. It is co-ordinated so that no matter which style you

prefer our designers and product developers work hard to ensure that our products meet your

day-to-day needs and eliminates the unnecessary.

Low prices are the cornerstone of the IKEA vision and our business idea. The basic

thinking behind all IKEA products is that low prices make well-designed, functional home

furnishings available to everyone. We are constantly trying to do everything a little better, a little

simpler, more efficiently and always cost-effectively.

We have taken the straightforward approach to the furniture business, by starting with

developing furniture with the price tag in mind. This is the IKEA way, to maximize the use of

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raw materials in order to fulfill people's needs and preferences by offering quality products at an

affordable price.

Corporate Objectives

At IKEA our vision is “to create a better everyday life for the many people.”

To give down-to-earth, straight-forward people the possibility to grow, both as

individuals and in their professional roles, so that together we are strongly committed to creating

a better everyday life for ourselves and our customers.

Financial Objectives

The main financial objective of IKEA is to grow by using its own resources. IKEA’s goal

is to earn money before spending it. By sticking to this strategy IKEA can make long term

investments towards the future. A majority of IKEA’s profits are reinvested into new and

existing IKEA stores. Profits are also invested in product development as well as sustainable

solutions, thereby continuously lowering prices for customers. This strategy insures the

continued growth of IKEA while also benefiting the customer and increasing company profit.

Marketing Objectives

The marketing objectives for IKEA in India are to successfully penetrate the home

furnishings market.  Using print catalogs, billboards, radio advertisements and television

commercials Ikea will become the go to furniture store in Mumbai and Delhi.  The

advertisements will make the consumer aware of the modern Scandinavian design of the

furniture while also showing a high quality product at a reasonable price point.  Ikea offers a

wide range of well-designed, functional home furnishing products at prices so low that as many

people possible can afford them.(Ikea corporate web site)  All marketing strategies and

objectives will stem off that statement.

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Long-Term Objectives

Over the next 10 years, IKEA will build retail stores in larger metro areas including

Mumbai (India’s most populated city) and Delhi (the capital of India). (IKEA Group, 2014) The

end goal is to have established 25 stores. The total value of IKEA’s investment in the Indian

market will be “$1.9 billion,” the largest investment value ever to made in one, single country by

the company. (IKEA Group, 2014) Between now and 2020, IKEA plans to double its sourcing in

India, which currently consists of just over 50 Indian suppliers. (IKEA Group, 2014)

IKEA’s Basic Business Philosophy

IKEA’s business philosophy is to create well-designed furniture at acceptable prices for

the majority of people.

Entry Strategy: Greenfield Foreign Direct Investment

A greenfield investment is the entry strategy that will be sought by IKEA. Until recently,

the government of India did not permit foreigner single-brand retailers to establish wholly-owned

subsidiaries in their country. While IKEA has entered other countries by means of franchising, it

preferred not to do so in India. Single-brand retailers were only permitted to partake in a joint

venture in India, where “the FDI limit was capped at 51%.” (IKEA Group, 2014) This restriction

has since been removed, specifically during the year of 2012. Single-brand retailers are now

permitted to invest their full 100%, giving them “full ownership of [their] Indian operations.”

(IKEA Group, 2014) In addition to removing the FDI limit, the government also relaxed its

regulation that required all wholly-owned subsidiaries to “source products worth at least 30% of

the value of their sales in India, from small and midsize companies” from being mandatory to

now being “preferable.” (IKEA Group, 2014)

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IKEA has had a strong presence in India for more than two decades. The IKEA brand is

well known in the country, in urban communities. If approval is granted by the government for

IKEA to operate retail sites in India, IKEA would be the first single-brand retailer to enter the

country having 100% ownership and “control over its operations and flexibility in projection of

their brand.” (IKEA Group, 2014).

In additional to their ground-up construction of IKEA India, the multinational will also be

making considerable investments in the construction of much needed supply chain infrastructure.

S.W.O.T. Analysis

Strengths

Renewable energy. Adding to their list of ways to save on costs, IKEA produces

much of their own renewable energy. Energy production also offers a solution to blackouts and

helps IKEA “control [their] exposure to fluctuating electricity costs,” which are both common in

India. (Kelly-Detwiller, 2014)

Appeal to the masses. IKEA’s global marketing concept entails a multi-segment

marketing strategy. The market is segmented according to what age group and what stage of life

a customer is in. “Products are offered in multiple styles for multiple age groups [in order] to

[successfully] meet multiple needs.” (Collins, 2011) This approach to segmenting their market

enables IKEA to appeal to the masses, despite conflicting cultural values, religious beliefs, etc.

Recognizable brand. In India, IKEA is already a recognized strong global brand. The

company has both been sourcing from India and receiving raw materials from multiple

established Indian suppliers, for more than twenty-five years. (IKEA Group, 2014) Specifically,

“IKEA [currently] has around 50 suppliers in India and it sources around €315 million worth of

IKEA to India 22

goods annually.” (IKEA Group, 2014) For example, “India [is] a big sourcing market for

[IKEA’s] textiles” (Reuters, 2012)

Weaknesses

Although flat-packaged products are iconic of the IKEA Way, it is questionable as to

whether Indian consumers will accept that the assembly of their purchased products are their

responsibility.

IKEA does not offer home delivery. Many urban dweller will not have vehicles capable

of transporting their purchases. Many of IKEA products are extraordinarily heavy. Consumers

may find it difficult to get their items up multiple flights of stairs and into their homes.

A large portion of IKEA’s product line are neutral in color, or use simple designs. The

Indian consumer may be wanting multicolored products with intricate designs.

Opportunities

Demand for IKEA’s products. The demand for ecologically sustainable products

continues to grow around the world. India has begun to adopt these sustainability principles,

recognizing that they offer a basis for progress throughout Indian society. (Wong, 2009)

Sustainability is at the core of IKEA’s business concept and takes on a tangible form in many of

their products, making IKEA an ideal brand in modern India.

Low cost strategy. IKEA’s low cost strategy can be easily utilized to meet pricing

preferences for India’s middle class, and possibly for members of their working class. If IKEA

establishes retail locations in India, the added domestic demand will provide opportunities for

IKEA to “increase] sourcing from India and [further] expand the [already existing] supplier base

[in the country].” (Fibre2Fashion, 2015) This expansion would, in turn, help to lower product

prices even further.

IKEA to India 23

Trade blocs. IKEA retails in South Korea, Singapore, Malaysia, Thailand, China, and

other countries that share common trade bloc memberships with the country of India. IKEA also

sources from these countries and others in the region. As stated earlier in the Introduction

section, IKEA utilizes a global sourcing strategy in order to minimize costs and maximize

profits. Trade bloc memberships are of vital importance to IKEA’s inflows and distribution of

goods. The trade bloc listing does not currently present any challenges for IKEA India. On the

contrary, India’s free trade agreements will work to the benefit of IKEA India’s operations.

Growth in internet usage. India ranks third in the world, behind only China and the

United States, having “243.2 [million]  active internet users.” (IAMAI, 2014) With such large

usage of the internet, and because the internet networks are expanding out into suburban and

rural areas (IAMAI, 2014), India would offer IKEA an additional cost-effective procurement

strategy, remote insourcing.  

Tourism. Tourism in India is an important industry in terms of its contribution towards

the country’s economic growth. India ranks in “third [place] among countries with the fastest

growing tourism industries.” (WTTC, 2013) India’s tourist industry “is predicted to grow at an

average annual rate of 7.9% from 2013 to 2023.” (WTTC, 2012) The size of this industry

presents a substantial opportunity for IKEA in terms of marketing their products to hotels.

Government in favor of foreign investments. The new party in government,

the strong preference towards economic reforms, and the rapid increase of implementing those

reforms, are all reasons why IKEA now has an opportunity to enter the India market, without

significantly altering their business model, practices, and percentage of ownership. This

government is also open and willing to negotiate with multinationals seeking to invest in the

country. Again, this is of the upmost important for the success of IKEA India.

IKEA to India 24

IKEA India will be established in the city of Hyderabad, located in the state of

Telangana. The leadership of this state, Chief Minister Kalvakuntla Chandrashekar Rao, or KCR,

is eager to work with IKEA to help them pass all investment hurdles so that the establishment of

a retail site will be successful. The city is in close proximity to major ports, important Indian

trade routes, and local manufacturing firms sourcing IKEA. Also, being located in the Southern

region of the country, officials and locals are more culturally progressive.

Operational profitability. India’s first Goods and Services Tax (GST) is expected to

be in effect beginning January 4, 2016. (Singh, 2015) Still being debated parliament, the GST

represents the largest tax reform “in decades.” (Singh, 2015) The GST would be the first federal

tax, helping to bring unity among the states of India and, as many businesses are hoping, helping

to decrease corruption in state governments. According to the World Bank, the GST will “free up

decisions on warehousing and distribution from tax considerations so that operational and

logistics efficiency determines the location and movement of goods.” (World Bank, 2014) The

ease of distribution will be of dire importance to the IKEA India’s effectiveness in making goods

available to their India consumers. IKEA India, again, will be first built in Hyderabad,

Telangana. The state is led by its first Chief Minister Kalvakuntla Chandrashekar Rao, or KCR.

He was quoted recently saying, “all necessary clearances will be given...to expedite the process

of opening the store in the city.” (PTI, 2014) Reiterating an earlier statement, the Indian

government does, in fact, have a regulation that makes is mandatory for all wholly-own

subsidiaries to “source products worth at least 30% of the value of their sales in India, from small

and midsize companies.” (IKEA Group, 2014) During negotiations, and because the government

of India is eager to expedite IKEA India’s establishment in the country, the government altered

the regulation from being mandatory to now being “preferable.” (IKEA Group, 2014)

IKEA to India 25

Threats

Land acquisition difficulties. While IKEA India has received a go-ahead by the

local government, land acquisition will prove to be difficult and may be very costly. There are

only two ways to acquire land in India, through government auctions or by purchasing a parcel

of land directly from the current owner. (Press Trust of India, 2013) According to the World

Bank, however, the new party in government is looking to reform policies relating to land

acquisition, for the purpose of simplifying the process. (World Bank, 2014)

Terrorism. Terrorism has occurred frequently in India. India borders Pakistan, a

country rich in religious terrorist cells. Terrorism occurring in India includes religious terrorism,

ethno-nationalist terrorism, left-wing terrorism, and narco terrorism. (Sharma, 2013) In recent

years, terrorist attacks have occurred in mosques, on commuter trains and at train stations, in

markets, in streets, etc. (Reuters, 2011) With the new government in place, as of 2014, terrorist

activity has declined. IKEA has experience with establishing subsidiaries in countries where

terrorism is a threat. This will not be a new concern for them to deal with. Each IKEA location

employs a Safety and Security Manager. This individual focuses both on internal and external

security threats to the location of his/her employment.

Government restrictions. IKEA’s global retail model includes an ‘IKEA Swedish

food market’, a restaurant, and a bistro. Policy pertaining to FDI in single brand retailing, does

not permit the retailing of food items from the shelf. (ET Bureau, 2013) “...IKEA can have a

restaurant/cafe in accordance with its global model but cannot engage in retailing of food items.”

(ET Bureau, 2013)

Other. The country has been known to devalue the Indian rupee for the intention of

causing an increase in Indian exports. India commonly practices the action of freezing

IKEA to India 26

individuals’ and businesses’ assets. Disputes between businesses and the Indian government

have been known to be lengthy.

Target Segments

The target segment for Ikea in Sweden is somewhat different than the target audience

around the world.  In Sweden IKEA’s target segment is women between the ages of 20-49 and

these women are often married and have children.(Burt 2008)  In addition an important target

group for IKEA has been people 55 years and older.  This segment is seen to have done enough

home furnishing and have no children in the home and have a good financial situation.  The

population size of women age 20-54 years old in Sweden is 1,872070 or about 19% of the total

population of Sweden.(Indexmundi 2014)  The population size of people 55 and over is

3,067,015 or about 31% of the entire population of Sweden.(Indexmundi 2014)  This is a very

large market to work with and is a reason why IKEA has been so successful in Sweden.  The

wants and needs from these market segments are somewhat the same.  They want furniture and

home accessories that are stylish and at an affordable price.  The specific reasons may slightly

differ but the overall reason for buying IKEA furniture is the same amongst these two market

segments.

In India IKEA will be targeting the urban middle class located in Mumbai and Delhi.  We

will also be targeting businesses such as hotels and corporate offices to get our products in as

many hands as possible.  In developing countries this has always been the strategy that IKEA has

used to penetrate a market and it has worked very well in the past.  The literacy rate in Mumbai

is just under 90% even in the slums the literacy rate is and estimated to be over 70%.

(worldpopulationstatistics 2013)  This makes mumbai the most literate city in India.

IKEA to India 27

(worldpopulationstatistics 2013)  This also leads to the middle class size increase that makes

India such an attractive market.

The segment of the population that includes 15 to 54 years olds makes up 58.7% of the

total population, while the majority of the remaining percentage is made up of children. The

portion of the population who are urban dwellers totals 31.3%. The rate of urbanization is seeing

a 2.47% annual rate of change, as Indians migrate to the cities for employment. (CIA, 2015) This

rate of change is seen as being characteristic of rapid urbanization. In the long term, for IKEA

India, it will act as an important force of change.

India’s labor force is highly skilled and educated. A large portion of the population have

completed high levels of education and many speak English. The literacy rate of Indians who are

15 years of age and older total 62.8% of the population.

Implications of demographic indicators for IKEA India. India’s young

population, many living in urban locations and earning a middle class income, will be in close

proximity to IKEA India’s location. IKEA, specializing in space-saving solutions for urban

living, will do well in this market.

India is also projected to pass China this year as the world's fastest growing economy.

(Smith 2015)  Projections out of Delhi confirmed that the government expects GDP to grow by

over 8% this year and increasing to over 10% in years to follow.(Smith 2015) This makes India

one of the most attractive markets in the world.

The needs of this market segment are much different than that of Sweden.  The people in

this market are looking to make a statement with their furniture and home accessory purchases.

They finally have more disposable income to spend and want to have nicer things but still at an

affordable price.  The other market segment in India is corporate offices and hotels.  This is a

IKEA to India 28

growing market as well.  As the economy of India grows so does the need for office furniture in

businesses.  The wants and needs of this market segment consists of quality for a very affordable

price.  Penetrating this market may also lead to further penetration of the middle class market.

When someone is using a piece of IKEA furniture at their job they will see the quality and

modern Swedish design of the furniture and be tempted to get the furniture for their home as

well.

Customer Analysis

The Swedish Customer

The Swedish buying decision process is very different than the buying decision process

in India.  The determining factor for the swedish consumer is going to come down to price

followed by quality.(santander trade 2015)  The Swedish consumer wants a product that is a

reasonable price but still a high quality.  Swedish consumer do extensive research before buying

a product especially when it regards to durables.(santander trade 2015)  Other important qualities

of the buying experience in Sweden are the salesperson know how or how much they sales

person really knows about the product.  The after sales service is also very important to the

Swedish consumer.(santandertrade 2015)  When it comes to buying furniture and household

appliances, the deciding factors are the range of choice, price and the transparency of the offer.

(santandertrade 2015)

The average household size in Sweden is 2.1 persons per household.(santandertrade

2015)  The average household disposable  income is $27,546 USD.  This is ranked 11th in the

world.(OECD 2015)  Consumer expenditure on furnishings and household equipment is equal to

5.1% of the total income per household in Sweden.(santandertrade 2015)  On average, Swedish

consumers have resources and purchasing power well above the rest of European consumers.

IKEA to India 29

They are used to a higher standard of living than in most European countries and have high

expectations.  Swedish consumers are spending more and more as time progresses.

(santandertrade 2015)  Swedish people are very loyal to brands and to specific shops.

(santandertrade 2015)  

The Indian Customer

The Indian consumer is quite different than the Swedish consumer.  Some Indian

consumers are aware of quality differences and insist on world-class products.(santandertrade

2015) Many consumers can sacrifice quality concerns for price reductions.  The Indian consumer

is similar to the Swedish consumer in that they both value the after-sales service by the seller and

can greatly affect the buying decision of the consumer.(santandertrade 2015)  Indian consumers

are buying trademarks that they recognize.  It is very necessary to invest in advertising and

marketing to promote the brand and make the product recognizable.(santandertrade 2015)

Indians are far more brand conscious and this is generating demand for some products that were

previously unfamiliar.(santandertrade 2015)  The dynamism in the country’s economy has

resulted in purchasing power and an expansion of the middle class having higher disposable

income levels. (santandertrade 2015)  It is very necessary to adapt the product to target a specific

segment of the market.  In IKEA’s case this is the expanding middle class.  The middle class

currently consists of around 350 million consumers.(santandertrade 2015)  These consumers will

be interested by products which can be found in western countries.(santandertrade 2015)  

The average size of a household in India is 5.3 persons per household.(santandertrade

2015)  In India 4.0% of the consumer's income will be spent on furnishings and household

equipment. (santandertrade 2015)  Indian consumers are not as loyal as Swedish consumers.  As

IKEA to India 30

the Indian consumers disposable income increases and they are making more purchases their

brand loyalty is increasing as well.

The IKEA Product

Product Mix

The product mix of IKEA is one of the most extensive of any businesses on the planet.

Ikea sells an excess of 10,000 products. (Friesner) Products include everything from tables,

chairs, shelves, sofas, bookcases, children’s beds, changing tables, and kitchen fittings. Every

single segment is divided again into an even more detailed subset of the groups. Penetrating the

Indian market should be fairly simple due to the massive number of products. IKEA even offers

play areas for children and restaurant food courts.

Product Strengths and Weaknesses

The product strengths of IKEA lie in their business model. Many of IKEAS products are

recyclable or made from recycled materials.  The furniture is made directly by the company and

the wood and wooden components are produced in IKEAs own sawmills. The customer gets a

wholesale price with the only downside being the fact all products are put together by the

customer. Many customers however enjoy this part of the buying process.

IKEAs consumers are treated as prosumers, somewhere between a professional and a

consumer, due to its products requiring assembly after purchase. (Ihorjy) A weakness is if IKEA

did decide to enter any market that is not entirely do-it-yourself favorable then there will be a

cost of the assembly service added to a products price.

Product Life Cycle Management and New Product Development

IKEA to India 31

While developing the many products, IKEA first decides on the price tag the item will

have when sold in IKEA stores. However, the quality or safety should never be compromised

throughout the product's life cycle.

IKEA wants to offer sustainable products at low prices by examining every stage of a

products life. Every improvement has been added to a so called Never-Ending list that is

currently at a total of 81. The latest one regarding India. IKEA has already begun to introduce

themselves and their name by launching a water conservation project in 2005 with two of IKEAs

suppliers in India. The goal was focused on ensuring the water usage at the suppliers factories is

sustainable during manufacturing and does not have a negative impact on surrounding

communities after use. Part of the plan involved building five water catchment areas designed for

the villages around the factories. The areas collect rainwater during the wet season and store it

for use and gives easier access to water where there was none before. “The water catchments

have reduced travel time to wells and increased water storage capacities, soil moisture and the

ability of communities in the area to plant crops throughout the year.” (IKEA, 2009)

IKEA has a very straightforward strategy to lessen the impact on the environment.

Through the use of different tools and processes, IKEA improves on raw material,

manufacturing, distribution, product use, and end of life. IKEA believes in using the fewest

possible resources to create the best products without negative impact. The main raw materials

used in IKEA products are wood, cotton, metal, plastic, glass and rattan and we work towards

using as many renewable and recyclable materials as possible. (Hurin)

Brand Name, Brand Image, and Brand Equity

IKEA has strong brand equity. The company has made sure to invest heavily in green

energy solutions such as solar power. “IKEA's products respond to eco-efficient requirements.

IKEA to India 32

There is approximately 50% of IKEA's 9,500 products are made from wood or wood fibres and

70% recycled materials with aim to recycle 90%.”(Hurin)

The Augmented Product

The augmented product involves most IKEA stores provide collection points for

customers to return waste, such as electrical and electronic equipment, discarded packaging,

spent batteries and low-energy bulbs, for recycling. Another extra is that IKEA attempts to repair

products rather than simply discarding them. These products are used as spare parts or sold at

reduced prices in specially designated areas of the store.

The IKEA Price

IKEA’s price is aimed to be 30 to 50 percent lower than the traditional distributor

(Jackson, 2002). One of the main challenges for IKEA in India will be price. When IKEA

expanded into China it faced problems while using its global branding of low prices. The main

issue faced was that its prices “considered low in Europe and North America, were higher than

the average in China” (Chu, 2013). Local stores could also offer lower prices because of access

to cheaper labor and raw materials. IKEA built local factories and increased its local sourcing of

materials, “These local factories resolved the problem of high import taxes in China” (Chu,

2013). These methods allowed IKEA to drop its prices more than 60 per cent. IKEA will need to

implement similar strategies in India to lower costs and be successful. It will be important to

have local mass production and trim supply chain cost. In China, “western products are seen as

aspirational in Asian markets. In this regard, IKEA's low-price strategy seemed to create

confusion among Chinese consumers” (Chu, 2013).  Similar issue are likely to arise in India as

well. To curb this problem IKEA began to target the young middle class population that better

understood western culture, instead of targeting the mass markets a whole. Another pricing issue

IKEA to India 33

to arise while expanding into developing economies will be the cost of trying to be Eco-friendly,

which IKEA has done since 1999. One method used was to charge for the use of plastic bags.

Issues arose in China where “Price-sensitive Chinese consumers seem to be annoyed when asked

to pay extra for plastic bags and they did not want to bring their own shopping bags” (Chu,

2013). Many of the suppliers in china also lacked the technology to meet IKEA’s green

standards. India, also an emerging market, shares a lack of environmental regulations. To

implement green policies meant higher costs, which IKEA could not afford in the Chinese

market, and so the eco-friendly methods were abandoned. Similar approaches will need to be

made in India for IKEA to have competitive prices.

Place

Geographical Coverage

IKEA operates in over 36 countries, more than 260 stores, with over 9000 employees

working there. In addition, it has over 1300 suppliers in 50 countries and it provides good

inventory management, and in-time product distribution. This added-value is might be one of the

reasons of the company's world success and recognition. (Basin)

Distribution Channels

IKEA only grants rights to become a franchisee in markets where rights have not already

been given, thereby maintaining their exclusivity. When selecting franchisees, IKEA evaluates

the experience, local market knowledge, corporate culture, and financial strength. IKEA stores

are located in suburban areas and fits IKEAs target market of customers willing to transport

purchases and assemble their own products.

Physical Distribution and Logistics

IKEA to India 34

The country has the second longest system of roads but many of them are dirt or too

narrow for a large vehicle. There is a need for upgrading the infrastructure especially in the huge

cities. Urban populations in India are projected to reach upwards of 500 million by 2017. The

Ministry of Road Transport has gone over plans for one hundred and twenty billion dollars worth

of road widening projects and sixty five percent of the money will come from the private sector.

Government also has budgeted for one trillion dollars in spending in the five years prior to 2017.

Location of IKEA India

Entering the country of India, IKEA will not be a first mover; however “IKEA...is one of

the first foreign companies to receive Indian[‘s]...approval” to establish a wholly-owned

subsidiary in its “$500 billion retail market.” (Pandey, 2014) Ground has yet to be broken, and

IKEA is still in negotiations with multiple levels of the Indian government; but IKEA has

“signed agreement[s] with the Indian states of Karnataka and Telangana.” (Pandey, 2014) These

agreements, referred to as Memorandum of Understanding, “detail the prerequisites” that are

needed in order for IKEA to begin investing in the construction of supply chain infrastructure. In

the Indian state of Karnataka, IKEA will be investing in the “development of supply chain

infrastructure and new stores.” (Pandey, 2014) The first retail location will be built in

Hyderabad, the capital of Telangana. (Pandey, 2014) Hyderabad is located within close

proximity to many of  India’s primary ports. For example, a ten hour train ride connects

Hyderabad and a port located in the coastal city of Visakhapatnam. One of the country’s seven

primary airports is also located in Hyderabad.

IKEA focuses on heavily on “markets in countries with [considerable] growth potential.”

(Grol, et al, 1998) Instead of conducting extensive market studies, IKEA takes on an “empirical

experimental approach,” asking locals, IKEA’s potential future consumers, what they want and

IKEA to India 35

are looking for in a foreign home goods retailer. (Grol, et al, 1998) Choice of location is also

affected by the availability of sourcing and proximity to IKEA’s regional distribution

warehouses. (Grol, et al, 1998) All in all, this information will be accessed through an external

scan of the selected region.

Promotion

The promotional goals for Ikea in India is to increase the brand recognition in the

corporate  and middle middle class markets.  Ikea’s main approach for marketing in developing

countries is through the dispersing catalogs.  This allows corporate clients and the population an

easy way to view and order the furniture and accessories since internet penetration is so low in

India.  Even though Internet penetration is so low Ikea would still develop a website for the

Indian Market.  The internet penetration is expected to grow at a rate of 14% or more over the

next few years. (Internetlivestats 2015)  Middle class Indian citizens more and more are getting

internet access through their mobile devices which are becoming more and more popular. We

will stick to mainly traditional ways of marketing in the Indian Market.  This includes magazine

ads, billboards, television ads, product placement in television, radio ads, and the main means of

reaching the consumer, the catalog.  The ads will target the up and coming middle class

consumer who is looking for a modern style.  The ads will feature Indian models and be made to

suit the Indian consumers style and tastes. Having celebrity spokespeople will also be very

important in the marketing strategy.  Some of the non traditional ways Ikea will promote

themselves is through  online ads on other popular websites. The ads will be simple and try to

‘hype up” the future store openings and excite the population about the new stores.  The Ikea

Facebook page in Indian will also be very important since the internet penetration rate is

IKEA to India 36

increasing.  Facebook is the most popular social media site in India.  Having a Facebook page

promoting new items and special deals you can receive will be very important as well.

IKEA India’s Competition

Competition Comparison

India’s furniture industry is made mostly of small and unorganized retailers. The

unorganized retailers make up around 85% of India’s furniture industry. The other 15% is made

up organized companies with local manufacturing sites and retail importers (IKEA, 2015). One

of the major competitors IKEA will encounter in India is called Home Town. The company

retails all major manufacturers from India and abroad. The store are similar to IKEA, offer

similar products, and also offer services such as plumbing and electric. Another local competitor

is called Godrej Interio. This company has 50 showrooms throughout 18 cities, and 800 outlet

dealers throughout India (IKEA, 2015). The company offers modern style furniture and

accessories, exchange deals, and is also ready to assemble furniture. Other competitors include

western businesses such as Walmart, which does not specialize in furniture but offers low price

alternatives.

Expected Outcomes

Forecasts. The costs for setting up retail in India will be around 1.5 billion euros.

IKEA plans to set up around 25 retail stores through a wholly owned subsidiary (IKEA, 2015).

Within the first two years of business 600,000,000 euros will be invested for set up,

infrastructure, supply chain, publicity, etc. In the second stage 900,000,000 more will be invested

for continued functioning and improvements. The market share increases by an average 5% per

year. Over the first three years the company can expect to bring in around 100,000,000 euros

each year. By year 5 IKEA can break even and begin to earn a profit (IKEA, 2015).

IKEA to India 37

“Success” Defined. Success for IKEA in India is defined by becoming the leading

furniture retailer in the country and giving investors a 15-20% return on their investments.

Conclusion

In conclusion, IKEA will be very successful in India based on the findings of this report.

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