IKEA's Entry & Survival Strategies in India: Environments, Elements & Segments - Essay Sample

Introduction

IKEA is a Sweden based firm that deals with ready to collect furniture and other prized products. The company has established itself as one of the best furniture retailers for its modernized products across the world. This paper provides a detailed discussion of how IKEA made entry to India and how it developed survival strategies.

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IKEA's Environments Elements and Segments in India

IKEA has established itself as an organization that provides its clients with a wide variety of household products and services at fair rates. As a result, customers enjoy modern designs, low prices, and a do-it-yourself concept (Tommysdotter, 2016). By expanding its market venture to India, the organization experienced few political hurdles and regulations complications before settling in as a market giant.

In efforts to overcome and fix these challenges, IKEA organized a strategy to work directly with service providers to meet the requirements set by the Indian administration. The environment adjacent to this organization was a critical factor in overseeing the success of IKEA. The market entry barriers served as motivational factors enabling the company management to figure out key strategies to penetrate and get the resources it needed.

Perspectives of the General Environment

One key element that defined the Indian market was a harsh political environment that was characterized by a corrupt government and social inequalities. Such aspects led IKEA to deal with bad politicians and inefficient bureaucracy while trying to enter the Indian market. Under the economic environment, IKEA came to India when the country was experiencing industrial growth, especially in its export businesses (Goel & Garg, 2018). Economic growth promised a lucrative and profitable market environment in the country.

The social environment in the Indian market provided a diversity of different values and beliefs, an aspect that proved as a positive step to serving different needs for different people, thus serving a more extensive market (Jain, 2013). On the higher end was the technological environment. During IKEA launch in India, the country ha poor infrastructure ranging from poor road to lack of electricity connection. As a result, the poor infrastructure was a challenge towards establishing an effective supply chain an accessing skilled workforce to provide workforce needs.

Environment Segments and their Relations to IKEA's Situation

India suffers from political issues, including corruption, and has many blockades that have negatively affected business infrastructure. The government has strict foreign policies and socio-cultural practices that require furniture brought into the country to be preassembled (Goel & Garg, 2018). Otherwise IKEA should have shop assistants to help in assembling the furniture in different stores.

Such a requirement proves a challenge to IKEA, which has developed pride in do-it-yourself goods. However, to operate in India, IKEA has to hire and train locals to be store assistants, a move that will create jobs for the natives while helping the brand to generate more revenue (Jain, 2013). Economically, India is a developing country characterized by high poverty levels. By putting up stores in this country, IKEA took the risk since many people could not afford the products. Nevertheless, being a growing nation, it promises a spread of power. It makes sense for IKEA to establish itself in this market before it is infiltrated by competitors.

IKEA's International Corporate-Level Strategy in India

IKEA's adapted a business approach to target the middle-class citizens who were keen on beautifying their offices, homes and contract areas with international brands. In doing so, the company aimed at establishing outlets in three different areas with high populations to develop a firm foundation (Limaye, 2018). IKEAs conducted market research that ascertained that the company's pre-fabricated furniture could well match with the Indian way of life. Moreover, IKEA's brand was well known by Indians living in urban regions.

IKEA became interested in the Indian market through its past investments in China, which had many market similarities as India. By investing in India, IKEA would offer great quality furniture at relatively low prices for the middle-class people. IKEA also found raw materials in both India and China, which was an alternative to lowering the cost of production.

IKEA's International Entry Method

IKEA's method of entrance to the international market is through franchising. By this, IKEA established links with suppliers in the host nation prior to establishing retail outlets through branches (Chu et al., 2013). Through franchising, IKEA gains total control of the retail stores in the new country, thus ensuring top quality and positive portrayal of the brand. Through franchising, IKEA has its freedom to allow for different elements and customs from the native culture to be implemented into its outlets without changing its concepts.

An example is where an owner of the outlets could sell Indian foods in the restaurant portion of the IKEA to attract the natives. The strategy allows the IKEA brand to be gain support from its HQ's global international approach, which can be flexible in meeting the needs and preferences of the host country (Goel & Garg, 2018). Another critical strategy is partnering and aligning itself with local furniture brands that could provide them with the knowledge, thus helping to understand the Indian regulations that concern the furniture business.

IKEA's Challenges in India and Recommendations

Some of the key obstacles in the current Indian market are the rising cost of real estate, poor political environment, and corporate strategies that do not match with the local populations' preferences. IKEA could cut on property costs by placing its outlets in the city outskirts or else reduce the size of their retail stores. The do-it-yourself strategy is not familiar enough to Indian locals and not work since many prefer ready-made furniture (Kazmin, 2018). IKEA could, however, examine the corporate strategies used by other players in the market to reach a broader market. In overcoming these challenges, IKEA will have to adapt to policies and procedures that meet the populations' needs and those that comply with the government's requirements.

Risks and Uncertainties of Doing Business in Different Regions

Political instability is a major issue that that poses a risk in conducting multinational businesses. Such countries are characterized by war with their neighbors that creating a barrier for foreign investors (Kazmin, 2018). Such countries have a high prevalence of corruption, which also makes it hard to enter a new market. Poor economic conditions are also a source of risk as they impact the exchange rates that make it hard for foreign businesses to thrive.

Cooperative Strategy and When to Adapt It

A cooperative tactic would be an intelligent move for IKEA as it would help in consolidation market share and optimization of returns. For IKEA, the move would be critical in penetrating new zones by forming an alliance with similar businesses in the market. Developing partnerships and alliances would be the best cooperative strategy for IKEA as it would benefit from shared infrastructure and expertise, thus being in a better position to reach new markets (Tommysdotter, 2016).

IKEA should pursue this strategy with a supplementary company. In doing this, the firms will reduce competition and will focus on targeting the same clients by offering supplementary products. However, the cooperative strategy would not be advisable if IKEA is enjoying a competitive advantage. In such a situation, IKEA should focus on expansion.

Managing IKEAs Product Demand

IKEA should manage its products by having different varieties, detailed for diverse market segments to target a wider market. In developing a product line, IKEA should break up their management into independent departments that deal with specific market segments without overlapping responsibilities (Chu et al., 2013). The move will be critical in developing favorable competition with other players in the market. In India, IKEA should put more focus on the low-end market as it has a large consumer base promising high profitability.

References

Chu, V., Girdhar, A., & Sood, R. (2013, December 6). How IKEA adapted its strategies to expand and become profitable in China. Business News - Latest Stock Market and Economy News India. https://www.businesstoday.in/magazine/lbs-case-study/how-ikea-adapted-its-strategies-to-expand-in-china/story/196322.html

Goel, R., & Garg, S. (2018). India as a Marketplace: A Case Study of IKEA. Available at SSRN 3282924.

Jain, S. (2013, January 27). IKEA in India. Share and Discover Knowledge on LinkedIn SlideShare. https://www.slideshare.net/surbhijainiet/ikea-in-india

Kazmin, A. (2018, August 9). Ikea unpacks the first store in India after a 12-year struggle. Financial Times. https://www.ft.com/content/81f6b6fa-9b78-11e8-9702-5946bae86e6d

Limaye, Y. (2018, August 9). Will the first Ikea in India succeed? BBC News. https://www.bbc.com/news/business-45122848

Tommysdotter, A. (2016). IKEA in India: A study of the cultural aspects of deploying an IKEA store in India.