The IKEA India Company’s Strategic Analysis

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Introduction

Ikea is an international business company that deals with the sales of furniture products. It is a well-known retailer following its competitive ability of ready-to-assemble technology. The corporation has overseas stores and operates in over 29 countries across the globe. The emergence of new markets and the need to increase the overall revenue prompted the firm to expand its operation in India. The business organization uses several practical approaches to attract more customers to its stores. The case analysis will focus on the identification of the company’s strategy and related problems facing it while providing proper recommendations to overcome the issues.

The growing population of the middle class with high disposable income in India presented the economy as a potential market for international investment. The country’s rapid economic growth and development have led to an increment in people’s living standards (McNamara and Descubes 3). The advancement would make most individuals able and willing to consume consumer goods. IKEA’s executives evaluated the possibility of venturing into the Indian marketplace to sell their brand.

Corporate Level Strategy

After the Indian government lifted strict regulations and policies on foreign investors, IKEA opted to enter the market directly by opening stores in different parts of the country. Adopting the corporate-level strategy indicated that IKEA was ready to work and acknowledge the role of the Indian government in the retail industry (“Next Stop: India” 41). The approach proves the existence of a mutual understanding between the company and the authorities. The main focus of IKEA was to develop a strong cultural perspective that takes into consideration the norms of consumers and other potential associates in the markets. The strategy facilitated the growth and expansion of the company by being allowed to operate as a single-brand firm in the Indian retail furniture market. Furthermore, the business organization managed to acquire an opportunity to expand its operation to eCommerce that India did not allow foreign companies to pursue. IKEA received the full support of the Indian local government, which made its activities easier following reduced paperwork formalities.

IKEA developed a cost leadership technique that involved lowering product prices. This was intended to increase the sales volume, especially by attracting price-sensitive consumers. It also provides a shopping platform that gives consumers a memorable experience, such as assembling furniture individually. The strategies aimed to improve its stability in the retail market and gain a competitive advantage over the local players.

Strategic Issues Facing Ikea

Competition from Local Traders

The retail furniture market in India is vastly dominated by unorganized and few organized local traders. The players have strong knowledge of the industry, giving them a competitive advantage over foreign companies (Lawrence et al.) For example, small firms comprehend the culture and living style of Indian consumers, unlike IKEA, which has limited knowledge of the industry. It will have to take the company a relative amount of time to adapt to the Indian culture.

Existing Poor Infrastructure

India, a developing country, does not have adequate roads, railways, and seaports to facilitate the easy shipping of materials. It, therefore, takes the company a considerable amount of time to transport its products from suppliers to the respective stores. Similarly, the lack of facilities such as reliable electricity makes it a challenge to light the business places effectively throughout the year. These problems make the corporation incur an increased cost of operation, making it reduce the expected revenue return.

Recommendation

Despite the increased competition from local traders, IKEA can still outshine and become the market leader in Indian retail furniture. Most of the competitors do not have recognized national brands, making them incapable of attracting more consumers. Unlike IKEA, it can use its branding and resources to influence its promotion in order to increase its positioning in the market. Furthermore, it should maintain providing quality products at a relatively lower price to lure clients, especially those who do not have high disposable income (Goel and Garg 12). IKEA should also diversify its product line to accommodate the growing influence of western culture amongst Indian people. The company should ensure it has an array of services and products to enhance one-stop shopping for consumers.

In the case of poor infrastructure, IKEA can formulate possible means to transport the products from the suppliers to the stores. IKEA should manage its logistics effectively to enable it to minimize the shipping time, thus lowering the corresponding cost of transportation (Goel and Garg 15). Similarly, IKEA should ensure its stores have well-lit and spacious rooms to attract and increase the shopping experience of Indians.

Conclusion

In summary, international business expansion is influenced by several factors. IKEA’s need to invest in the Indian retail market was facilitated mainly by the growing economy with many middle-class income earners. The withdrawal of a single-brand product policy enhanced the ease of operating in the country. Even though the company used the corporate level of strategy, it faced some strategic issues, such as local competition and poor infrastructure. The firm has adequate resources and can manage and overcome problems to conduct its business activities effectively.

Works Cited

Goel, Ritika, and Shraddha Garg. “India as a Marketplace: A Case Study of IKEA.” Available at SSRN 3282924, 2018, pp. 1-17.

Lawrence, Geena, et al. “Ikea: Growing the Market in India–An International Case Study.” 2021.

McNamara, Tom, and Irena Descubes. “Can IKEA Adapt its Service Experience to India?” Emerald Emerging Markets Case Studies, 2016, vol. 6, no. 1, pp. 1-14.

Next Stop: India. Retail Becoming More Convenient, pp. 40-49.

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BusinessEssay. (2023, January 19). The IKEA India Company's Strategic Analysis. Retrieved from https://business-essay.com/the-ikea-india-companys-strategic-analysis/

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"The IKEA India Company's Strategic Analysis." BusinessEssay, 19 Jan. 2023, business-essay.com/the-ikea-india-companys-strategic-analysis/.

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BusinessEssay. (2023) 'The IKEA India Company's Strategic Analysis'. 19 January.

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BusinessEssay. 2023. "The IKEA India Company's Strategic Analysis." January 19, 2023. https://business-essay.com/the-ikea-india-companys-strategic-analysis/.

1. BusinessEssay. "The IKEA India Company's Strategic Analysis." January 19, 2023. https://business-essay.com/the-ikea-india-companys-strategic-analysis/.


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BusinessEssay. "The IKEA India Company's Strategic Analysis." January 19, 2023. https://business-essay.com/the-ikea-india-companys-strategic-analysis/.