Marketing Management Case

Study Case: Can IKEA adapt its service experience to

India?

Maryam Namira – 2403211017

Telkom University
2021
1 Situation Analysis

2 Problem Analysis
3 Decision Analysis
4 Potential Problem Analysis
1 Situation Analysis
Currently, CEO of IKEA planned to enter India’s market, while India’s market for furniture is
relatively small, responsible for estimated 0.5% of GDP and ranked 14th in the world.. Well-known
local furniture brands would include Godrej Interio (with a self-reported 15 to 20 per cent market
share), Zuari, USHA Lexus Furniture, Durian, Damro, EVOK and Wipro Furniture, just to name a few.
All would have the competitive advantage of already being established, thus possessing valuable
insights into the Indian consumer. The company was one of the first to take
advantage of a 2012 decision by the Indian government to allow 100% foreign-owned companies to
do business in the country (previously, foreign companies needed a local Indian partner)

Chief Executive Officer (CEO) Mr Peter Agnefjall is coy about IKEA’s strategy, saying that the company
is still in the process of “defining the entry plan” with regard to India. He says that he is “focusing on
existing stores and markets”

2 Problem Analysis

• What makes IKEA’s service experience so unique?

• What trends and demographics would favour IKEA’s expansion plans into India?
• What makes India a difficult place to do business? What are some of the factors that would
complicate IKEA’s entry plans into India?
• Overall, do you think IKEA will be successful in India? Explain why or why not?
• What exactly is “Scandinavian” and just what type of image, and service experience, is IKEA hoping
to create and maintain (Shanely, 2014)?
3 Decision Analysis
Helpful to
achieving the objective
Strengths
• Unique customer experience & customer
engagement
Attributes to the organization
• Same ratio of trained & developed
salesperson
Internal origin
• Same overall product selection, pricing,
presentation, branding and service
experience
SWOT MATRIX ANALYSIS
• Some of its stores adapt to local cultures
• Reasonably priced meals & child
playground
• Low price, but fair quality
Opportunities
• India will be one of the “Top 5” economies
in the world by 2030
Attributes of the environment
• Increased urbanization & higher incomes
External origin
lead to increased demand for foreign
brands
• Overall retail segment has 26% growth in 5
years
• IKEA will be 100% foreign owned in India
• India has lowest manufacturing cost
• Indian people used to horrible service &
horrible service experiences (74%)
• India people prefer large retails rather than
small retails
Harmful
to achieving the objective
Weaknesses
• far from assured that Indian consumers will
be open to IKEA’s service experience of
wandering around its enormous stores for
hours, performing unpaid labour and putting
together items made out of particle board
with instructions that have no words
Threats
• Market for furniture in India is relatively
small (only 0.5% of GDP)
• Competitor have competitive advantage of
already being established
• Corruption: drag on growth and a
deterrent to foreign investors
• Permits of business took long (27 days to
start a business in India & 196 days process
to get permit start new construction) &
many burdensome regulations
• Poor infrastructure for product distribution
in all over India
 Decision Analysis

1. What makes IKEA’s service experience so unique?

IKEA offers minimalist Swedish design furniture with reasonably price. Not only that, IKEA can give different
service experience when customer come to the shop. In IKEA shop, customers must navigate their way through a
tortuous maze (exploring every nook and cranny of the store in the process) to find the items they want, then
carry them to the checkout counter, haul them to their cars, unload and drag the items into their homes and then
assemble them with cartoon-like instructions, only seems to make the service experience all the more endearing.

Not only that, customer can also imagine how IKEA stuff will look like at their home/apartment which allows
emotional experience. Besides, IKEA also has value-adding service in smartphone app to see the item would look
like in your home before you buy it. These experience has never been offered in any retail before. Besides that,
IKEA creates an emotional engagement with customers.

2. What trends and demographics would favour IKEA’s expansion plans to India?

Trends:
Strong economic development in India over past decade has increasing living standards and created middle
class, thus effect to increased urbanization and demand for foreign brands. This gives opportunity to IKEA since
IKEA serves scandinavian (modern design furniture) that is accepted in many countries. India market share for
organized retail business is about 3-5%, plus retail industry in India also has substantial growth about 26% in 5
years

Demographics:
India people used to shop through a shop where they’ll be fully served during searching for items, checking it out,
and until the item is fully assigned at home. IKEA shifts the demographics by implementing experiential
merchandising and destination retailer. Experiential merchandising is a tactic to convert shopping from passive
activitiy into a more interactive one and engaging the customer more.
 Decision Analysis

3. What makes India a difficult place to do business? What are some of the factors that would complicate
IKEA’s entry plans to India?

Here are challenges to place a business in India:

• Small market share for furniture retail business (only 0.5%)
• Business permit and construction permit in India took a long process and time (223 days or almost a year)
• Poor infrastructure which will make new business have difficulty to deliver products on time to non-city
region
• Corruption, drag on growth and a deterrent to foreign investors
• Some of the regulations makes it difficult for new business to proceed and its government process is slow
• Not only that, IKEA is also unsure that Indian consumers will be open to IKEA’s service experience of
wandering around its enormous stores for hours, performing unpaid labour and putting together items made
out of particle board with instructions that have no words

4. What exactly is Scandinavian and just what type of image, and service experience, is IKEA hoping to create
and maintain?

Scandinavian design is marked by a focus on clean, simple lines, minimalism, and functionality without
sacrificing beauty. You won’t find any superfluous items haunting Scandinavian-style rooms; instead, everything
has a place and unnecessary tchotchkes are nowhere to be found.

The company’s goal is to “create a better everyday life for the many people” (ikea.com), which it tries to do by
providing well-designed furniture at a low price. A major factor in how IKEA manages the way customers
encounter and experience its service is in the configuration of its stores.
 Decision Analysis

5. Overall, do you think IKEA will be successful in India? Explain why or why not?

Yes, I think IKEA will be successful in India because if we put many factors in SWOT matrix, IKEA has more strength
than weakness (internal origin) and also has more opportunities than threats (external origin).

Theoritical answer:
• IKEA engage consumer in a way customer think, when we enter a furniture shop, we’ll consider size and model
of the furniture first whether they’ll suit well in our house. And IKEA do it by assigning their products per room,
so customer can visualize it. Next is, if customer think the product suits their room and needs, they’ll consider
the price. IKEA itself has depth for its products, from cheaper to most expensive.
• Yet there’s threat for IKEA success. One of retail success is determined by product distribution from
manufacturer to retail, thus it would be quite challenging if the country has poor infrastructures between
regions. Probably if IKEA want to expand their business to India, they can put store only in big cities which is
more accessible so lack of stock can be avoided.
• There should also discussion with government about labor cost and standard, not only that taxes regulations
should also be considered since it affects profit.
4 Potential Problem Analysis

Recommendations for IKEA in India:

They can adopt glocalization concept they once had in China. Glocalization is a concept when global brands exist
in foreign countries keeping in view the country’s social, political, and economic nuances. And there are several
factors for successful market entry strategy:
1. Lifestyle. They need to do market research on Indian lifestyle by visiting homes in India, this will make them
know how India lives and will earn some ideas such as furniture that they prefer to use. i.e. Children sleep in
the same bedroom with their parent (need new way to design the cubicle room in India IKEA), women in
India is shorter than western woman (shorter kitchenshelves).
2. Believe and Culture. India has a believe called ‘Swe-deshi’, means belonging to India. This means that IKEA
can add Indian food to their IKEA store cuisine menu, replace beef meatballs to chicken meatballs,
vegetarian meatballs, and drop pork menu. (Source: https://mediaindia.eu/business-politics/ikea-adapts-to-
indian-taste-lifestyle-and-prices/)
3. Locations. It would be better if they have stores in an urban well earning young people. IKEA can consider
Mumbai (financial capital of India), Bengaluru (IT, Technology, and Startup hub in India), and Gurgaon
(business hub of North India). Also they can do test water by opening small shop first to see demand, and
expand if there’s demand in that location.
4. Furniture assembly. In India they have a mindset that the shop staff will assembly the furniture for them.
IKEA need to provides staff especially to assembly furniture.
5. Delivery vehicles. Furniture shop oftenly deliver the furniture to customers home. Thus, to adapt IKEA need
to provide delivery services in India as well. Yet, since India’s street in city is crowded, they need to have
alternative transportation such as motorcycle or bajaj. Bajaj also an icon of India, it will give them more
sense of swe-deshi. To efficiently maintain the bajaj, IKEA can have an electric bajaj and install solar panel
and refill station for the energy. (Source: https://thestrategystory.com/2020/09/09/ikea-market-entry-
strategy-in-india/)
6. Products and pricing. India is a price-sensitive market, so IKEA need to adjust its material in India market to
make it cheaper yet stay Scandinavian (aesthetic).
THANK YOU