IKEA INDIA – EXPANDING TO SU

MARKETING MANAGEMENT CIA 2(A)

Shyam Shrinivas R 1 MBA R 2228357

 MARKETING MANAGEMENT
CIA 2(A) ASSIGNMENT

CASE STUDY :
IKEA INDIA- EXPANDING TO SUCCESS

By
SHYAM SHRINIVAS R
2228357
1 MBA R

Under the Guidance of

DR. RASHMI RAI

MBA PROGRAMME
SCHOOL OF BUSINESS AND MANAGEMENT
CHRIST (DEEMED TO BE UNIVERSITY), BANGALORE
JANUARY 2023
 IKEA INDIA – EXPANDING TO SUCCESS

Case Facts:

 Swedish businessman Ingvar Kamprad started IKEA in 1943, making it the largest
furniture retailer in the early twenty-first century.
 When the business first started, it offered a discount on a catalogue of home products.
After six years of selling furnishings, Kamprad built its first showroom. Kamprad
began selling furniture products later in 1947. Following that, IKEA began selling
furniture that it had created itself and charging customers less money.
 The biggest IKEA location ever opened in Sweden in 1958, making it the largest
location in all of Scandinavia. Furthermore, IKEA debuted its flagship location in
Stockholm in 1965, and that location served as the model for all subsequent retail
locations.
 The IKEA Group was a values-based business that was passionate about domestic
life.
 The 2011 census showed that India had a population of more than 1.21 billion
individuals from a variety of racial and cultural origins.
 50 The likes and preferences of people varied from place to location. In the Indian
market, Maeztu used a totally different approach in light of the wide set of consumers.
 As part of the "do it yourself" philosophy, the products from the IKEA Group were
shipped flat-packed and pre-assembled. However, because there was inexpensive
labour available, Indian consumers outsourced the assembly process. IKEA India
made the decision to charge a slight fee and provide a "assemble-on-premises and
ship the following day option" to Indian clients.
 IKEA India offered a selection of items from global best-sellers, including the Billy
expandable bookcase and Fargrik stoneware coffee mug.
 Products created specifically for India were also included, including chakla-belans
(rolling pins used to make rotis), pressure cookers, idli makers, flatbread tawas, and
spice boxes and utensils.
 DECISION SHEET

Date: 2017

Title of the case: IKEA INDIA – EXPANDING TO SUCCESS

Topic: Market expansion, Promotion, Understanding the customer behaviour, Marketing

Strategies

Key decision maker/s: Juvenico Maeztu – Chief Executive Officer – IKEA India

Dilemma/conflict faced by the decision maker:

 IKEA India made its debut by constructing an experience centre in Hyderabad in

November 2017. Maeztu had to worry about his company's future sustainability in the
Indian market as major retailers all around the world filed for bankruptcy. The
nation's enormous size, complexity, and diversity intimidated him as well. He
questioned whether the IKEA Group's efforts to grow in India will be hindered by
their European roots.
 Maeztu was also aware of IKEA's global brand value ($11.77 billion, placing the firm
46th on the Forbes list in terms of brand value) and its $40.19 billion+ in global
revenue in 2015. It would be difficult to introduce a well-known brand to the Indian
market.

Identification and Analysis of Problems faced by IKEA India

Problems Faced by IKEA:

 Given his lack of experience navigating a challenging market like India, how was
Maeztu going to complete the IKEA Group's Indian growth and meet his objectives?
  Whether the IKEA Group's plans to grow in India would be hampered by his
European heritage?
 The company also plans to invest $1.62 billion in the development of 25 stores in
India by 2025. Whether a significant investment will yield the anticipated returns?
 The company aimed to increase its workforce in India from 300 to 900 personnel in
order to draw in Indian customers and offer in-store service. Maeztu questioned if this
objective could be met or if it was unduly ambitious.
 For less than $3.02, IKEA India offered around 1,000 items for every home in India.
Due to their exorbitant pricing, most Indian households were unable to purchase
nicely constructed home furnishings. What measures will Ikea take to address this
problem?
 How can Ikea increase its share of the market?
 What can be done to guarantee long-term success for the company?
 What role does Ikea play in ensuring a brighter and healthier future?

Causes of the problems :

Cultural Difference: Indians differed from Swedish, Germans, and French in terms of their
social interactions, eating preferences, and leisure activities. In order to provide value to
customers in India's complicated and diverse environment, he needed to determine the right
pricing and supply chain approach.

Higher Production Cost: Due to the high production cost, the Company started purchasing
goods and outsource the production from Indian suppliers on the local level to reduce
production costs.

Variations In Consumer Behavior in Emerging Markets Like India: The study of

consumer behaviour focuses on how people, groups, and organisations choose, acquire,
utilise, and discard products, services, concepts, or experiences to fulfil their needs and
desires. Cultural, social, and individual aspects all have an impact on a consumer's
purchasing decisions. Cultural variables have the greatest and deepest impact of these. This
caused IKEA to understand about the consumer behaviour of Indians in a tougher way.

Competition in the Indian market: IKEA has a lot of competitors in India including
Pepperfry, Amazon and Wayfair etc which established their name and fame for the past few
years and also gained the trust of Indian Consumers. Also there are many local furniture
companies which has been in their areas for more than 10 years which threatens the
companies like IKEA as the local furniture company sells their furnitures cheaper than IKEA,
Amazon etc.
Lack of product knowledge: Indian customers are unfamiliar and less interest with DIY
projects where IKEA mainly focus on that kinda products. And IKEA had a very less
knowledge on the products used by Indians.
Product Delivery and Availability: IKEA faces issues in ensuring the quicky delivery and
availability of the products for the customers. Also they are not ensuring the efficient
customer services as Indian Customers are driven to that.

Problem Statement:

How IKEA manages to expand their business and sustain in Indian market by figuring out all
the problems and solving those?

Criteria for the effective solution to the problem identified:

Cultural Values with respect to India : The IKEA Group's culture is a reflection of its
Swedish heritage, which stands for tenacity, modesty, community service, and living close to
nature. Togetherness, concern for people and the environment, cost-consciousness,
simplicity, renew and improve, different with a purpose, give and take responsibility, and
setting an example are among the core values listed by the IKEA Group.

Develop Strategic Planning: IKEA's Strategic Planning strives to accomplish strategic

objectives that will help the company establish itself as a significant furniture retailer
globally. The IKEA Group believed in democratic design, which combined form, function,
sustainability, high quality, and cheap cost.

Consumer behaviour and customer segments: Middle-class and brand-conscious youthful

buyers were among IKEA India's most important clientele groups in India. So IKEA needs to
be very keen on learning about the cultural behavior and segment their company and products
according to that
Brand management: The emotional and rational principles that consumers identify with the
IKEA trademark and our company's reputation make up the entirety of the IKEA brand. The
brand image is the result of more than 50 years of work by IKEA co-workers worldwide.

Pricing Strategies: In order for the IKEA Concept to achieve its goal of "creating a better
everyday life for many people," low prices are a requirement. The IKEA product line requires
incredibly low price points because the IKEA Concept aspires to serve "the many people."
IKEA designers help keep costs down by utilising production resources in inventive and
previously unthought-of ways.

Environmental Measures: Regarding its environmental concerns, IKEA wishes to maintain

open lines of contact with its shareholders and customers. Using Robert's system conditions
for sustainability, the business was given a tactical way to enhance its environmental
performance.

Alternatives:

 Creating the brand awareness to Indian Consumers

 Bringing out New Innovations in their products
 Leveraging the Supply chain
 Establishing the effective E-Commerce platform
 Designing the products which orients the Indian Culture
 Pricing Dynamics
 Localization
 Ensuring Low Operation Cost
 Opening Mini Retail stores
 Overcoming Environmental Challenges

Evaluation of Alternatives

Creating the brand awareness to Indian Consumers : Though IKEA is one of the most
famous and well known company in global, They are very less known in India. Because
Indian companies and brands were registered in the minds of Indian Customers. Therefore,
The first stage that the IKEA need to work on it is creating the brand awareness. This
awareness can be created by campaigns and advertisements. Though IKEA Centres are in the
outskirts of cities like Hyderabad, Bangalore which is purely made for Inhouse Experience,
Some catchy advertisements and campaigns can create an awareness on IKEA to the Indian
Consumers. These awareness programmes should be purely in the form of glorifying Indian
Culture and dimensions as they target Indian markets.

Bringing out New Innovations in their products : Innovation leads to the success. So
IKEA needs to focus on innovations rather than focusing in variety of products. Therefore
IKEA should work to develop the Research and Development Team for bringing out new
innovative products. Bringing out the innovative products itself works as a bigger
advertisement strategy where the people comes to know about their innovative products, they
are driven to purchase that. Innovations like the addition of a line of air-inflatable furniture
items to the product lineup. By using fewer raw materials for stuffing and framing, these
goods can be transported with a 15% reduction in weight and volume compared to traditional
furniture.

Leveraging the Supply Chain: When entering a market, newcomers frequently begin by
exporting finished items from the closest Asian facility in an effort to preserve their brand's
quality, their intellectual property, or their capital investments. But with such a strategy, the
market size in India could be severely constrained due to import levies, transportation
expenses, and sluggish supply chains. To overcome this issue, IKEA need to follow some
strategical moves. IKEA needs to hire CMOs and COOs as Indians as they are aware about
the Indian Conditions. CMO can extend their hands to know about the market dynamics
where as COO knows about the operation dynamics of IKEA. And they need to outsource the
production units as they do already but they want to initiate the products based on India. And
Also setting up some low cost manufacturing units can increase profitability by decreasing
the production cost and boosts up the sales.

Establishing the effective E-Commerce Platform: E-Commerce has a greater influence in

India. Many companies were established themselves through E-Commerce Platforms. E-
commerce offers foreign businesses a considerably lower risk and investment route into India
than establishing a physical presence. Through e-commerce, they can reach a wide audience
in India and identify the niche clients that value their special product. Though IKEA has
outlet stores in Metropolitian cities like Mumbai, Delhi, Bengaluru, Hyderabad, E-
Commerce platforms make IKEA to set their footprints all over India. This makes even a
person who is out of Bengaluru or Hyderabad can use the IKEA products. IKEA is providing
their products only where their store is located. So they need to establish their e-commerce
service in the cites and towns where their stores are not located which makes IKEA to sustain
in Indian Market.

Designing and selling the Products which orients the Indian Culture: India is diversified
with many cultures. But every cultures atleast have some similarities and same things they
have been following yet now. So IKEA needs to address that similarities and creating the
products which grasps the Indian Customers. For example, Indians still use steel, copper and
eversilver appliances than ceramic. So IKEA can create some products on Steel and
Eversilver products in their modular kitchen, bedroom and bathroom concepts. This can click
the Indian Consumers in a better way.

Pricing Dynamics: According to their mission of serving many lives, IKEA should bring
their products in lower price. As most of the Indian Consumers are price driven consumers,
IKEA should focus on lower price by utilizing the production resources. “Lower the Price,
higher they sell” is the strategy they need to keep in mind. This reduction in price can help to
improve themselves in sourcing and transportation solutions and affordability of the products
by the Indian Customers.

Localization: Localization is nothing but the running the organisation by keeping the minds
of local area. In other words, The Organisation, the service provided by them, the product
produced by them should be in meeting up the needs of local culture. As we are discussing
about the creating the products orients the Indian culture, pricing for Indian culture, these
comes under localization. Many foreign companies show themselves like an Indian company
and establish their markets and reign the throne. Unilever, Bata are the best examples for this.
IKEA can also do this to become the king in India in the Furniture sector. IKEA can do by
making their products to sell by the local vendors rather than selling by themselves. For
example, IKEA can sell their products in Rural areas through the local vendors which
automatically reaches the customers at the very nominal price.

Ensuring Low Operation Cost: Operating Costs are any expenses that is required for day to
day maintenance and operations to run the organisations. These are commonly referred as
Overheads. Operating costs include electricity, employee payroll and office lease, Sales
commissions and maintenance costs. These operating costs can be cut in many ways by using
new technologies in operations. In Manufacturing process, IKEA can go for automation
process to manufacture their products and thereby it gives efficiency. Also Implementing
latest technologies like softwares in Supply Chain Management and Vendor Management
process can improve the efficiency of Supply chain as well as finding solutions for the
problems like reducing the cost of shipping and transporting the goods. Also IKEA can
reframe their “Take It Home” policy which initiates the free delivery instantly if the price
was paid bit higher and this is being the key for IKEA to reduce the operations cost.

Opening Mini Retail Stores: Opening of Mini Retail stores will be one of the good
alternatives that IKEA can do. This ensures the accessibility and availability of their
products. Though IKEA stores in the outskirts of the city provides inhouse experience, It is
very far for the people who are in the city. So IKEA can open mini retail stores (like what
reliance is doing right now) across various parts of cities and display their main products and
some cheap products which can make Indian consumers to drive towards the IKEA. These
Mini Retail stores can be a self help stores where only the cashier and store manager will
work which cuts the employee cost and will be more profitable for them.

Overcoming Environmental challenges: As Ikea is heavily dependent on raw material such

as wood and plastic, they are need to be very keen in recycling and other sustainable
measures. IKEA can manufacture their products using renewable and recycled process and
products. As IKEA had a mission of achieving this within 2030, they need to work on it.

Implications:
Consumer Behaviour:
The Best way for IKEA India to get sustained in the Indian Market is to understand the
consumer behaviour of Indian consumers and working on it. This consumer behaviour is
nothing but the field of study focused on understanding how and why consumers choose to
buy certain goods and services over others. As IKEA is Swedish company, their products are
purely in European style which doesn’t suits the Indian behaviour. So as mentioned in
alternatives, IKEA should introduce their products in Indian style which can win the attention
of Indian consumers. And also IKEA should sell their products in nominal price by cutting
the rates is a perk. This Consumer behaviour can be learnt through some strategies like
  Online Surveys
 Proctored Testing
 Live Inhouse Experience centers
 Assigning experts from the same region
 Market Research

This is how the IKEA can learn about the consumer behaviour. Also by learning they can get
the idea on
 Increase in sales
 Promotion Strategies
 Forecasting and Competitive Analysis
 Targeting and Segmentation
 Designing the Product Portfolio.
In these things, IKEA India can focus and retain the Indian consumers to sustain in Indian
Markets.

Decision/summary/learning:
In May 2017, the CEO of IKEA India faced a challenging circumstance. The business
decided to begin operations in India by building an experience centre in Hyderabad in
November 2018 before opening furniture retail locations around the nation by 2025. One of
the main target categories was young, price-conscious middle-class consumers. IKEA India
wanted to make sure that its products were accessible to everyone. At a period when major
worldwide retailers were having financial issues, the CEO had trouble coming up with a plan
for commercial expansion. He needed to choose the appropriate price and supply chain
strategy in order to give value to clients in India's complex and diversified environment. By
considering the alternatives, IKEA India can sustain in Indian Market.

Recommendations and Suggestions

I recommend that IKEA should learn about the Consumer Behaviour of Indian Consumers
and working according to that by designing product portfolio, Pricing strategies, Promotion
strategies therefore they can increase the sales.
Though IKEA is having good marketing strategies, Their marketing strategies are not good to
impress Indian Consumers. So IKEA should work on creating the awareness on their brand
as it the vital and foremost step in Marketing Funnel. Also IKEA should reframe their
Marketing funnel layout to win the loyalty of the customers.