IKEA BUSINESS

STRATEGY IN INDIA

Submitted to: Prof. Gadiyar

WORKING PARTNERS (17-MMM-I)
No. Name Roll No.
1 Lakhan Bhomiya 17-M-411
2 Rahul Chandragiri 17-M-412
3 Bhaskar Chaturvedi 17-M-413
4 Ruchi Chaurasia 17-M-414
5 Sanket Chiplunkar 17-M-415
6 Pranali Churi 17-M-416
7 Monica Daga 17-M-417
8 Vaibhav Dhamanskar 17-M-419
9 Ganesh Dhuriya 17-M-420
CONTENT
 Executive Summary
 About Ikea
 Global Business Model
 Current Furniture Market In India
 IKEA In India
 SWOT Analysis
 Competitors Analysis (Porter's 5 Forces)
 Primary Data & Analysis
 Growth Plans
CONTENT
 Recommended Business Model For IKEA India
 Conclusion
 References
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
• IKEA is known globally for its low prices and innovatively designed furniture.
In INDIA, it ran into several problems, such as Foreign Direct
Investment(FDI) setting up the physical stores in large country like INDIA.
• This presentation analyses current presence of IKEA in INDIA and how it can
expand in the country
• IKEA has considered doing business in India for years, having first established
a presence in 2007. This presentation aims to capture the essence of India as a
marketplace, the growing purchasing power and rising influence of social
media have enabled Indian consumers, making India an aspiring emerging
market for IKEA.
EXECUTIVE SUMMARY
• We ran a survey titled “Consumer Preferences for furniture” which helped
figure out preferences of Indian consumers which included “Preference for
Durability, High Quality and Low Cost in furniture buying, Ability to
customize, Want for physically testing furniture quality and Home Delivery of
products”
• In this presentation we shall analyze most of these factors along the lines of
business strategies for IKEA collaborating with the macro environment, and
over all industry in India.
• The purpose is to reflect on how IKEA fits into the Indian consumer market,
where future growth is likely to emerge.
ABOUT IKEA
IKEA
• Founded in Sweden in 1943 by 17-year-old Ingvar Kamprad.
• IKEA is a Swedish-origin, Dutch-headquartered multinational group that
designs and sells ready-to-assemble furniture, kitchen appliances and home
accessories, among other useful goods and occasionally home services.
• IKEA has been the world's largest furniture retailer since 2008.
• The company is known for its modernist designs for various types of
appliances and furniture, and its interior design work is often associated with
an eco-friendly simplicity.
• As of June 2019, there are 433 IKEA stores operating in 52 countries.
• In fiscal year 2018, €38.8 billion (US$44.6 billion) worth of IKEA goods
were sold.
GLOBAL BUSINESS MODEL
GLOBAL BUSINESS MODEL
• Volume Of Sale - The higher the volume of business, the higher the profit, the
lower the cost. Thus, to reap benefits, IKEA begins with low cost on furniture
and strategically places itself in cities with a population over 500,000.
• Shipping Cost Elimination - IKEA believes in saving non-essential costs. The
company uses the flat pack system to its advantage. Since the furniture packs
up in a box that looks identical to your flat screen TV system they can ship
more furniture in a single shipment as the compact arrangement makes fitting
more furniture in less space viable.
• Hybrid Material - IKEA uses hybrid materials like medium density
fibreboards and laminates to have a strong structure at a cost and weight less
than that of wood. This helps reduce their pricing for the final product.
GLOBAL BUSINESS MODEL
• Private Franchising – IKEA takes an annual franchise fee of 3% of all sales
made from the stores that franchise the brand. Unsurprisingly, this franchising
business model results in a lot of money for IKEA.
• Lesser Skilled Carpenters - IKEA believes in a strong R&D team which cuts
costs and finalizes the design as per requirement. They are constantly involved
in making the set cheaper and easier to put together. Thus the design they pick
out usually is replicable and is done in a CNC machine and not by the custom
carpenter.
CURRENT FURNITURE
MARKET IN INIDA
INDIAN FURNITURE MARKET
• Estimated market of Rs.35,000 Cr on
of which 85% unorganised sector
• The Hong Kong Trade Development
Council has estimated CAGR of
13.38% during 2018-23
• The market of only wooden furniture
is around Rs. 60 Crore.
• Online home décor is projected at a
CAGR of 50.42% and luxury
furniture at Rs.244 Crore
REVENUE FROM FURNITURE MARKET
(COUNTRYWISE)
 Furniture With a Multifunctional
Smaller Profile Furniture
Furniture GoGreen

Technology-Driven
Furniture Design

Leather Furniture FURNITURE TRENDS

IN INDIA

Popularity of Vintage
Furniture
Custom-Made
Globally-Inspired
Furniture
Furniture
IKEA IN INDIA
IKEA IN INDIA
• Each country is a strategic business unit for IKEA. India was the 37th entrant
for IKEA.
• IKEA has been present in India for the last 30 years as part of the INGKA
group, sourcing many different products for IKEA stores worldwide. Today
IKEA source products for approximately € 315 million every year.
• IKEA unveiled its first massive 4 lakh sq feet Indian store in Hyderabad on
Aug. 9, 2018.
• IKEA also has an online e-commerce presence in Mumbai, Pune and
Hyderabad.
• IKEA is now planning to open new retail stores in Mumbai, Bengaluru and
Delhi with similar capacity as Hyderabad
SWOT ANALYSIS
STRENGHT AND WEAKNESS
No. STRENGHT WEAKNESS
1) Government supports 100% Competition delivers ready-to-use furniture at
ownership of IKEA in India customer doorstep at their convenience

2) No competitor as big as IKEA Customized furniture available

existing in INDIA

3) Already has good network of Trust factor of consumer is high on local

suppliers which is intended to go up vendors

4) IKEA makes benefit through

economies of scales being global
giant
OPPURTUNITIES AND THREATS
No. OPPURTUNITIES
1) No Interference from government –
100% ownership in country
2) 2nd most populous country with
median age of 28 years. Young
population
3) High PPP, showcasing high buying
potential of the consumers in market
4) Environment friendly power
generation approach by IKEA
5) Availability of cheap and competent
Labour/Workforce
THREATS
Price sensitive market – Price over Quality
No exposure to DIY (Do-it-yourself) amidst
customers. Hence tie ups with assemblers and
delivery entities making the products expensive
Modifications to products required due to
difference in culture, ethnicity and beliefs
Corruption
Electricity Disruption
COMPETITORS ANALYSIS
COMPETITORS ANALYSIS
 Market bifurcation
• 15% - Organised sector
• 85% - Unorganised sector
 Major competitors:
• Retail Competitors - Pepperfry, Urban Ladder, Home Centre &
Home Stop in India
• Online Competitors - Amazon, Rentmojo, HomeLane,
Homefuly & GoZefo
• Private Label brands like Durian, Godrej Interio, Hometown &
Featherlite etc.
• IKEA also enjoys competition from unorganised sector and
Chinese brands like Tmall.
PORTER’S FIVE FORCES
PRIMARY DATA & ANALYSIS
PRIMARY DATA EVALUATION
• Sample set was of 115 people
• Primary data obtained was evaluated with below parameters
1) Age
2) Preferences (about product - as quality, durability, cost)
3) Options
4) Buying options
5) Delivery time expected
6) General problems
7) Interest in travel to buy
 Age Group (%) Options (%)
20-30 years 31-40 years 41-50 years 60 years and above Customised as per your idea Readymade Recommendation from expert

53 53

35 35

10 10
3

Preference (%) PREFERENCE FOR ATTRIBUTES

Cost Durability Durability, Cost Duraility, Quality 44

56
Durability, Quality, Cost Durability, Style, Quality & Cost Quality Style

Style, Quality

33
69
56
16
12 13
10
4 5 5
1 Durability Style Quality Cost
 Buying Options (%) General Problems (%)
Bad finishing/polish Bad plywood quality Loose fixture
Local Market Online website Second-hand purchase (OLX/Local Market Assemble by carpenter
Not robust/strong No problem
Fair/Exhibitions

25
43 42 23
20
17
15

11

2 3

Expected delivery time (%) intErest in travel to Buy (%)

Within a day Two to three days Not more than three days Least Interest (Scale - 1) Ok Interest (Scale - 2) Moderate Interest (Scale - 3)
Good Interest (Scale - 4) High Interest (Scale - 5)

50
26
25
34 21
18

16 10
OBSERVATIONS AND CONCLUSION
No. Parameter Observations Conclusion
1) Age 88% out of sample set of 115, were Indicates have freedom of
in age of 20years-40 years opinion/choice and have interest in
home décor.
2) Preference 49% people had given preference to Most important parameters for
durability, quality and cost selection of furniture is durability &
quality.
Cost, Style are important but have
less impact on buying behaviour.

3) Options 53% people had preferred to This indicates youthful attitude.

customized furniture as per their They search, identify and only accept
need and like what they want.
This behaviour is somewhat different
with our one step back generation.
OBSERVATIONS AND CONCLUSION
No Parameter Observations Conclusion
.
4) Buying 85% people were buy furniture Wants to feel the product
options from local market and prepared It is cordial with travel preference
by carpenter (‘ok’ to travel and visit shop/mall)
5) Delivery time 84% people expected delivery This is enough time to deliver the
of furniture in 2 - 3 days product at customers end .
(Things to be consider is that fast
delivery with slightly applying high
charges)
6) Problems 48% people faced problem of It is cordial with preference (quality is
quality of plywood and poor most important)
robustness of furniture.
7) Interest in 61 % people were ok to travel Concept of online shopping of furniture
travel and visit to local market or have long road to travel
mall for shopping of furniture
GROWTH PLANS
IKEA EXPANSION PLANS
• IKEA will be present in other cities like Ahmedabad, Surat, Pune, Chennai and
Kolkata with a multi-channel approach.
• By 2025, the brand is looking at opening more than 25 touchpoints across
various cities.
• The brand aims to be present whenever the customers want, by various
channels like on-line, smaller touch points and large IKEA stores.
IKEA GROWTH PLANS
• IKEA Wants To Get Closer To Urban Homes With Network Of Smaller Stores
in Indian Cities
• IKEA is planning to open small stores in major cities to cut down travel time
to the outlets and helping company to be closer to its customer’s home.
• IKEA switched its plans for Mumbai expansion to online-then-offline through
smaller outlets, pickup centers and customer service stations.
• The omnichannel and multi-format model is adopted to be more accessible to
reach out to a younger customer base.
• IKEA could have well over 25 points of sale in India.
• The company wants to reach 100 Million customers.
• The ambition is to be present in as many Indian cities as possible through
different channels.
RECOMMENDED
BUSINESS MODEL
FOR IKEA INDIA
SOLUTIONS ADOPTED FOR INDIAN CUSTOMER
• Distancing from DIY culture - IKEA operates on a do-it-yourself model,
where users assemble their own furniture. In India, however, IKEA is
customizing for the market and is building assistance for furniture assembly,
by tying up with Indian Startup- Urban Clapp. As part of this collaboration,
consumers purchasing a select range of IKEA furniture from the store will be
able to book furniture assembly services via the Urban Clapp app or website.
• Low Priced products - IKEA is selling a product in India for less than it
charges elsewhere. Given India’s lower income levels, the store features
hundreds of products – from dolls to spice jars – priced at less than 100 rupees
i.e 1.2 Euro
• Tailoring to local tastes - For example, most Indians do not use knives to eat
and primarily want spoons, so the company ditched its children’s plastic
cutlery packs and instead sells four spoons for 15 rupees, i.e. 18 cents
SOLUTIONS ADOPTED FOR INDIAN CUSTOMER
• Plugging the Cultural Differences through product adaptation - Indian
families spend a lot of time together, with relatives frequently popping in, so
the company added more folding chairs and stools that could serve as flexible
seating. Even the cafeteria caters to Indian tastes, with biryani, samosas and
chicken instead of beef Swedish meatballs (due to religious belief) on the
menu and 1,000 available seats, more than any other Ikea in the world, to
accommodate the more leisurely dining style of Indian families. Product range
here is less of heavy wood and the collection itself is very colorful.
• Adapting to Indian ethnic group and climate - Indian women are also
shorter than Europeans and Americans, so the company decided to showcase
some cabinets and countertops at lower heights.
IKEA MARKETING STRATEGY FOR INDIA (6P’s)
• Place - Locating themselves in Metro cities in India and Instead of
concentration on large stores. The small and many stores strategy adapted
• People - Middle Class- high incomes working class people, bachelors, young
couples etc., Offer products to Hostels, educational institutes, Offices etc and
Knowledgeable and friendly staff, advice and assistance department
• Product - Quality and Design, Traditional Indian design combined with
contemporary Scandinavian design, Availability of assembling Service
• Price - Low Prices- Cost conscious people and low labour cost
• Process - Product exchange/ Return policy, Home Delivery, On-line Buying
option and Efficient staff and customer service
• Promotion - Moderate awareness about the brand already existing in the
country and advertisement through all retail channels – TV, Radio, Newspaper
and magazine
BLUE OCEAN STRATEGY
• IKEA’s main domestic competition will be the thousands of tiny furniture shops and roadside carpenters
who build-to-order. There are only a few national furniture brands and websites, in the country.
• The furniture market in India is largely (85%) dominated by the unorganized sector, office furniture
segment is one of the major revenue generators of the overall furniture market in India, due to low cost,
possibility of customization and long drawn trust among the customers.
• Pepper Fry, is one of India’s leading online furniture retailing firms, which is one of the fastest growing
furniture companies in India. Going ahead, hence, we shall now analyze blue ocean strategy for IKEA
India in comparison to the unorganized Furniture Market in India and Pepper Fry, on the following
parameters.
• Price • Brand Image
• DIY (Do-it-Yourself) • Offering an experience – such as Food
• Traditional Designs
• Contemporary and Modern Design
• Ease of Buying i.e. Online
• Availability of accessories
• Speed of availability
• Quality
ACTION FRAMEWORK FOR IKEA INDIA
PORTER’S DIMOND
To analyze the overall
competitive advantage of
IKEA in India, we now
will analyze through
Porter’s Diamond Model.
FEW RECOMMENDATIONS

• Acquiring an existing competitor such as Godrej Interio, Home Town or

Pepper Fry to capitalize of their knowledge of the Indian consumer base.
• Replacing Home Centre or other home Furnishing brand with IKEA Products.

Advantages
I. Well trained and aware Labour Force. Just train them as per IKEA culture
II. Scaling down the Competitor
III. Gaining the trust of the consumers
IV. Accesibility to Ready-use-infrastructure
CONCLUSION
CONCLUSION
• IKEA is currently standing as the leading brand name in furniture through
their constant innovations across the globe, which in itself is a crowd puller in
Indian market.
• Indians are easily attracted by foreign brands in retail and consumer goods.
• IKEA needs to consider opportunities and deal with threats to take advantage
in this competitive market.
• In Indian market, IKEA needs to face barriers and simultaneously maintain
pricing strategy, technology innovations as they can drive out from these
barriers.
• IKEA is able to generate strong growth and hold its identity in the market by
considering both micro and macro factors.
CONCLUSION
• To retain customers loyalty, IKEA focus on expanding their omnichannel and
multiformat strategy which will cater to the convenience factor of the Indian
market with positive publicity.
• All above factors will aid increasing IKEA'S customer baselines and help
them grab the larger pie in the Indian market.
• Recommended strategies will have positive results once implemented and the
standing of IKEA in the Indian Furniture Market would be heightened to a
whole new level.
REFERENCES
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https://www.livemint.com/Industry/aid4AZ29vWVw4Uqg3ppaCK/Ikea-plans-to-double-product-sourcing-from-India-by-2020.html

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