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IKEA expands into India

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IKEA expands into India

By: Lovisa Martinell | 26/05/2020
 Table of contents
Company Overview ........................................................................................................................ 2
Appenedices ................................................................................................................................. 3
A: Annual revenue of the IKEA group 2001-2019 ........................................................................... 3
B: IKEA Company structure ................................................................................................................ 3
References ................................................................................................................................... 5

Assessing the External Environment .......................................................................................... 7

Appenedices ............................................................................................................................... 10
A: PESTLE analysis of Ikeas expansion into India ....................................................................... 10
B: Porters Five Forces Analyis of Ikeas expansion into India ..................................................... 10
C: Sales Performance of Home and Garden in India .................................................................... 11
References ................................................................................................................................. 12

International Strategy and Key Resources................................................................................. 15

Appendecies ............................................................................................................................... 17
A: Bartlett & Ghoshal Framework for International Strategy.........................................................17
B: IKEA Adaptations, UK, Saudi Arabia and India ........................................................................ 18
C: IKEA Advertising adaptations ...................................................................................................... 19
D: IKEA Timeline of internalisation process ................................................................................... 19
References ................................................................................................................................. 20

Stakeholders and Ethical Issues .................................................................................................23

Appendecies ............................................................................................................................... 25
A: Stakeholder Analysis: How employees may be impacted by the expansion and ethical
issues.................................................................................................................................................... 25
B: Stakeholder Analyis: How the government may be impacted and ethical issues ...............26
C: Suppliers Analysis: How suppliers may be impacted and ethical issues ............................. 27
D: Customers Analysis: How customers may be impacted and ethical issues ........................28
References ................................................................................................................................. 30

Assessing the success of IKEA in India ..................................................................................... 35

Appendix A: Sales of Home Furnishing in India......................................................................... 38
Appendix B: Sales Performance of home Furnishing in India ................................................... 39
References ................................................................................................................................. 40

PAGE 1
Company Overview

IKEA was founded in 1943 by Swedish born Ingvar Kamprad at age 17 (IKEA, 2020). The

first furniture showroom opened in 1953 in Älmhult, Sweden and continued growing from

there to the IKEA that we know today (IKEA, 2020). IKEAs industry, which is Home &

Garden, is worth 1 trillion US Dollars globally (Euromonitor, 2020). It is forecasted to grow

from currently 1,091,458,4 USD in retail value to 1,259,365,8 USD in 2022 (Euromonitor,

2020) IKEA’s product range includes a wide range of Home & Garden products including

Indoor furniture, home textiles and decorative paint (Euromonitor, 2020).

In Sweden, they are the top company in their industry and have a 19,5% market

share (Euromonitor, 2020). They are followed by Mio who have a 8,6% market share and

Jysk with a 4,8 market share (Euromonitor, 2020). Small companies have a 53,1% market

share in Sweden (Euromonitor, 2020). Globally, IKEA has a 3,2% market share

(Euromonitor, 2020). Their biggest competitor globally is Ashley Furniture Industries Inc a

US company that has a 0,8% market share (Euromonitor, 2020). Ashley is followed by

Nitori, a Japanese company at 0,4% market share (Euromonitor, 2020). A large market

share of 84,5% in home and garden is held by smaller companies globally (Euromonitor,

2020). IKEA does had a market share in India of 0,4% in 2019 (Euromonitor, 2019).

In 2019 IKEAs revenue was 41,3 Billion Euros (O`Connel, 2020). This is a

steady growth which has not stagnated or declined since at least 2001 (O`Connel, 2020).

(See Appendix A) Indoor furniture contributes more than 70% to IKEAs total revenue

globally (Euromonitor, 2020). Foods also contribute to IKEAs revenue, they sell 2 billion

euros of food per year and is one of Swedens largest food exporters (Carlsson, 2019). In

2014 IKEA had 51 stores in North America, 222 in Europe, 14 in Russia, 23 in Asia and 5

stores in Australia. (IKEA, 2020) Other than fast food-companies and the United Nations

there is no entity that are present in so many countries as IKEA (Shoulberg, 2018).

IKEA is divided into Inter Ikea and Ikea Group (Warren, 2017). Inter Ikea allows

Ikea Group to franchise their brand for 3% of their annual revenue (Warren, 2017). IKEA

PAGE 2
is a complex net of groups, companies, foundations and holdings as Appendix B

demonstrates. The company is decentralized, as the authority is transferred from the

central company to Inter Ikea and other parts of the company (Ehsan, 2016). The founder,

Ingvar Kamprad´s three sons all have board member roles within the companies (Warren,

2017). They also own Ikano group which used to be a part of IKEA but it has since become

independent whilst retaining control of 8 IKEA stores (Warren, 2017).

Appenedices

A: Annual revenue of the IKEA group 2001-2019

Source: Statista 2019

B: IKEA Company structure

PAGE 3
Source: Financial Times 2017

PAGE 4
 References

Carlson, Magnus. (2019) Strategic Sourcing and Category Managment, Lessons

learned at IKEA. 2 ed.

Ehsan Ullah, E., Karlsson, B., & Dada Olanrewaju, D. (2016). Foreign Market

Entry Strategies.: A Case study of IKEA entering Indian Market.

Euromonitor. (2019) Ikea Svenska Försäljnings AB in Home and Garden, Local

company profile. Retrieved from https://www.portal.euromonitor.com/

Euromonitor. (2020) Market sizes, historical/forecast Home and Garden.

Retrieved from https://www.portal.euromonitor.com/

Kazmin, A. (2018) Ikea unpacks first store in India after 12-year struggle.

Retrieved from https://www.ft.com/content/81f6b6fa-9b78-11e8-9702-

5946bae86e6d

Milne, R. (2017) Ikeas complicated tax-driven structure faces EU scrutiny.

Retrieved from https://www.ft.com/content/d332c7a0-e3fb-11e7-97e2-

916d4fbac0da

O`Connel, Liam., Statista. IKEA`s revenue worldwide from 2001 to 2019. (2019)

Retrieved from https://www.statista.com/statistics/264433/annual-sales-of-

ikea-worldwide/

PAGE 5
IKEA. (2020) Our product range. Retrieved from

https://www.ikea.com/ms/en_JP/about_ikea/the_ikea_way/our_business_i

dea/our_product_range.html

IKEA. (2020). Our vision and business idea. Retrieved from

https://www.ikea.com/ms/en_JP/about_ikea/the_ikea_way/our_business_i

dea/index.htl

Rana, P. (2016) IKEA`s India bet runs into thicket of rules. Retrieved from

https://www.wsj.com/articles/ikeas-india-bet-runs-into-thicket-of-rules-

1456265878

IKEA. (2020) This is IKEA. Retrieved from https://www.ikea.com/au/en/this-is-

ikea/

Warren, Katie. (2019) Ingvar Kamprad, the reclusive billionaire who founded

Ikea. Retrieved from https://www.businessinsider.com/ikea-founder-

ingvar-kamprad-wealth-family-net-worth-2019-12?r=US&IR=T

PAGE 6
Assessing the External Environment

The PESTLE framework is useful when analysing the external environment of this

expansion (See appendix C). Porters five forces will also be utilized to complement the

research and comprehend the competitiveness of IKEA in India (See appendix D).

Corruption is found in almost every government public service, this impacts the

ease of doing business (Vyas, 2015). India has strict restrictions on Foreign Direct

Investment (FDI) (UKIBC, 2020). Previously only 51% foreign ownership in IKEAs Industry

was allowed (Gale, 2018). IKEA wanted 100% ownership, this may be due past failed

joined ventures (Jonnson, 2011). The government then amended the law to allow this

(Gale, 2018). This had held IKEA back (Gale, 2018). India is the fourth most popular

investment location in the world (UKIBC, 2020). Corporate tax for IKEA in India would be

30% (Invest India, 2020. India´s rate is higher than its rivals (ET, 2019). The government

takes steps to facilitate and promote FDI through its up to date and modern looking ”Invest

India” website which suggests government cooperation with FDI (Invest India, 2020).

India is an emerging market with political stability, low cost of labour and a

middle class of 350 million (Ehsan, 2016). India is ranked number 58 out of 140 countries

on the global competitiveness index in 2018 (WEF, 2018). The population is 1.3 Billion

and many companies see this as a growth opportunity (The Economist, 2018). A common

argument for investing in India is the large middle class. IKEA saw this as a top growth

opportunity for their business (Kazmin, 2018). But even though they are categorized as

middle class they are poor and can not spend money on more than their essentials (The

Economist, 2018). The amount of wealthy people in India is only a few million (The

Economist, 2018). This is evidenced by the slow growth and disappointing revenue in

PAGE 7
many industries including eCommerce, cars, technology and airline (The Economist,

2018).

Foreign investors of India may have been misled as Indians National Council of Applied

Economic Research defines the middle class as people earning at least 10 USD (United

States Dollars) per day (The Economist, 2018). 10 USD is currently 762 INR (Indian

Rupee) (Transferwise, 2020). Currently, you can purchase a wall clock for 1,490 INR

(IKEA, 2020). This is almost twice as much as what a middle-class Indian will make in one

day. The idea that a middle class Indian would be able to furnish their home with IKEA

products seems unlikely. The latest iPhone cost five months wages for an Indian who was

in the top 10% of the highest earners (The Economist, 2018). This presents a problem for

IKEA in terms of sales and profits.

IKEAs industry, The Home and Garden Industry dipped in growth in India in

2014 and hit a decade low in 2018 (See appendix E) (Euromonitor, 2019). Sales have still

been increasing despite slow growth (Euromonitor, 2018). New home furnishings is not a

priority for Indians, they keep products for a long time and their culture is frugal (Mishra,

Ray & Karuna, 2019). IKEAs DIY (Do it yourself) concept is essential for IKEAs low prices

but would not be popular with the Indian consumer due to the lack of DIY culture and the

effortless access to low-cost assembled furniture in India (Mishra, Ray & Karuna, 2019).

Indian consumers are loyal to their favourite local brands so it could be difficult to get them

to try something new (Goel, 2018).

Technological factors that present a challenge for IKEA is India's inadequate

infrastructure which includes poor access to electricity and transportation (Tommysdotter,

2016). Also the ease of copying IKEAS product (See appendix C.)

A legal challenge of doing business in India for IKEA is the local sourcing

regulations which meant that within 5 years 30% of all products sold must have been

produced in India (Kazmin, 2018). In 2012 India only made up 3% of IKEAs supply chain

(Kazmin, 2018) India has good availability of natural recourses which can help IKEA with

PAGE 8
this (Vyas, 2015). Environmental factors include how difficult and expensive acquiring land

is (Goel, 2018). Especially for IKEA that need a big plot of land (Goel, 2018).

IKEA was faced with a challenging external environment, especially culturally

(Tommysdotter, 2016). DIY is alien to Indian consumers and they are loyal to their local

companies (Goel, 2018) There is a lot of well-established brands in India already that

IKEA has to try to compete with (Alenezi, 2019) India has a high GDP but the average

income does not allow purchases on top of the bare necessities (The Economist, 2018).

Porters five forces (Appendix D) establishes High Rivalry for IKEA in India due to strong

Bargaining power of customers, high threat of new entrants and high threat of substitute

products. Bargaining power of suppliers was initially weak but strict local sourcing

regulations might lead to their bargaining power to be stronger posing challenges for IKEA

(Kazmin, 2018).

PAGE 9
 Appenedices

A: PESTLE analysis of Ikeas expansion into India

B: Porters Five Forces Analyis of Ikeas expansion into India

PAGE 10
C: Sales Performance of Home and Garden in India

Source: Passport Euromonitor: Home & Garden India, 2019

PAGE 11
 References

Economic Times. (2019) Corporate tax cut to improve Indias competivness in

Asia: IHS. Retrieved from

https://economictimes.indiatimes.com/news/economy/indicators/corporate

-tax-cut-to-improve-indias-competitiveness-in-asia-

ihs/articleshow/71333927.cms

Euromonitor. (2019) Home and Garden in India, Country Report 2019. Retrieved

from https://www.portal.euromonitor.com/

Gale, Jason. (2018) Ikea´s long road to India: Timeline. Retrieved from

https://www.bloomberg.com/news/articles/2018-08-09/ikea-s-long-road-to-india-

timeline

Goel, Ritika., Garg, Shraddha. (2018) India as a marketplace: A case study of

Ikea. Retrieved from

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3282924

IKEA. (2020) Söndrum Wall clock. Retrieved from

https://www.ikea.com/in/en/p/soendrum-wall-clock-grey-80466207/

Invest India. (2020) Taxation in India. Retrieved from

https://www.investindia.gov.in/taxation

Invest India. (2020) Home Page. Retrieved from https://www.investindia.gov.in/

PAGE 12
Jonsson, A.,Foss, N. (2011) International expansion through flexible replication:

Learning from the internationalization experience of IKEA.

Kazmin, A. (2018) Ikea unpacks first store in India after 12-year struggle.

Retrieved from https://www.ft.com/content/81f6b6fa-9b78-11e8-9702-

5946bae86e6d

Plecher, H. (2020) Gross Domestic product (GDP) in India from 1984 to 2024.

Retrieved from https://www.statista.com/statistics/263771/gross-

domestic-product-gdp-in-india/

R K, Mishra., A Sridhar Ray.,Meher, Karuna. (2019) IKEA, furnishing the Indian

Homes: The challenges of Culture, Competition and Channel. IPE Journal

of Managment. Retrieved from https://www.ipeindia.org/wp-

content/uploads/journals/ijm/IPE%20JoM%20(Jan-

Jun%202019).pdf#page=99

The Economist. (2018) The Elephant in the room: Indias missing middle class.

Retrieved from https://www.economist.com/briefing/2018/01/11/indias-

missing-middle-class

The World Bank, Doing Business. (2020) Ease of doing business rankings.

Retrieved from https://www.doingbusiness.org/en/rankings

PAGE 13
The World Bank. (2019) Ease of doing business rankings. Retrieved from

https://www.doingbusiness.org/en/rankings

Tommysdotter, A. (2016) A study of the cultural aspects of deploying an IKEA

store in India. Retrieved from http://lnu.diva-

portal.org/smash/get/diva2:940305/FULLTEXT01.pdf

Transferwise. (2020) 10 US Dollar to Indian Rupee. Retrieved from

https://transferwise.com/gb/currency-converter/usd-to-inr-rate?amount=10

UKIBC. (2020) Doing business in India. Retrieved from

https://www.ukibc.com/india-guide/how-india/fdi-restrictions/

Vyas, A. (2015) An Analytical Study of FDI in India (2000-2015) Retrieved from

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.736.72&rep=rep

1&type=pdf#page=209

PAGE 14
International Strategy and Key Resources

Ikea pursued organic growth in India (Limaye, 2018). There are four global strategies

(See appendix F) which explains a companies approach to managing global integration

versus local responsiveness, also known as the global-local dilemma (Bartlett &

Ghoshal, 1986). This framework is used since IKEA mainly use adaptation strategies to

fit into the local culture; when operating in Saudi Arabia they are still held accountable by

Swedish media and activists for their actions (Peng & Meyer, 2016). IKEA must find a

balance.

(Jonsson, 2007) argues that IKEA utilized the transnational strategy1 when

entering Russia, China and Japan. The transnational strategy is implemented when there

is high pressure for global integration and high pressure for local responsiveness. It is the

most difficult strategy to attempt (Peng & Meyer, 2016) due to cultural differences between

the home and host country. In Saudi Arabia, IKEA airbrushed women out of photos in their

catalogue since women are not allowed to be in advertising. This caused outrage in

Sweden and IKEA apologised. This demonstrates the difficulties of implementing this

strategy in practise (Eskander, 2010; Peng & Meyer, 2016).

IKEA claims that they do not adapt according to different markets, that is partly

true, least when it comes to physical products (Ghosh, 2020) See appendix G, This

appendix evidences that IKEA does adapt significantly. Less in countries like the UK, India

is the middle ground and a significant amount of adaptation is seen in countries like Saudi

Arabia which are completely different culturally. In Appendix H it is evidenced how far

IKEA is willing to go to adapt to local markets.

For every expansion into a new country and region, IKEA completes a study of

local peoples homes (Karlsson, 2016). They carried out roughly 1000 visits to local people

homes in India to understand their needs (Ghosh, 2020).

1
Transnational strategy is a personalized approach to each market as opposed to the global
strategy where a product is marketed and sold the same way worldwide (Johnson, 2017).

PAGE 15
 IKEAs low-cost competency was used in the expansion to make IKEA products

affordable to the average Indian consumer (Kazmin, 2018). This is something other

companies such as Apple Inc. have been unable to do (The Economist, 2018). Low

price points is a part of IKEAs global strategy but not the only factor that makes IKEA so

successful (Shoulberg, 2018; Johnson, 2008,). IKEA started their business with

globalisation as an aim (Shoulberg, 2018). IKEA always postpones an opening of a new

store to ensure that it is perfect from the start, many other retailers try to perfect their

FDI as they go along which proves to be a mistake (Shoulberg, 2018).

IKEAs most important global strategy is culture adaption and its culture neutral

product range (Shoulberg, 2018). The global sourcing model plays an important part in

IKEAs global strategy, IKEA uses many different suppliers worldwide which ensures

access to supplies worldwide (Shoulberg, 2018). IKEAs motivation behind their global

strategy is not oversaturating a market and instead exploiting economies of scale

(Jonsson, 2011). IKEAS strategy has changed over time (see appendix). Their current

strategy is to not adapt the products or marketing (they do this by using the same pictures

worldwide and editing them according to the country) Using flexible replication aids them

in this strategy (Jonsson, 2011). IKEA is motivated by maintaining a strong culture in all

of their stores across the world (Jonsson, 2011).

IKEA gains and sustains a competitive advantage in three main ways (Li,

2010). The first is always looking for a lower price, they reduce the amount of staff

needed at the stores, flat-pack and utilize suppliers from all around the world (Li, 2010).

The second is differentiation, IKEA has 9500 cheap products in its range with good

quality and style, for customers to get this in a product is rare (Li, 2010).

The IKEA experience is a competitive advantage (Clifford, 2019). Customers leave their

kids for free at IKEAs daycare and enjoy a home environment instead of a congested

retail environment (Clifford, 2019). A restaurant is placed in the middle of each store

allowing customers to recharge and keep shopping (Clifford, 2019). IKEA design the

PAGE 16
customer route trough the store themselves to maximise spending (Clifford, 2019). At

the end of the route customers can smell pastries, the sweet smell eases customers

worry about overspending (Clifford, 2019) IKEA provide an experience that other stores

do not.

As demonstrated by IKEAs many successful expansions, their competencies are

transferable. IKEA transfers but do not use a template, they use their experience and

knowledge (Jonsson, 2011). The pressure for global integration and local

responsiveness is strong which is why IKEA has adopted the transnational strategy to

address this (see Ringstrom, 2013).

Appendecies

A: Bartlett & Ghoshal Framework for International Strategy

PAGE 17
B: IKEA Adaptations, UK, Saudi Arabia and India

Compiled using a variety of sources including the following: Goel (2018),

Eskander (2010), Limaye (2018) Selling IKEA abroad (2013)

PAGE 18
C: IKEA Advertising adaptations

Source: IKEA Catalouge 2011. IKEA presented its designers in a spread in the
Swedish catalouge. In the Saudi Arabia catalouge the female designer was
edited out of the picture.

D: IKEA Timeline of internalisation process

PAGE 19
 References

Bartlett, C.A., Ghoshal, S. (1986) Managing across borders: the Transnational

Solution, The Harvard Business School Press pp. 376-401

Clifford, C. (2019) Meatballs and DIY bookcases: The pshyocology behind Ikeas

iconic success. Retrieved from

https://www.cnbc.com/2019/10/05/psychology-behind-ikeas-huge-

success.html

Eskander, D., Aal, M. (2010) Does IKEA culture apply abroad? A study of IKEA

in Saudi Arabia. Retrieved from http://kau.diva-

portal.org/smash/get/diva2:403657/FULLTEXT01.pdf

Ghosh, S. (2020) IKEA business strategy in India. Retrieved from

https://www.researchgate.net/publication/340001625_SEMINAR_PAPER_

IKEA_Business_Strategy_in_India

Goel, V. (2018) Ikea Opens First India Store, Tweaking Products but Not the

Vibe. Retrieved from https://www.nytimes.com/2018/08/07/business/ikea-

first-india-store.html

Johnson, G., Scholes, K.,Whittington, R. (2008) Exploring Corporate Strategy

Texts and cases. (8th Ed). Pearson Education Ltd.

PAGE 20
Jonsson, A. (2008) A transnational perspective on knowledge sharing: lessons

learned from IKEAs entry into Russia, China and Japan. Doi:

10.1080/0959396070177804

Jonsson, A., Foss, N. (2011) International expansion through flexible replication:

Learning from the internationalization experience of IKEA.

Karlsson, B., Olanrewaju, B., Ullah, E. (2016) Foreign Market Entry Strategies, A

case study of IKEA entering the Indian market. Retrieved from

http://lnu.diva-portal.org/smash/get/diva2:942136/FULLTEXT01.pdf

Li, Z. (2010) The competitive advantage of IKEA and IKEA in China. Retrieved

from http://hig.diva-portal.org/smash/get/diva2:326248/FULLTEXT01.pdf

Limaye, Y. (2018) Will the first IKEA in India succeed? Retrieved from

https://www.bbc.com/news/business-45122848

Ringstrom, A. One size doesn't fit all: IKEA goes local for India, China. Retrieved

from https://www.reuters.com/

Peng, M., Meyer, K. (2016) International Business. Second Edition. IKEA adapts

in Saudi Arabia. Page 283, In Focus 10.1.

PAGE 21
Shoulberg, W. (2018) Why Ikea Succeeds Around The World While Other

Retailers Falter. Retrieved from

https://www.forbes.com/sites/warrenshoulberg/2018/07/30/put-another-

stamp-on-the-ikea-passport/#4130f47e3f7c

Strategic Direction. (2013) International Retailing relies on understanding local

culture. Doi 10.1108/SD-08-2013-0056

The Economist. (2018) The Elephant in the room: Indias missing middle class.

Retrieved from https://www.economist.com/briefing/2018/01/11/indias-

missing-middle-class

Quito, A. (2017) The secret taxonmy behind IKEA´s product names, from Billy to

Poäng. Retrieved from https://qz.com/896146/how-ikea-names-its-

products-the-curious-taxonomy-behind-billy-poang-malm-kallax-and-rens/

PAGE 22
Stakeholders and Ethical Issues

Employees may be impacted by this expansion. (See appendix A). In 2018 IKEA had

1,500 employees in India (PTI, 2018). The company plans to have 15,000 employees in

the future (PTI, 2018). According to (Daunfelt, 2017) when IKEA opens in a municipality

in Sweden total retail employment is increased by 17%. Women's unemployment is

higher than men in India (Sharma, 2020) and IKEA is hiring half women, half men (PTI,

2018). Some ethical issues IKEA will face are low wages, child labour, poor working

conditions (OECD, 2011).

The Government of India will be impacted (See appendix B) IKEA is required

to obtain 30% of its supplies from local producers (Sivakumar, 2016). This will create

more jobs, revenue and generate tax income. Foreign Direct Investment (FDI) in retail

has a positive impact on economic development, infrastructure, and improvement of

skills and technology (Ojha, 2017). According to (Transparency, 2019) India is almost a

highly corrupt country. When operating in India, IKEA needs to ensure that no one in the

company receive or accept bribes. This has happened in France (Sebag, 2020) and in

Russia (Kramer, 2010). 40 Billion (USD) of illegal money is generated yearly from land

transactions and the process is lengthy (Srinivas, 2012). IKEA will be involved in land

transactions and may be faced with ethical issues. In Russia, IKEA has been sued 200

times and fined five million Euros for refusing to participate in corruption (Belasen,

2016). The financial risk that comes with corruption is evident.

Since IKEA is required to source 30% locally (Sivakumar, 2016) there will be

more business for suppliers and they may gain bargaining power since IKEA is unable to

go elsewhere. Walmart has had a positive impact on suppliers in India (Patibandla,

2014), this may be the case for IKEA too. IKEA could help domestic suppliers go global

(Batiblanda, 2014) Ethical issues in the past includes child labour (Smith, 2010), forced

labour (Roque, 2016), prison labour (Milne, 2012) and exploiting workers (Churchill,

PAGE 23
2017; Haan, 2006). IKEA also needs to be careful not to use suppliers in India that do

not follow its sustainability policies on procurement (Laurin, 2017).

Customers in Hyderabad or elsewhere in India will be impacted. (See

appendix D) According to (Mukherjee, 2011) when a new low-cost retailer opens, Indian

consumers may gain more bargaining power and local stores lower their prices, this

increases consumer wealth. In the car industry, FDI enabled more Indian people to

afford cars as domestic dealers became globally competitive in their pricing as a

response. IKEA could give more people access to furniture. ”Predatory pricing” is when

a business reduces its prices to force competitors to close which limits consumers

buying power (Mukherjee, 2011). IKEA is known to sell food in their stores at a loss to

attract sales (Spear, 2015). They need to be careful not to be perceived as engaging in

predatory pricing. To adhere to cultural traditions in India, IKEAs menu contains no beef

or pork (Bailay, 2017). Other types of meat than advertised have been detected in their

food in the past (See Appendix C). IKEA needs to ensure that there are no pork or beef

found or this could cause ethical issues. (More stakeholders, appendix E).

PAGE 24
 Appendecies
(sources A-D: see reference list)

A: Stakeholder Analysis: How employees may be impacted by the expansion and ethical
issues

PAGE 25
B: Stakeholder Analyis: How the government may be impacted and ethical issues

PAGE 26
C: Suppliers Analysis: How suppliers may be impacted and ethical issues

PAGE 27
D: Customers Analysis: How customers may be impacted and ethical issues

PAGE 28
E: Overview: Key Stakeholders that may be impacted by IKEAs expansion in to India

Image by (Johnson, 2017).

PAGE 29
 References

Belasen, A., Toma, R. (2016) Confronting Corruption in Business, Trusted

Leadership, Civic Engegament. Part 1 page 5.

Churchill, F. (2017) Truckers carrying Ikea goods ”living out of cabs”. Retrieved

from https://www.cips.org/supply-management/news/2017/march/ikea-

logistic-contractors-exploiting-european-drivers/

Cirillo, J. (2011) Human Rights and Global Sourcing: IKEA in India. Journal of

International Managment. Retrieved from

https://journalofinternationalmanagement.wordpress.com/2011/05/13/hum

an-rights-and-global-sourcing-ikea-in-india/

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Assessing the success of IKEA in India

IKEA opened their first store in India less than two years ago so it is too early to

determine if the expansion was a success or not. Instead, an attempt will be made to

predict if IKEA will be successful in India or not.

As of 2020, IKEA maintains global leadership in their industry, home &

garden (Euromonitor, 2020). IKEA's global share was 5,1% in 2018 and has stayed

there (Euromonitor, 2020). Their share in home furnishings in India increased from 0,2%

in 2018 to 0,4% in 2019 (Euromonitor, 2020) In 2019 their net profit was 1,5 Billion EUR

(IKEA, 2019). IKEA has been secretive about its financial figures in India (Retail Asia,

2019). However, some Indian publications have obtained the figures from the Registrar

of Companies (Malviya, 2019). According to (Malviya, 2019) the profit was Rs 407 crore

and loss was Rs 685 crore in FY 2019. They lost Rs 368 crore in FY 2018 (Malviya,

2019). Their profits were in line with rival Urban Ladder and double of competitor

Pepperfry (Malviya, 2019).

The sale of home furnishings in India increased from 697,353,5 million INR in

2017 to 750,894,5 INR in 2018 (Euromonitor, 2020). The industry is forecasted to grow

rapidly to 1,053, 544,1 INR in 2024 (Euromonitor). Sales have been declining (See

appendix B) but It is forecasted to rise (Euromonitor, 2020). India's economic growth will

decelerate in 2020 but consumer expenditure will grow by 5,9% between 2020 and 2030

(Eghbal, 2020).

IKEA has teamed up with Indian company Urban Company to provide assembly

services (ET, 2018). As of yet no additional physical stores have opened but they are

planning to open stores in Mumbai, Bangaluru and Dehli (PTI, 2019). After this

expansion, they plan to open stores in cities with smaller populations (PTI, 2019). They

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have online stores in Mumbai, Pune and Hyderabad (IKEA, 2020). They are planning to

open more than 25 stores in the future (Tandon, 2019). The expansion into India has

challenged IKEA to reduce costs and if they succeed they will have improved their cost-

reducing competency (The Economist, 2018; Kazmin, 2018).

The population is large and living spaces are small so there is a need for

space-effective furnishing solutions (Goel, 2019). According to (Ghosh, 2020) the new

middle class in India is more conscious of their interior design. With a population of 1,3

Billion and a median age of 28, there is a large market that IKEA has access too

(Ghosh, 2020). The e-commerce market is also growing rapidly (Ghosh, 2020). India

can also offer cheap competent labour (Ghosh, 2020). There has recently been a

corporate tax cut in India (PTI, 2019).

According to (Enderwick, 2020) challenges in business is trade conflicts,

social unrest, viruses and terrorism. These kinds of issues affect the economy

(Enderwick, 2020) and will, therefore, have an impact on IKEAs success in India. India's

economic growth is also set to slow down in 2020 (Euromonitor, 2020) which may

impact IKEAs sales. The weakness of the infrastructure (Enderwick, 2020) is a costly

threat to IKEA. as they plan to construct several buildings in the future (Enderwick,

2020). They may also be faced with having to provide their own power sources due to

this (Enderwick, 2020; Ghosh, 2020). According to (Goel, 2020) companies have copied

IKEAs products. There is also the possibility of changing laws and tax policies which

could force IKEA to increase their prices (Goel, 2019). IKEA has a lot of competitors in

India including Pepperfry, Amazon and Wayfair etc (Goel, 2019). Indian consumers have

no experience with DIY and hiring an assembly service increases the cost of their

purchase (Ghosh, 2020). India has high corruption (TI, 2019). IKEA has faced many

challenges in other highly corrupt countries that they have operated in (Kramer, 2010).

According to (The Economist, 2018) the majority of India's large population is poor and

can not afford to purchase what is not essential cheaper local options (Mishra, Ray &

Karuna, 2019). This is mainly why IKEA India will not be successful, but it depends on

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how success is measured, if measured according to stakeholder theory as opposed to

profits, IKEA in India is successful due to all the benefits its presence brings to its

stakeholders.

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Appendix A: Sales of Home Furnishing in India

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Appendix B: Sales Performance of home Furnishing in India

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