Return to Previous Page

IKEA in India: Market Entry Strategy

CASE STUDY, MARKETING MANAGEMENT
ET Cases, 24 Pages
AUTHOR(S) : Bala Bharathi Yelamanchi and Dr. Nagendra V. Chowdary

Case Preview

IKEA in India: Market Entry Strategy

“India is a vibrant, multi-cultural, multi-faceted and a really exciting market for IKEA. As I start my new role, I look forward to establishing IKEA as a meaningful, loved and trusted brand. I will be working with the local teams to bring in a unique global shopping experience offering good quality and affordable home furnishing products to a diverse set of consumers across the country.” replied, Peter Betzel (Peter) when asked about IKEA’s launch and expansion plans in India. Peter took charge as the CEO of IKEA India in March 2018 from Juvencio Maeztu, CFO and Deputy CEO, IKEA Group who was IKEA India’s CEO from 2012 till December 2017.

The world’s largest furniture retailer – with $40.2 billion sales, 403 stores in 51 countries as on FY2017 – opened its first store in Hyderabad (capital city of Telangana state), India on August 9th 2018 to a rousing welcome. While the first day saw nearly 40,0004 customers queuing up to visit the stores, Peter was concerned about the impending challenge of setting up 25 stores in India by 2025.

Though quite ecstatic with the thunderous response from the public, Peter was thinking about the three-fold mandate at hand. First, how easy or difficult would it be for him to introduce omni-channel retailing, including e-commerce and multi-format stores in India? Second, how can he ensure that IKEA maintains its cost leadership despite India’s high import duties and other challenges? Third, given that IKEA’s growth has been slowing in its traditional strongholds including Europe (Exhibit I), will he succeed to make India count as IKEA’s next growth haven?........................

Furniture Retailing: IKEA Way

IKEA is a privately held global company which designs and sells ready-to-assemble furniture and home furnishings across the globe. Started in 1943 as a small mail-order business, IKEA introduced furniture to its general merchandise in 1947 and pioneered its famed flat-pack furniture concept in 1956 (Exhibit II). Gradually, it expanded its global footprint in markets across Europe, North America, the Middle East, Asia and Australia over the years to emerge as the world’s largest furniture retailer since 2008. IKEA’s financial year ending August 31st 2017 witnessed sales of about..................

Furniture Retailing in India

Indian furniture market has been highly fragmented with unorganized retailers (local vendors or local furniture stores having no formal distribution channels) holding 90% market share while the organized players accounting for only 10% market share. The ‘do-it-for-me’ culture was a norm with consumers enjoying the comfort of made-to-order or fully assembled furniture delivered to their doorsteps at lower costs. However, the organized market, which has been growing at a CAGR of 10.9% in the five-year period since 2012, witnessed sales of 45,470.06 crore in 2017, according to Euromonitor International.................

IKEA in India

The Preparation

IKEA’s journey to the world’s second most populous country was fraught with many roadblocks. IKEA had been sourcing its products from India since more than 30 years and had been very keen on entering India from the past 12 years.Back in 2006, IKEA’s India plans were blocked in a raft of regulations limiting foreign investment in the country’s retail sector. India’s FDI norms allowed only 51% foreign ownership for single-brand retailing while IKEA was keen on going alone with 100% FDI...........

Pre-launch

Upon receiving Indian Government’s approval in 2012, IKEA team began its preparations to set up its first store in India. Juvencio Maeztu (Juvencio), an IKEA veteran who was managing IKEA’s London operations was tapped to prepare the ground for IKEA India’s launch..........

Marketing Communication

Taking cues from its ethnographic research and to make IKEA relevant and aspirational, ‘Make Everyday Brighter’ was the first-ever marketing campaign launched (Exhibit X) in print, TV and OOH by IKEA, preceding its signature store launch in Hyderabad............

Training the Workforce

In preparation for its Hyderabad store opening, IKEA flew 75 Indian co-workers to Sheffield in 2017 to give them an experience of opening a store in the English city. Also, IKEA helped its co-workers open ‘Hej Hyderabad’ pop-up shop in a Hyderabad mall to train them in introducing its products to potential customers..............

..............................

..............................

IKEA in Hyderabad

August 9th2018 Inauguration

After 12 long years of planning and 6 years after its announced entry, IKEA India’s first store was launched in Hyderabad on August 9<sup>th</sup> 2018 (originally slated to be launched on July 19<sup>th</sup> 2018 but postponed due to quality commitments). IKEA Hyderabad’s iconic blue box format was spread over a13-acre land in sprawling 400,000-square-foot near HITEC City.............

Store Experience

In IKEA’s signature style, Hyderabad outlet was divided into two parts with a Market Hall on the ground floor and a display Showroom along with 1,000-seater restaurant on the first floor (Exhibit XIII)...........

Product Mix

Besides including IKEA’s international bestsellers such as the expandable Billy bookcase, Klippan Sofa, Poäng chair and Lack side tables, it also created a range of products made especially for India including common kitchen items such as ‘masala boxes, idli makers, pressure cookers, and tawas............

...................................

.................................

Delightful Service

• Parking

IKEA Hyderabad store accommodated two levels of parking within its premises for 1,200 private cars and space for 700 private two wheelers. Within the store’s parking space, to entertain shoppers during long waiting periods, plenty of entertainment options were being provided from jugglers to magicians............

• Restaurant

The gigantic store comprised of world’s biggest IKEA restaurant and cafe offering popular Nordic-Indian delicacies such as salmon, shrimp dishes, hyderabadi biryani, dal makhani, samosas, etc. (Exhibit XVII). Swedish retailer’s trademark beef and pork meatballs were replaced by chicken meatballs...........

..............................

The Road Ahead

“India might be the most challenging market yet for IKEA. But that’s good for us. Whatever we learn from here, we will take to China, Russia, Europe – new markets”, said IKEA’s global purchase development manager, Henrik Elm. IKEA had been confronting with a plethora of challenges as it was making a headway in India.................

Assignment Questions

I. Discuss the reasons behind IKEA’s keenness in entering India.
II. Conduct a strategic analysis of IKEA and the external environment, given the backdrop of IKEA’s India entry.
III. Why did it take several years of planning and preparation for a global player like IKEA to enter into India?
IV. ..........

Exhibits

Exhibit I: IKEA’s Global Sales from 2013-2017 (% change over a year earlier)

Exhibit II: IKEA’s Milestones

Exhibit III: IKEA’s Worldwide Revenues from FY 2008-FY 2017 (in billion Euros)*

Exhibit IV: IKEA Worldwide Customer Visits (in billion)

Exhibit V: IKEA’s Corporate Structure

Exhibit VI: Inter IKEA Holding and IKEA Franchise System

Exhibit VII: Indian Furniture Market

Exhibit VIII: Competitors Response to IKEA’s Entry to India

Exhibit IX: IKEA’s Top Purchasing Countries

Exhibit X: IKEA’s Maiden Campaign in India

Exhibit XI: IKEA Hyderabad’s Marketing Communication

Exhibit XII: IKEA’s First Store Inauguration in India (Hyderabad) on August 9<sup>th</sup> 2018

Exhibit XIII: IKEA Store at Hyderabad, India

Exhibit XIV: IKEA Product Range

Exhibit XV: IKEA Place – IKEA’s Augmented Reality App

Exhibit XVI: IKEA’s Instagram Handle Announcing the Waiting Period

Exhibit XVII: IKEA India’s Restaurant

Exhibit XVIII: Global Share of Middle Class Consumption

Teaching Note Preview

IKEA in India: Market Entry Strategy

Synopsis

After over a decade of floating IKEA’s India entry plan, the Swedish retailer finally marked its entry in India with a 400,000-square-foot store in the southern city of Hyderabad on August 9th 2018. The response on the inaugural day was phenomenal with thousands of people flocking to IKEA’s signature blue-box store. It offered 7,500 affordable and good quality home furnishing products, all under one roof. To effectively serve the price-sensitive Indian market, IKEA came up with low-price strategy from the outset by pricing around 500 products below 100 and 1,000 products below 200. The global retail giant tweaked its signature DIY practice and popular menu items such as Swedish meatballs and various other practices to suit to Indian culture, values and lifestyles.

Besides its globally successful big-box store format, IKEA planned to experiment on various other formats through omni-channel strategy for its long-term play in a diverse economy like India. Given the highly fragmented nature of Indian furniture industry with organized sector comprising of a meagre 10% share in India, industry experts saw IKEA as quite a business disrupting force for Indian retailing industry in general and for Indian furniture retailing industry in particular.

Prerequisite Conceptual Understandings and Before the Classroom Discussion

• Philip Kotler, et al., “Tapping into Global Markets” Marketing Management, 14th Edition, Pearson Education, Inc., 2013 – To examine the market entry strategies of a global retail behemoth
• Philip Kotler, et al., “Analysing Consumer Markets” Marketing Management, 14th Edition, Pearson Education, Inc., 2013 – To understand how to analyze new consumer markets by carrying out market research

Preamble to the Case Analysis and Discussion Dashboard

The purpose of this case study was to enable an understanding of the market entry strategies of a global players in the backdrop of IKEA’s first-ever store launch in India. The analysis was done by first carrying out strategic analysis of IKEA, as it entered India. The classroom discussion was then focused on analyzing IKEA India’s market entry strategies. It was finally concluded by analyzing impending challenges before Peter Betzel and suggested options. The classroom discussion was orchestrated accordingly [Exhibit (TN)-I].............

Exhibits

Exhibit (TN)-I: Classroom Discussion Dashboard

Exhibit (TN)-II: SWOT Analysis of IKEA

Exhibit (TN)-III: IKEA’s Research and Preparation to Enter India

Exhibit (TN)- IV: Ethnographic Research Findings and the Resultant IKEA India’s Desi-Twist

Exhibit (TN)-V: Government’s Cooperation Extended to IKEA India

Exhibit (TN)-VI: IKEA India’s Marketing Mix

..............

$7.31
Rs 0
Product code: MKTG-1-0079, MKTG-1-0079A

Abstract

When the world's largest furniture retailer, IKEA, decided to enter the second most populous country in the world, it wasn't a mere news. Founded in Almhulty (Sweden) and headquartered in Leiden (Netherlands), IKEA had taken 12 years to enter India with quite a few firsts (departure from its global practices) for its 'long-term' play. IKEA built a global business empire selling affordable, Scandinavian-design inspired furniture with DIY model. Having honed the IKEA WAY over 51 countries with 403 stores and $40.2 billion sales, IKEA's India entry was quite a news globally and in Indian business landscape. IKEA's entry was a news for a few firsts as it entered India. As of September 2018, IKEA's $1.9 billion investment had been India's biggest single-brand FDI. For the first time ever, IKEA was experimenting with an omni-channel retailing strategy starting from Mumbai in 2019. IKEA's Hyderabad store has IKEA's biggest restaurant with 1000-seater with customized Nordic - Indian menu. DIY seemed to be replaced with LUHY (Let Us Help You) with home-delivery (using e-vehicles) and assembling services (tie-up with UrbanClap).

IKEA's first Indian store was launched in Hyderabad on August 9th 2018 after postponing the inauguration once (slated for July 19th 2018). The 4-storied store in HITEC city (2 floors for parking) was built in 400,000-square-foot (37161.26 square metres) with 7,500 well-researched products (1,000 products selling below 200) had been quite a business disrupting force for Indian retailing industry in general, and for Indian furniture retailing industry in particular. While Hyderabad welcomed IKEA store with warmth, the CEO, Peter Betzel (Peter) stared at quite a few daunting challenges including product labelling (with MRP), taxes, IPRs, discerning Indian consumers and most importantly how the established competitors (offline as well as online) would ready their stealth weapons to take on India’s new guest. Would Peter set the ground for IKEA to open 25 IKEA stores by 2025, as planned?

Pedagogical Objectives

This Case Study can be used

  • To understand how a global business player makes a new market entry decision through a series of well-crafted and meticulously executed steps
  • To analyze IKEA India’s market entry strategy – from announcement to the first store launch – and debate on its efficacy for Indian consumer retail landscape
  • To discuss and debate on the best possible options for Peter Betzel to navigate IKEA India through the impending business challenges

Case Positioning and Setting

This case can be used for any of the following courses:

  • MBA Program – Marketing Management Course – To help understand marketing mix concept by considering example of IKEA’s entry into Indian market
  • MBA Program – Strategic Retail Management Course – To help understand the market launching strategies of a global retailer while entering a new market


  • This Case Pack Includes:
    - Abstract
    - Case Study
    - Teaching Note (**ONLY for Academicians)


    ** If you need to make copies, you must purchase the corresponding number of permissions based on the number of participants. Electronic downloadable links (PDFs, PPTs, Supplements etc.) are available immediately after purchase. Single copy can be used only for evaluation purpose. Unauthorized distribution of these files is prohibited pursuant to term of use of this website.

    No. of Copies
    $7.31
    Rs 0

    Related products




    Request for an Inspection Copy

    (Strictly for Review Purpose, Not to be Used for Classroom Discussion/Trainings)