The aim of the report is to talk about the strategies related to the case study of Ikea India. The business model and competitive strategy of Ikea in the market of India is the case study on which the report has been prepared. The report includes the application of some strategies out of Business Strategy, Corporate Strategy, Acquisitions and structure, International Strategy and Cooperative Strategy. The application of the strategy has been decided after reading the case study of the Ikea India. The major focus has been done on the corporate strategy and the business strategy that is followed by the company in the market of India. Furthermore, some of the related strategies are discussed in the report that is based on the incidences took place in the case study.
Company background
Ikea is a well-known Swedish company who is operating in the 44 countries across the world as the largest furniture retailer. The company have a presence in USA, Russia, EU regions, Japan, Australia and China. Ikea was founded in the year 1943 by Ingvar Kamprad. The company didn’t enter into the Indian market until the year 2013 through the company was a presence in the country from the year 1980s as the sourcing destination for the global stores. In 2007, the company opened its regional procurement office in Gurgaon and in 2009; the company enter to form the stores but was unable because it was thwarted by FDI. Ikea again applied for the permission in the year 2012 after the change in rules in FDI. The company was expected to wait for one more year to obtain the approval from the government for opening the stores. This time will be utilized by the company in sourcing the outlines and preference of customers in the market. The company was registered on new heights with the total of 298 stores in 26 countries and with 139 000 employees.
Furniture Industry in India
This is found in the case study that India was home of the rich traditional handicrafts and autistics works related to the wood. The art and design of India have earned goodwill in the market across the world. The change in the time has brought the changes in the preferences of customers which leads to the changes in the furniture industry of the country. The furniture industry includes the wide range of the products which include living room, bedroom, garden and school and many others which is made up of wood, rattan, steel, plastic and metal (Ehsan, Karlsson and Dada, 2016). According to the case study analysis, this has been found that the furniture market in India is expected to be Rs.700 billion in the year 2010. Further, the furniture industry in the market of India is expected to rise.
Application of the strategy in the Case of Ikea India
Corporate strategy
The corporate strategy includes the hierarchically the highest strategic plan of the company which mainly focuses on the corporate goals and ways to achieve the strategic management (Grant, 2016). The major tasks that are included in the corporate strategy include – Allocation of resources, organisational design, management of the portfolio and strategic trade-offs (Grant, 2016). The case study of Ikea India includes the effectiveness of the corporate structure.
Corporate structure
Ikea was structured in such a way so that it can prevent the takeover of the company and a way through which it can protect the Kamprad family from the taxes. The structure of the company was a bit complex array of for-profit and non-profit organisation. It mainly includes both components which include operations and franchising. The structure was designed in such a way that it was able to maintain the tight control over the operations which include IKEA stores and INGKA holding.
The above image reflects the corporate structure of the company which reflects the design of the organisation. The design of the organisation matters a lot for the success of the business in the competitive environment.
Business strategy
The business strategy is referred to as the firm’s working plan for attaining the vision, prioritizing the objectives and competing successfully in the market (Peng, 2016). In the current era, the companies are expected to form the business strategy that will help them to stay in the market. Ikea company follow the business strategy in the case of India as this was the reason due to which it was willing to enter into the market of India. The discussions of some of the Ikea business strategy in the Indian market are given below: –
Ikea entry in India
Ikea Company was not able to enter into the market of India because till the year 2011, the FDI multi-brand retail was forbidden by the government of India and with this FDI in the single retail brand was permitted only up to 51% (Vikram and Mittal, 2013). Later, the country allowed the 100% FDI for the single brand retail in India with the condition that they should compulsory source approx. 30% of their goods from India’s MSMEs. After the reforms, in the year 2012 Ikea decided to expand the business into the Indian market and the company allied for the permission to invest approx. US $19 billion. Further, they set up 25 retail stores in the market of India in two stages (Samad, n.d).
In addition, in the year 2012, the government of India approved for the 100% FDI in the single brand retail. Though, the company faced the issue related to the clause of sourcing the products. The big retailers said that the clause should be removed because the SME of the Indian market is not able to meet the standards of the big brands (Srivastava and Kumar, 2015).
Cost-effective Strategy
Cost effective is one of the business level strategies that is followed by them in the market of India (Agnihotri, 2015). Ikea works as a low-cost sourcing destination since the year the 1980s and on every year the company source more than the US $600 million which is equal to the goods from approx. 70 suppliers and 1450 sub-supplier in the market of India (Samad, n.d). The sourcing from the Indian suppliers worked effectively for the company because they were able to offer the products at the low prices because they were able to source the products at low prices. This is evident from the fact that which is given in the case study which shows that the yield of cotton according to per hectare was very low in the market of Indian then from Australia and China from where the company usually source the products.
Product diversification
Ikea expanded their product range which shows that they have implemented the diversification in the market. The diversification is the strategy in which the company offer diverse products and services which include pens, wallets, picture frame, table runners, jewellery and watches at the reduced prices (Rothaermel, 2015).
After all the products, the company decided to bring the furniture product line into the existence which is considered as one of the major factors for the success of the business in the market of India. Ikea Company had not only taken the permission for the expansion of the furniture market but also taken the permission to get engaged in the import, export, distribution, marketing and warehousing. Along with this, the company opened the stores that feature like the cafés, restaurant, nursing home, children play area and many others. Ikea clarifies with the opening of a store that they are able to maintain the 30% of the sourcing from the Indian suppliers according to the updated laws of the Indian government.
A long-term relationship with Suppliers
Ikea business strategy related to the suppliers in the Indian business market is to form the ties ups with them so that they can easily get the raw material from them. Along with this, the company presence in the market of India was effective for improving the availability of the low price products, high quality and rise in the sourcing of good with the increase in the competition in the Indian market. This is possible with the help of the global design, skills development, technologies and the best practices in the market of India (Crane and Matten, 2016).
Ikea strategy is to create the long-term with the new and existing suppliers with the shared values. The company destination was India because they want to source the textiles and carpets for the longer period of time. Further, the company is willing to link the suppliers for the plastics, steel, lightening and natural fibre (Vinay, Srivastava, Vij and Rawat, 2017). At the initial establishment of the Ikea Company the sourcing was not done in bulk but with the change in the time, the demand from the suppliers was done in bulk. This clearly shows that the order volume for the suppliers was increased by the company.
Cooperative strategy
The cooperative strategy is referred to as the planning strategy in which two or more firms come together to work with the motive to achieve the common objective. The objective can be an internal or external matter of the company (Xu and Wang, 2018). Ikea formed the alliance with the company for the welfare of the society in the dynamic environment.
Working for welfare with society
Ikea continues with the sourcing and the production of the products in the Indian market. In the year 2010, the CEO, Mikael Ohlsoon visited the country to ensure that their suppliers are not involving the children’s in the business or not forcing the people to work. The company formed the sustainable audit and transparency in the Indian market. Further, Ikea maintained the transparency by working in the partnership with the United Nations development program, and UNICEF on grassroots development programs which include health awareness, education, empowerment and many others. All these programs have offered the benefits to the women and children which are for the betterment of the nation.
This reflects that both the companies worked together and perform the activities with the motive of the welfare of the people in India. These programs offered the benefits to the Ikea as their image got improvement in the market of India. This strategy helped the company to perform their business operations effectively. Further, the strategy helped in making the space in the heart of the people of India which is very emotional.
International strategy
The international business strategy refers to the commercial transaction that takes place between two or more different countries (Hitt, Li and Xu, 2016). In the current market, there are different types of international strategies that are followed by the Ikea India.
Global business strategy
The global business strategy is the strategy in which the company set their business operations beyond the home country or it can be said across the border (Scholes, 2015). Considering the history of the company, they opened their first store in Oslo, Norway in the year 1963. Then later, the company entered into Denmark with its store. The global expansion strategy of the company initiated in the year 1970s and 1980s as the company opened the store in Switzerland which is followed by Germany.
The company opened the stores in the other market which include Australia, Hong Kong, Canada, France, Spain and many others. Germany market is considered as the biggest market for Ikea with more than 44 stores which are followed by the USA with 37 stores. In India also the company followed the same international strategy in which they planned to open 9 stores in 7 years. Out of the 9 stores, two stores in NCR, Mumbai, Bangalore and one store in Chennai, Pune and Hyderabad (Samad, n.d.). This shows that the company follow the international strategy which is evident from the case study.
Conclusion
In the end, it can be concluded that any company who is looking to expand their business operations in the international market need to follow the strategies. These strategies help them in achieving the success in the market where they are willing to expand their business operations. The report reflects the strategies which are implemented by Ikea India according to the case study. The strategies which are followed by the company include corporate strategy, business strategy, cooperative strategy and international strategy. The major focus is done on the corporate and business level strategy which helped the Ikea in the India market to expand their business operations.
References
Agnihotri, A. (2015) Low-cost innovation in emerging markets. Journal of Strategic Marketing, 23(5), pp.399-411.
Crane, A. and Matten, D. (2016) Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
Ehsan, U. E., Karlsson, B. and Dada, O. D. (2016) Foreign Market Entry Srategies.: A Case study of IKEA entering Indian Market.
Grant, R.M. (2016) Contemporary strategy analysis: Text and cases edition. New Jersey: John Wiley & Sons.
Hitt, M.A., Li, D. and Xu, K. (2016) International strategy: From local to global and beyond. Journal of World Business, 51(1), pp.58-73.
Peng, M.W. (2016) Global business. Boston: Cengage Learning.
Rothaermel, F.T. (2015) Strategic management. UK: McGraw-Hill Education.
Samad, S. A. (n.d.) The Business model and competitive strategy of Ikea in India. Case 10.
Scholes, M.S. (2015) Taxes and business strategy. New Jersey: Prentice Hall.
Srivastava, G.K. and Kumar, S. (2015) Foreign Direct Investment in Indian Retail Sector. Anusandhanika, 7(2), p.8.
Vikram, S. and Mittal, M.P. (2013) FDI in Multi-Brand Retail Sector–A Study Regarding Indian Context. Asia Pacific Journal of Marketing & Management, 2(7), pp.121-131.
Vinay, A., Srivastava, I., Vij, S. and Rawat, S.R. (2017) IKEA: The Furniture Guru-An Exploratory Study. New Delhi: Indian Institute of Technology.
Xu, F. and Wang, H. (2018) Competitive–Cooperative Strategy Based on Altruistic Behavior for Dual-Channel Supply Chains. Sustainability, 10(6), p.2103.
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