INTERNATIONAL BUSINESS CASE MEMO-IKEA INDIA
Question 1: How Would you describe IKEA’s Target Customer Segment in India?
According to a survey conducted in 2013 by Marie Lundstrom, an IKEA Group design executive, the main target market segment consisted of brand conscious, fun-loving customers, and middle-class customers. Also, the target market included young software engineers who loved decent, easily portable furniture, students who looked for low cost functional resale-able designs, and newly married couples.
Question 2: What should Juvencio Maeztu do to ensure the growth of IKEA’s retail operations in the Indian market? Apply SWOT Analysis for IKEA India
SWOT analysis is a technique used to evaluate a company’s competitive position and determine its growth strategy.
Strengths (Internal factors that give a company a competitive advantage)
IKEA has a strong worldwide brand. It ranked 46th on the Forbes list with a brand value of $11.77billion. It also has affordable products with excellent designs that appeal to its young customer segment. The company’s enormous range of products consisting of pre-fabricated furniture, household items, stationery, and food store, strong financial position, and excellent store designs ensure growth in its Indian market. It further has an educated, skilled, capable, dynamic, innovative, and productive workforce and efficient production techniques, unlike its competitors. For instance, the company works with 48 suppliers, employs more than 45,000 direct employees and about 400,000 other workers in the supply chain.
Weaknesses (Internal factors that hinder a company from operating at its minimum)
Among the company’s internal weaknesses are; inefficient stock controls, absence of a practical execution framework, lack of trust in external organizations, and lack of awareness on quality.
Opportunities (Favorable external Factors that could give a company a competitive advantage)
IKEA India has a large potential market in the furniture design sector and other emerging market segments in services, little competition in furniture designs, research and development capability, and low outsourcing labor costs. These factors provide a favorable business environment for the success of IKEA in India.
Threats (Refers to external factors with the potential to affect a company’s operations)
IKEA India’s growth faces uncertainty arising from considerable fluctuations in stocks resulting from new production methods, the rising cost of imports, and risks in pioneering among its product range. Also, the fast-changing technological inventions and clashes from the imbalance in India’s complexity and diversity could affect IKEA India’s growth strategy.
Question 3: What 4P Marketing Strategies do you suggest for IKEA to be successful in the Indian market?
Product
Product differentiation – IKEA India should differentiate its product through unique designs such as pre-assembled designs and assemble-at-premise designs. Combining low prices and well-designed home furnishing products will lead to IKEA’s success.
Price
IKEA’s low-cost pricing strategy appeals to a broad target market across the price ladder. This pricing strategy ranges from low to high with styles ranging from sleek wood, modern minimalist, the neo-traditionalist, and the young. Price ranges are subsequently set in the field of thirty percent to fifty percent as the company utilizes superior production capabilities.
Place
IKEA India employs retail, wholesale, offline, and online sales through its franchising model. This marketing strategy eliminates geographical limitations and expands its scope for customers. Its partnership with suppliers is expanding to include suppliers of textile, rugs, and home furnishing.
Promotion
Due to its popular brand and cost-leadership strategy, IKEA India should focus on sales promotion and trade promotion. This promotion is achievable through its use of catalogs and other advertising techniques such as its concept center that receives 3.2million visitors annually, and displays for 9600 home furnishing products.