The Business Model and Competitive Strategy of Ikea in India

This case study analyzes the business model and competitive strategy of Ikea in India, focusing on the application of business strategy to deal with market issues. The findings show that Ikea India utilizes a cost-effective strategy, differentiation, long-term relationships with suppliers, and forming a new market to address the challenges faced in the Indian market.

Competitive strategy
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Executive summary
In the dynamic environment, business adopts different types of competitive strategies that can
help them in surviving in market. The case study that has been analysed is Case 10: Ikea India
with the name of “The business model and competitive strategy of Ikea in India” and strategy
that is applied is business strategy because as case says it includes a business model which means
different business strategy. The findings of report show that Ikea India business strategy shows
different strategy that is applied by Ikea India to deal with issues that are faced by them in
market.

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Contents
Introduction......................................................................................................................................3
Summary of the case........................................................................................................................4
Identification of strategic issues......................................................................................................4
Application of the business strategy................................................................................................5
Cost-effective strategy.................................................................................................................6
Differentiation..............................................................................................................................6
Long terms relationship with suppliers........................................................................................7
Forming a new market.................................................................................................................8
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
The aim of the assessment is to be familiarised with one of the case studies and to apply related
foundational strategy development models that apply to the case. The case that has been selected
for evaluation is case 10: Ikea India (The business model and competitive strategy of Ikea in
India). This case has been analysed with the support of one of the competitive strategy that is
related to case. The competitive strategies that are provided include Business Strategy,
Acquisitions and Structure, Corporate Strategy, Cooperative Strategy, International Strategy,
Sustainability. Out of these strategies, the strategy that has been selected for applying it on case
is a business strategy.

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Summary of the case
The case talks about Ikea company is one of the well-known Swedish company who is
performing its business operations in more than 44 countries and thus this is the reason due to
which it is considered as largest furniture retailer. The company was founded by Ingvar Kamprad
in the year 1943. Later, company started expanding the business operations but as clear with
case, it did not enter into market until the year 2013 (Samad, n.d.). However, this has been found
that the company had a presence in Indian market since year 1980s as sourcing destination for
stores across the world. In the case, it has been found that in 2007, company has introduced its
regional procurement office in location of Gurgaon. Further, in 2009 company entered into
market to form the stores but was not able as it was thwarted by FDI. Later, company again
applied for permission in year 2012 once the rules and regulations changed in FDI (Samad, n.d.).
Company was expected to wait for more than a year to get approval from government for
opening the new stores in India. Ikea Company effectively utilized this time in sourcing
preferences and determining the preferences of customers in Indian market. Later on, company
was registered on new heights with total number of 298 stores in more than 26 countries and
with more than 139000 personnel working with them.
Identification of strategic issues
In case study, country is home of rich traditional autistics with high traditional handicrafts that is
linked to wood. The major issue is faced by company with art and design of India has earned
goodwill in market across world. However, the change in time has brought many changes in
preferences of the customers present in country. The industry of furniture is consists of wide

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range of products which comprises of bedroom, garden, school, living room and many others
(Wheelen, Hunger, Hoffman, and Bamford, 2017). The market of furniture industry in India is
expected to increase which leads to rise in competition in market that is expected to be 700
billion in year 2010. The competitors in market are increasing due to which Ikea deals with
issues, as they have to bring changes in their strategy that can affect the working of company
(Buckley, Burton and Mirza, 2016). These domestic competitors like durian industries, Wipro
group, Houseful furniture and many others can maintain their business operations in market
because consumer changing preference as people of Indian market started believing in retailing
in Indian market. This leads to rise in opportunities for business in the Indian market and they
enter into market (Ehsan, Karlsson and Dada, 2016).
Further, this has been found that according to government rules company need to maintain 30%
of the sourcing majorly from suppliers present in Indian market. This affected company, as Ikea
need to follow norms according to which they need to source the 30% of the goods from
suppliers of India for which they need to form contacts. Also, considering Ikea as new entrant in
market of India suppliers will offer products at high cost to their employees. All issues that were
faced by Ikea India were resolved by company with the help of business strategy (Grant, 2016).
The application of effective business strategy shows how a company deal with issues present in
market.
Application of the business strategy
Business strategy is defined as companies working plan that is essential for attaining vision and
prioritizing objective and competing successfully in market (Peng, 2016). The companies make
use of the different elements of the business strategy so that they can easily survive in market

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and reduce impact of issues that are faced by them in market. Ikea Indian applied the different
business strategy in market that is presented below –
Cost-effective strategy
The cost-effective strategy is considered as one of the business level strategies that is
implemented by company in India (Rothaermel, 2015). In the case study, this has been found that
since the year 1980s company is working as low-cost sourcing firm who is able to source more
than US $600 million that is approximately equal to goods from approximately 70 suppliers and
with 1450 sub-suppliers present in market of India (Samad, n.d.). The low-cost sourcing helped
the company in offering products to the customers at low prices that help them to deal with issue
of competition. It has been witnessed from the case study that yield of the cotton is according to
per hectare which was very low in Indian market rather than from Australia and China where
company generally source products (Vinay, Srivastava, Vij and Rawat, 2017).
Differentiation
Differentiation includes the developing product or service that can offer superior value to the
customers. The company can do differentiation through high quality, features, high customer
service, and many others (Chen, Eshleman and Soileau, 2016). This strategy is majorly used by
company to enhance sales that are linked with existing product line that is used by business that
has been experiencing declining sales (Frynas and Mellahi, 2015). Ikea expanded their product
range that shows that they have applied differentiation strategy, as they want to meet emerging
needs of customers by offering different products. This is evident with fact that company offer
services like pens, wallets, picture frame, table runners, watches, jewellery, and many others.
This strategy helps company to meet changing needs of customers present in market that is one
of the leading issues. The company applied differentiation strategy under which they took step to

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bring furniture and its related products into existing market that is considered as one of major
factors that lead to the success of business (Srivastava and Kumar, 2015). It has been found that
Ikea Company has not only to seek the permission for expanding the furniture as product in the
market but they took permission to get engaged in the export, import, marketing, and distribution
as well as warehousing.
In addition to this, the company has businesses of café, nursing, restaurant, home, children play
area as well as many others which is possible under this strategy only. This differentiation
supported company to offer facilities that help in adding value to the life of customers.
Moreover, it contributed in enhancing brand value and recognition in market. This recognition in
the market with brand name is essential as it makes the suppliers to offer the correct as well as
cheap prices for products. The effective sourcing by the company helps them to lead market of
India. This wide range of services that are provided by company helps them to form more tie-ups
in market as they are obliged to source amount (Teece, 2010). These tie-ups helps Ikea in India
to source at least 30% of products because company deals in a wide range of products due to
which they have a wide scope to source product from suppliers present in India.
Long terms relationship with suppliers
In business strategy, the company include both internal and external elements that contribute
effectively in performing business operations in a smooth and easy manner. Ikea business
strategy is related to its suppliers who are present in market (David, 2011). The regulation of
Indian government shows that company is obliged to source 30% of the amount from local
suppliers due to which company need to form the long term relationship with suppliers so that
they can do easy sourcing of products (Samad, n.d.). The strategy of company is to form long-
lasting relationship with new as well as existing suppliers with support of shared values of

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company. The reason behind long-term relationship is Indian market is selected by company that
they want to source carpets as well as textiles for longer duration of time. This strong
relationship will help company to source the products in low prices (Zhong and Li, 2018).
However, sourcing at initial stage was not done by company in bulk, as demand for products in
market was low. Moreover, this has been found that rise in competition in Indian market will
give suppliers to choose company to whom they want to provide their products. This strategy
effectively contributes to improve operation and resolving issues faced by company. In addition,
the long-term relationships with suppliers help the company to meet criteria of company that
include 30% of the product sourcing from local suppliers.
Forming a new market
One of business strategies that are generally adopted by company is forming a new market that is
formed to meet goals of company (Chernev, 2018). The goals of Ikea Company are to expand the
business operations to get revenue as well as to grow business. Until year 2011, company was
not able to enter into market, as the foreign direct investment in multi-brand retail by government
was not allowed and at same time FDI in single retail brand was majorly permitted only up to
51% (Vikram and Mittal, 2013). Later on, country permitted 100% of foreign direct investment
majorly for single brand retail in market of India with condition that they should source 30% of
the goods. In year 2012, company took steps finally to expand their business and decided to
invest around US$ 19 billion with help of which they set up approx. 25 stores in market (Samad,
n.d.).
The company not only entered in Indian market to form new market but they also entered into
different countries. Ikea strategy of expansion began from 1970s and 1980s as company operate
their business in market of Switzerland and later on in Germany. It has been found that company

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has its stores in the market like Australia, Hong Kong, Canada, Spain, and many others. Out of
this, Germany market is considered as one of biggest markets for company due to which there is
the presence of 44 stores that is further followed by the USA with 37 stores (Samad, n.d.).

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Conclusion
In the end, it has been found from the analysis that Ikea India Company is willing to expand
business operations in international market for which they follow business strategy. This has
been found in case that Ikea deals with different issues in Indian market. However, they have
applied business strategy that helps them in resolving the issues that are majorly faced by them.
The different business level strategy which is implemented by company include cost-effective
strategy, Differentiation, long term relationship with the suppliers and forming the new market
for company in business market. It has been shown in report that how business strategy helps
company in reducing issues.

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References
Buckley, P.J., Burton, F. and Mirza, H. eds. (2016) The strategy and organization of
international business. Springer.
Chen, Y., Eshleman, J.D. and Soileau, J.S. (2016) Business strategy and auditor
reporting. Auditing: A Journal of Practice & Theory, 36(2), pp.63-86.
Chernev, A. (2018) Strategic marketing management. Chicago:Cerebellum Press.
David, F.R. (2011) Strategic management: Concepts and cases. India: Pearson/Prentice Hall.
Ehsan, U. E., Karlsson, B. and Dada, O. D. (2016) Foreign Market Entry Srategies.: A Case
study of IKEA entering Indian Market.
Frynas, J.G. and Mellahi, K. (2015) Global strategic management. USA: Oxford University
Press.
Grant, R.M. (2016) Contemporary strategy analysis: Text and cases edition. New Jersey: John
Wiley & Sons.
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.
Srivastava, G.K. and Kumar, S. (2015) Foreign Direct Investment in Indian Retail
Sector. Anusandhanika, 7(2), p.8.

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Teece, D.J. (2010) Business models, business strategy and innovation. Long range
planning, 43(2-3), pp.172-194.
Vikram, S. and Mittal, M.P. (2013) FDI in Multi-Brand Retail Sector–A Study Regarding Indian
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Vinay, A., Srivastava, I., Vij, S. and Rawat, S.R. (2017) IKEA: The Furniture Guru-An
Exploratory Study. New Delhi: Indian Institute of Technology.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E. (2017) Strategic management
and business policy (p. 55). Boston: pearson.
Zhong, T. and Li, J. (2018) Business strategy, managerial expectation and cost stickiness:
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Routledge.