Obstacles in Inward FDI's and Challenges Faced by IKEA in India

MBA global business

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Three examples of policy that pose an obstacles in inward FDI's...........................................3
2. challenges faced by IKEA in its venture in India....................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................5

INTRODUCTION
IKEA is the furniture brand which is Sweden-based. They are known for its designer and
good quality of furniture. IKEA is interested to enter the Indian market because of the potential
customers available in India. This report will discuss that what policies will pose obstacles for
company to carry business in India (Baby and Sharma, 2017). Further it will discuss that what
prospects and challenges will IKEA face in India because of the formula of providing affordable
and aspirational rather than low costs.
MAIN BODY
1. Three examples of policy that pose an obstacles in inward FDI's.
Foreign direct investment of India is the reason for slow growth of IKEA in making its
retail presence which are as follows:
high tariffs and protectionist policies:
Foreign companies when entering into Indian markets for trade face high tariffs and
protectionists policies because the government of India want to save domestic business so that
have build restrictions through their trade policies (Aykut, Sanghi and Kosmidou, 2017).
Government knows that if they apply high tariff than less foreign companies will show interest of
doing business in India. Protectionist policies are applied in order to save the interest of local
business. Government are providing subsidies to local business in order to facilitate its growth
but foreign companies have to face high tariffs which are creating trade conflicts (Policy of
foreign direct investment liberalization in India: implications for retail sector., 2021).
Rigid licencing policies and high tax rate:
Government of India also have made complex licencing for foreign companies which
discourage foreign investors to enter in consumer goods industry (Siddiqui and Ahmed, 2017).
Country also gets affected from such polices because Indian citizen gets less variety of products.
Here government is thinking about domestic business but not thinking that consumer will get
limited choice only. Legal authority has also restricted on the movement of goods within
interstate. IKEA has also faced issues of complex licencing system. Foreign companies have to
take various licence from Indian government if they want to do business in India (Essandoh,
Islam and Kakinaka, 2020). It includes licence related to enter into Indian market. Foreign