HI6006 Case Study: IKEA's Competitive Strategy in the Indian Market

This case study examines IKEA's strategic challenges and successes in entering the Indian furniture market. It delves into the company's background, its expansion plans, and the obstacles it faced, including bureaucratic hurdles, space limitations, and adapting to local consumer preferences. The analysis highlights the application of strategic concepts like the BCG matrix to tailor product offerings for the Indian market. The paper recommends strategies such as forming strong bonds with local suppliers and utilizing a wholly owned subsidiary strategy to navigate the complex Indian business environment. It also emphasizes the importance of transnational strategies to effectively serve Indian customers. The study concludes with insights into how IKEA can sustain its competitive advantage by adapting its business model to the unique characteristics of the Indian market.

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Competitive Strategy
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Competitive Strategy 1
Executive Summary
The case of competitive strategy for the company IKEA revolves around its objective to enter in
the Indian furniture industry. With the changing time, the government of India started making
entry laws more rigid and complex due to which it was difficult for companies like IKEA to
enter in such market. Further, the paper highlights the struggles faced by the company while
entering in the Indian environment along with the strategies that they should use to succeed. It
should be noted that the company should use transnational strategies in the environment to offer
products and services to customer. They should also make use of wholly owned subsidiary
strategy in the business environment in order to enter correctly in the India. It is recommended
that the organization should form strong bond with local suppliers in India.

Competitive Strategy 2
Contents
Introduction......................................................................................................................................3
Brief Summary of Case Study.........................................................................................................3
Identification of Key Strategic Issues..............................................................................................4
Relevant Theoretical Concepts........................................................................................................6
Application of Strategy Formulation theory....................................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

Competitive Strategy 3
Introduction
The purpose of this paper is to enlighten the reader with the information about the case IKEA
aiming to enter in the Indian furniture industry. IKEA is one of the largest furniture retailers
present in the worldwide environment. With an objective to expand its scope of business in
international market and attract people of India, the organization focused on internationalizing in
Indian environment. However, the company faced several consequences in entering in the Indian
environment. The paper analyse the use of international strategy in business environment IKEA
in order to successfully enter in India. The environment of India is diverse and complex at the
same time. Different people have different preferences in the nation that creates threat for the
organization to attain profitability in the new environment. Further, more information about the
given case of IKEA entering in India and international strategies implemented by the
organization is mentioned below.
Brief Summary of Case Study
IKEA is a Netherlands based Swedish company that works in the furniture industry. The
organization provide ready to sell and DIY (do it yourself) products to the customers in different
parts of the world. The organization sell its products to total 44 nations in the world including
UK, US, EU, Japan, Russia, China etc. The organization thought of entering in the India in the
year 2013 in order to attain success in the worldwide environment. IKEA is a privately held
company that was inaugurated in the year 1943 by Ingvar Kamprad and became world’s largest
company in the year 2001. The name of the organization was influenced from the initials of the
owner of the organization along with the initials of his farm and hometown name. The objective
of the company is to produce goods in the market that can be used by people belonging all
income level. The products of the company are organized and income friendly as well that helps
the organization to increase its sales (IKEA 2020).
In the year 2015, the company had aimed to double its sales of €27.6 billion until the end of
2020. The website of the organization involves total 12000 products that represent entire range
of products that the company offer. The corporate structure of the company states that the
organization wanted to secure the position of the company from several takeover etc. financial

Competitive Strategy 4
actions. Therefore, the organization entirely contributed the business to the foundation which
secured the inheritance of the Kamprad family on the organization. In the year 1963, the
company opened its first home furnishing outlet outside Sweden. The company also formed the
outlet in a differential way so as to attract more customers as IKEA encouraged the customers to
visit the entire store and then find out the section where they want to go. The stores of the
company are aesthetic and mainly functional that helps the customers to get inspired and
decorate their house, apartment accordingly. The USP of the company is its price as the
customers come to the organization with an aim to find the furniture at best prices in the market
(Burt, Johansson, and Dawson 2015).
The case explains that the changes in the furniture industry have changed the functioning of
IKEA over the years. The furniture industry is growing smoothly and providing more
profitability to the people. In India, top three furniture companies are Godrej Interio, Usha Lexus
and Zuari. The FDI restrictions were tough in India resulting in which the company faced
difficulty in entering in the nation. After consistent attempts of IKEA to enter in India, the
organization was approved by the government to enter in India with 100% FDI for single brand
retailers in the year 2012. The company opened its first store in Gurgaon in India. Further, it
should be noted that along with all such beneficial factors present in the reputation of the
organization, the company still struggled to enter in the market of India. However, with the
consistent efforts, the company successfully entered in the Indian environment and it is believed
that the nation would provide profitability to the company (Bereznoi 2015).
Identification of Key Strategic Issues
IKEA suffered many challenges while they were aiming to enter in the Indian environment.
Information of these key strategic issues affecting the growth of the company is mentioned
below:
Facing Bureaucrats and Politicos: IKEA was focusing to enter in India for a long period of time
but due to high restrictions in the environment, the organization was unable to get the business
policies approved. The government of India was consistently strengthening the policies related to
FDI of MNCs in the Indian environment which was making it difficult foreign companies to
enter in India. The stringent Foreign Direct Investment regulations of the nation was making it

Competitive Strategy 5
difficult for companies like IKEA to sell their products in the Indian environment. The company
wanted to expand its business only FDI so as to manage the business actions accordingly.
However, the government of the nation was rejecting the proposal of the company again and
again. There is presence of high degree of politics in the nation due to which the company was
unable to woo the authorities and get the file approved (IKEA 2020).
Availability of Space: the country was facing the struggle to find the best place to organize their
outlet in the Indian environment. After the approval of FDI, the organization was struggling to
find the most suitable location for the outlet. As it is known that IKEA is a furniture organization
that require sell the products to its customers by displaying the products in an attractive way.
Therefore, the organization required huge space to manage their outlet in India. However, due to
hike in the prices of the land in India, the company was facing difficulty to get a brand in
reasonable prices. The location at which IKEA wanted to place themselves was not having
sufficient space for the business. Along with this, the budget of the company for the land was
another problem because the organization wanted the area in limited resources however hikes in
the price made it difficult for the organization to select the prospect location (López-Cózar-
Navarro, Benito-Hernández, and Platero-Jaime 2017).
Anti-Corruption Policy: the CEO of the company formed the policy to create three point plan in
the Indian market. It is known that the country holds high degree of corruption in the
environment that hinders the growth of several organizations in the Indian environment. It should
be noted that corruption makes the business activities slow as it takes time for the companies to
get the response of the government on several activities. A new organization like IKEA requires
several legal and general assistance of government in several cases. The anti-corruption policy of
the nation made it difficult for the organization to get the work done within required time. The
government officials in India do not agree to sign any kind of business contract before taking
bribe from the organization. Resulting in which, the company faced difficulty in getting in the
work done in less time period (Ehsan Ullah, Karlsson, and Dada Olanrewaju 2016).
Attracting customer’s interest: lastly, it should be noted that the company also faced difficulty in
attracting the interest of the customers in the business environment. It should be noted that the
organization IKEA became highly famous in other parts of the world because of its differentiated
business structure but that model was not appreciated by people belonging to different parts of

Competitive Strategy 6
the world. The company majorly promoted the DIY projects under which the customers have to
assemble the products themselves based on their requirements. But people in India do not prefer
using similar furniture in their houses. Resulting in which, it acted as one of the major issues that
affected the international strategy of the company IKEA in India (Schneider, and Bermudez
2018).
Relevant Theoretical Concepts
The corporate level strategy refers to the business strategy that helps the business to make
effective decisions for the organization. The corporate strategy helps the business to manage the
finance, human resource, management etc. operations of the company. This type of strategies
helps the organizations to maximize their level of profitability and attain competitive advantage
over the competitors in the business environment. Under this type of strategy, the organization
focuses on using the resources wisely so as to attain success over competitors in the industry
(Rothaermel 2017). Some of the corporate strategies that the companies like IKEA could use to
attain growth are mentioned below:
BCG Matrix: the Boston Consulting group’s product portfolio matrix (BCG Matrix) is a strategic
tool that helps the business in long term strategic planning. This tool helps the business to
consider the growth opportunities present with the organization in the international environment
and then review the products accordingly. Basically, this type of strategy helps the organization
to analyse that which type of product is useful for the business and would provide productivity to
the company and which type of product line of the business would let the organization to suffer
losses in the environment. This strategy would let the organization to invest in right type of
product and discontinue to ineffective product for the business. This type of strategy is also
called Growth / share matrix. The matrix is divided in four quadrants that are dog, question
mark, stars and cash cows. All four segments have their differential features and the products are
segregated on these four segments (Baumgartner, and Rauter 2017).
Another strategy that the business could use is vertical or horizontal integration. Vertical
integration strategy focuses on attaining greater control on the operations by integrating the key
functions of the business. While horizontal integration refers to the growth strategy, in which the
business takes the existing product or service and initiate new business operations. Acquisition

Competitive Strategy 7
and merger strategy under this case helps the organization segregate the business functions of
different products and operate them accordingly. Both the strategies are different from each other
and works accordingly. On one hand, vertical integration strategy combines the business
functions and let the organization collectively operate the activities. While on the other hand,
horizontal integration differentiates the activities on the basis of the products and then let the
company operates activities accordingly (Welford 2016).
Application of Strategy Formulation theory
Considering the illustrated theories of the company, it should be noted that the company should
make use of BCG matrix to differentiate the product and succeed in the furniture industry of
IKEA.
Market Growth Rate
High
Relative Market Share
(Cash Generation)
High Low
Stars Question Marks
 Sofa sets (Innovative business
unit)
 Customized and innovative
business unit
 Textile
 DIY Model
Cash Cows Dogs

Competitive Strategy 8
(Ca
sh
Usa
ge)
Lo
w  Café, restaurant  IKEA Children Toys
Stars: these are the best products of the organization that provide high degree of profitability to
the company. This product of IKEA hold highest market share and provide high return on
investment as well. The company would attain high degree of profitability in the environment
using SBU (Strategic Business Unit) as the DIY model is not praised by people in India. The
SBU model would help the company to innovate the products on the basis of requirements of the
customers and provide them products accordingly. It should be noted that as per the strategic
design of the company, the company would be able to provide innovative products to the
customers on the basis of their requirements in a cost effective manner. The star model of the
company that is most profitable in other nations would not account best for the people in India.
Therefore, the customized and income friendly model would help the company to attain
profitability in the business environment (Shaukat, Qiu, and Trojanowski 2016).
Question Mark: this involves the product of IKEA that has usually high growth level but the
market share of the company is relatively low. This means that the product of the company
consumes much investment and in return, the productive output is very low in comparison. This
product of the company is also called problem child. The textile products of the company fall
under this category as it has strong competition along with the potential to grow. Growth in the
business unit and brand promotion might help the organization to attain growth and profitability
out of this segment of the company. The DIY segment is high profitable for the organization in
other nations. Therefore, after settling in Indian environment, the company might introduce this
segment in a new way so as to attract customers (Komassi, and Pal 2015).
Dog: these are the products of the company that are standing at the breakeven segment. This
means that the products bring as much profit which is directly consumed in producing. The
company is not left with any additional revenue through this product line. There is presence of
low market share and low growth level as well. Toys produced by the company fall under this
line as there is presence of low market for IKEA toys. Toys segment of the company does not
provide any additional benefit to the organization (Goud, and Goud 2019).

Competitive Strategy 9
Cash Cow: these are the market leader products for the organization as this segment provides
more cash to the company than invested in it. However, such products have low market growth
and high market share. The food segment of the company falls under this line, as there is high
availability of customers in this segment. The food segment of the company is extremely famous
in the diverse market because of its quality and taste. Yet the product line shows high potential to
grow in the market of India and company should invest more in this segment (Hague, P 2019).
Conclusion
Thus, in the limelight of above mentioned events, the fact should be noted that the paper
highlighted details about the case analysis of IKEA aiming to enter in India. IKEA is a globally
renowned retail furniture company that was facing difficulty to enter in the Indian environment.
The stringent regulations of the nations were making it difficult for the organization to enter in
prospective furniture industry of India. However, after several affirmations and change in
policies, the company was able to enter in India in the year 2013. The report analyse the
implementation of international strategies in the corporate environment of IKEA. It should be
noted that the company should make use of transnational strategy in the business environment of
India with an aim to succeed. Further, the company should also make use of wholly owned
subsidiary strategy as the market entry mode for India. It is recommended to the organization
that they should form close bonds with the Indian suppliers if they want to capture the interest of
local customer.

Competitive Strategy 10
References
Arnstad, H., 2015. Ikea fascism: Metapedia and the internationalization of Swedish generic
fascism. Fascism, 4(2), pp.194-208.
Baumgartner, R.J. and Rauter, R., 2017. Strategic perspectives of corporate sustainability
management to develop a sustainable organization. Journal of Cleaner Production, 140, pp.81-
92.
Bereznoi, A., 2015. Business model innovation in corporate competitive strategy. Problems of
economic transition, 57(8), pp.14-33.
Burt, S., Johansson, U. and Dawson, J., 2015. International retailing as embedded business
models. Journal of Economic Geography, 16(3), pp.715-747.
Ehsan Ullah, E., Karlsson, B. and Dada Olanrewaju, D., 2016. Foreign Market Entry Srategies.:
A Case study of IKEA entering Indian Market.
Goud, B.M. and Goud, A.P., 2019. Strategic Service Management: A Guide Into 20 Different
Models, Theories and Concepts. Routledge.
Hague, P., 2019. The Business Models Handbook: Templates, Theory and Case Studies. Kogan
Page Publishers.
IKEA., (2020) About IKEA [online]. Available from: https://www.ikea.com/ms/en_ID/this-is-
ikea/about-the-ikea-group/index.html [Accessed on: 16 January 2020].
IKEA., (2020) IKEA in India [online]. Available from:
https://www.ikea.com/in/en/this-is-ikea/ikea-india-pubb0de1ef1 [Accessed on: 16 January 2020].
Komassi, E. and Pal, R., 2015. Investigating short term strategies in product sustainability index
implementation, a case study at IKEA. Universitätsverlag der TU Berlin.
López-Cózar-Navarro, C., Benito-Hernández, S. and Platero-Jaime, M., 2017. The influence of
cooperative relations on geographical expansion and diversification strategies in family
firms. International Business Review, 26(4), pp.764-773.

Competitive Strategy 11
Nandamuri, P.P., Rao, K.V.G. and Mishra, M.K., 2018. Sustainable Competitive Advantage
Through Business Model Innovation: The Indian Perspective. In Enhancing Competitive
Advantage With Dynamic Management and Engineering (pp. 217-246). IGI Global.
Rothaermel, F.T., 2017. Strategic management. New York, NY: McGraw-Hill Education.
Shaukat, A., Qiu, Y. and Trojanowski, G., 2016. Board attributes, corporate social responsibility
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Welford, R., 2016. Corporate environmental management 1: systems and strategies. Routledge.