An Analysis of IKEA's Competitive Strategies in the Indian Market

This report analyzes IKEA's competitive strategies in the Indian market, focusing on how the company adapts to the local environment. It examines the implementation of vertical integration to control costs, diversification strategies including product and market development, and the importance of price sensitivity and the low-cost principle. The report also explores IKEA's product development approach, particularly its DIY model and its focus on understanding Indian culture and lifestyles to offer tailored solutions. Furthermore, it details IKEA's market development strategies targeting the growing middle class in India by offering space-saving and cost-effective furniture. The report highlights IKEA's research-driven approach to understanding customer needs and its efforts to maintain long-term relationships with suppliers. The report also explores how IKEA's joint ventures and collaborations are helping in its diversification. Overall, the report provides a comprehensive overview of IKEA's strategic adaptations and market approach in India.

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Table of Contents
3 Strategies Ikea implemented in line with India’s environmental factors......................................1
3.1 Vertical integration................................................................................................................1
3.2 Diversification.......................................................................................................................1
3.3 Price sensitivity and low-cost principle................................................................................2
3.4 Product Development............................................................................................................2
3.5 Market Development.............................................................................................................3
REFERENCES................................................................................................................................4

3 Strategies Ikea implemented in line with India’s environmental factors
3.1 Vertical integration
Vertical integration is said to be a process or a strategy through which company tend to
reduce the cost level without compromising the efficiencies of the product. Mainly, this
procedure is adopted when the firm has more than one stage of supply chain. Therefore, their
duty is to convert the raw material into the final product so that it can be delivered to its end
customers (Rothaermel, 2015). This is commonly divided into four phases and these are
commodities, manufacturing, distribution and retail. Thus, to operate business in an effective
manner it is crucial that IKEA incorporate this process so that significant advantages can be
gained from the market area. Company can use this so as to make strategies and action plan for
reducing cost price even after providing the valuable services and facilities to its customers.
Henceforth, IKEA can use vertical integration for depicted business functions for getting
effective outcomes.
Other than Vertical Integration, there are other factors on which IKEA is worked on such
as harmful effects of using plastic. By considering this point, company has now moved towards
using those materials that can be recycled easily like recycled plastic. Therefore, in order to
implement this, IKEA with the help of Vertical Integration they are making strategies which is
ultimately pushing the company towards attaining goals and objectives in a speculated time
frame. Along with this, Vertical Integration has enabled IKEA in having control over supply
chain of the management. As a result, it is assisting firm in operating the production process in
an effective manner within the organisation. In the year around 2015, IKEA purchased forest in
Romania so that all the requirements can be fulfilled in order to cover the need of raw materials
required for manufacturing goods and products.
3.2 Diversification
IKEA has a multiple layer of corporate competitive strategy which is enabling them in
becoming the most diversified firm amongst all who are dealing in the same sector. Basically,
IKEA deals in ready to assemble home furnishing and from the time it was founded they are
dealing in the same sector. Although in India, this can be one of the most attractive product
because spaces are decreasing and people are preferring small rooms with less furnitures. But
IKEA can think of diversifying in other fields as well such as food sector as Indians are foodie
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this will assist company in increasing their sales and profitability. Buying home furnishing is not
an easy task as this can take lot of time and customer can feel hungry. Therefore, IKEA can open
a food outlet where they can not only take rest but eventually have food instead of going far from
that place (Jayaram and Avittathur, 2015).
Along with this, talking about the diversification of the products company in the year
2015 IKEA collaborated with DreamWorks in order to launch animated series with the help of
which firm can tell its customers about new and fresh products which organisation is promoting.
Because of the approach of diversification of IKEA, many of the companies and investors are
looking to work with the firm like through Moxy Project IKEA has joint ventures with Marriott
International. As a result, it can be evaluated that this joint venture will aid company in having
high-quality investment portfolio across the world.
3.3 Price sensitivity and low-cost principle
In the year 2003, IKEA established a relationship with India and they started trading with
the country for raw materials so as to manage their cost and getting benefits from this. IKEA
purchased cotton from China and Australia when India's cotton yield was decreasing in order to
reduce the price pressures on India from export. This step was taken because of the belief that
most of the customers in India are from middle class family and they prefer low cost and
customised furnitures. When IKEA got the permission of establishing business in India than firm
promised to provide better services at low cost without compromising quality of the products
they are providing. Therefore, in order make this happen IKEA, improved its designs with the
help of latest technologies and skilled workers.
In addition to this, IKEA has implemented low cost principle but they have undertaken
different factors so that long term relationship can be maintained with the suppliers who are there
in India. Therefore, in order to look out the same company has to establish more stores in urban
areas and in different locations as well. Along with this, IKEA has reduced its production cost
upto 80 percent and with this firm is providing various offers.
3.4 Product Development
The biggest approach that is being used by IKEA is DIY i.e. Do-it-Yourself for most of
the products they are providing. In terms of fulfilling all the requirements of the customers,
company just have to do little bit of adjustments and innovation in their model. As a result, the
product gets ready according to the Indian Culture. In IKEA, there are suitable employees who
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are skilled enough in attending customers and influencing them with the services they are
providing. For example: customers who wants their furnitures to be packed and delivered are
done at free cost.
Since, 2003 IKEA after establishing themselves and open so many stores in India, they
have now understood the culture and living styles of India and company is providing services
accordingly. IKEA is focussing on every sector of the society so even for the middle class family
company is making furniture that can give lavish lifestyle even in reasonable prices. Therefore,
to becoming one of the leading companies in India, firm is taking feedbacks and gathering
information related to the economic level of customers so that price sensitivity can be maintained
(Goffin and Mitchell, 2016).
3.5 Market Development
In India, middle-class is the fast growing class and they are preferring new and
innovative products that can enhance their lifestyles. So, IKEA targeting this segment of the
society is making goods and products. For example: due to less spaces in homes, firm is
manufacturing reassembling furnitures which not only requires less space but is cost effective as
well. Now, IKEA has become one of the renowned company in India and this has happened
because of the research done by the firm related to the needs and wants of customers.
Therefore, company can think of many new and innovative ideas in its product so that
they can fulfil the needs and requirements of customers.
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REFERENCES
Books and Journals
Rothaermel, F. T., 2015. Strategic management. McGraw-Hill Education,.
Jayaram, J. and Avittathur, B., 2015. Green supply chains: A perspective from an emerging
economy. International Journal of Production Economics. 164. pp.234-244.
Goffin, K. and Mitchell, R., 2016. Innovation management: effective strategy and
implementation. Macmillan International Higher Education.
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