Ikea India

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THE RETAILFORMULA FOR IKEA IN INDIA

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Names and Relation numbers Group 12:

Julian Hoffbauer: 86282

Anwar Mohi-ud-din: 66913

Sonja Bogacki: 83353

Susanne van Scherrenburg: 78940

Lecturer

Mr. Oude Lohuis
Mr. Boels
Mrs. Wedrychowicz
Mrs. Kooijenga

Date

11/06/2009

EXECUTIVE SUMMARY

The following report scans the various environments of India and includes a retail formula to determine if an expansion of IKEA to India would be preferable. It will be summarized in a short conclusion at the end which will include our final recommendation.

In the first part we analyzed that India is the second most populated country in the world with about 1.2 billion inhabitants. Ports, Airports and a sufficient railway system are the basis for the countries decent infrastructure. Additionally, India is the largest democracy in the world and has a very stable political environment. Although, India ranks 122nd in the world when it comes to the ease of doing business, one can say that the general economic environment is favorable for IKEA. There has been constant GDP growth in the last couple of years and the Indian rupee is relatively stable as well. India’s society has been influenced by a very strong caste system in the past which prevented many people from freely choosing what work or business to enter. This has changed and urban regions tend to be more liberal concerning initial cast affiliation than the rural areas. As far as the technological environment is concerned, India’s population is increasingly connected to the Internet but still behind in the international comparison. There are 81 million Internet users and approximately 362 million mobile phones in use. The Indian climate is quiet diverse due to the country’s enormous size. As there are colder and warmer regions, the consumption behavior can differ on a regional level due to the diverse climate. The most important part of the legal environment in India is the presence of strong Foreign Direct Investment regulations in the retail sector posed by the government. As a result, IKEA will have to expand through franchising because 51% of the business has to be owned by a native Indian individual.

In the retail formula, we evaluated that India has a huge pool of highly educated and skilled workers and is one of the world’s most rapid rising markets. The brand IKEA is internationally recognized and also known to many Indians. The quality of its products is another factor which would strengthen IKEA’s position during a market entry. It is a very attractive retail destination due to the country’s rising living standard and its huge population. In case of a market entry, one of the biggest future opportunities for IKEA would be the E-commerce due to the rising number of Internet connections. Opposed to the Strengths and Opportunities, the most prominent threat to an expansion is the current global economic crisis. Additionally, the insufficient international ranking in ease of doing business is a weakness.

After taking all the relevant factors into consideration, we recommend IKEA to expand to India and come to the conclusion that it would be worth taking the risk.

TABLE OF CONTENT

Executive Summary……………………………………………………………………………………2

Introduction…………………………………………………………………………………….………..4

DIPESTEL

Demographical Environment……………………………………………….………………….5

Infrastructural Environment…………………………………………………….………………7

Political Environment………………………………………….………………….…………….8

Economic Environment…………………………………………………...……….……….…10

Social/Cultural Environment…………………………………………….……………………15

Technological Environment……………………………………………….………………….18

Ecological Environment…………………………………………………………………….…19

Legal Environment………………………………………………………….…………………19

Porter´s 5 forces……………………………………………………...……………………………….24

SWOT analysis…………………………………………………….……………………..……………26

The retail formula...
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