IKEA is considering entering the Indian market. India represents a large opportunity for furniture sales, with a growing middle class and rising incomes. However, the Indian furniture market is currently dominated by thousands of small, unorganized local players. IKEA would bring international design and quality standards to India, as well as its business model of low prices enabled by flat-pack furniture. A joint venture with a large Indian partner like AV Birla Group could help IKEA navigate the market successfully. Competitors in India range from local mom-and-pop shops to national retail chains, but none offer the one-stop shopping experience and globally recognized brand of IKEA.
2. About the company
IKEA was founded in 1943 when 17-year-old Ingvar Kamprad decided to start a local
catalog company using some money his father had given him
Initially, the company sold basic household goods at discount prices
Today, the IKEA has more than 300 stores in more than 35 countries and more than
130,000 co-workers
3. About the company
Timeline
1943- Ingvar Kamprad registers his firm IKEA, (Ingvar Kamprad Elmtaryd Agunnaryd) on July 28
1948- Stylish, modern furniture is introduced into the IKEA product range.
1951- The very first IKEA catalogue is published.Then, as now, free of charge.
1953- Ingvar Kamprad opens his first furniture showroom in Älmhult, Sweden.
1955- IKEA starts to design its own furniture. The commitment to provide functional, well-designed home furnishings at
prices so low that as many people as possible will be able to afford them begins.
1958- The world's first IKEA store opens in Älmhult, Sweden.
IKEA designer Gillis Lundgren designs the TORE series, which was first displayed in rooms for children.
1959- Self-assembly furniture begins and gradually develops as part of the IKEA Concept. Flat packages = reduced
transport costs = lower prices.
1963- The first IKEA store outside Sweden is opened in Oslo (Nesbru), Norway.
1964- A price/quality comparison published in "Allt I Hemmet" magazine confirms that IKEA products are of good
function and design at a low price, and does wonders for IKEA sales.
1965- The largest IKEA store is opened in Kungens Kurva, Stockholm. The success of the opening led to the idea of
opening up the warehouse and letting people serve themselves; an important part of the IKEA Concept was born.
1973- The first IKEA store outside of Scandinavia opens in Spreitenbach, Switzerland
1978- 1997- Time of product innovations and experiments
4. About the company
Product Innovation
1978- IKEA brings storage shelves into the living room,
1980- LACK, another innovative product, is introduced. This low-priced, functional coffee table is made from a
strong, light material that is normally used for interior doors.
1980- The KLIPPAN sofa with removable, washable covers is introduced. Children and parents quickly start
discovering the practical benefits.
1982- The PATRULL series, a line of children's safety products is launched, highlighting the IKEA commitment to
safety at home.
1984- The STOCKHOLM range of furnishings appears. It had everything expected of classic high quality, except a
high price. STOCKHOLM received the prestigious Excellent Swedish Design award.
1985- A supermarket trolley factory helped IKEA with the frame for the MOMENT sofa. The innovative design
won a prize.
1995- The IKEA PS series is first presented. This series allows designers free reign to shape the latest creations.
The low prices, however, are set with a firm hand.
1996- Some things from the past can still be great. This is the reasoning when IKEA launches products based on
18th century Scandinavian furnishings.
1997- For the most important people in the world, Children's IKEA is launched. A range specially developed for
children.
5. About the company
The IKEA Concept
The IKEA Concept is based on
offering a wide range of well designed, functional home furnishing products
at prices so low that as many people as possible will be able to afford them
The IKEA Concept guides the way IKEA products are designed, manufactured,
transported, sold and assembled. All of these factors contribute to transforming the
IKEA Concept into a reality
6. About the company
The IKEA Store
Visitors are encouraged to take their time and get comfortable with IKEA home furnishing solutions
and products in realistic room settings and real-life homes.
To sit, lie down,
open and close drawers
To compare styles
Compare prices
And imagine the possibilities!
The IKEA Concept relies on customers to choose, collect, transport and assemble IKEA products
themselves
All products in the store are supported by price and product information that is clearly marked on
large, easy-to-read tags
This makes it easy for visitors to serve themselves
Knowledgeable co-workers are also available to customers when needed
7. About the company
Shopping Experience at IKEA
Inside the IKEA store, there are hundreds of inspirational displays - from realistic room settings to reallife homes, all with product combinations that provide fresh ideas and know-how on contemporary
interior design.
There are up to 10,000 different products offered in the IKEA store. There are many new products
introduced throughout the year in the IKEA store. This gives visitors huge possibilities to find
solutions that best suit their needs.
While exploring the store, visitors may be inspired to pick up a few extra products. The IKEA store
is laid out so they will not only find what they came for, but also be inspired by unexpected ideas
and low-priced products as well.
The IKEA store provides everything that is needed for convenient shopping: pencils, notepads, tape
measures, store guides, IKEA catalogues, shopping bags, strollers and trolleys.
The only thing that customers need to bring is an empty car to take purchases home. Or they can
use the low-priced IKEA home delivery service if that is easier.
And no one has to shop on an empty stomach: IKEA stores have a restaurant that serves unique
Swedish dishes along with local favourites. It is a comfortable place to relax, look through the IKEA
catalogue and think about what to buy
8. About the company
IKEA Catalogue
It includes
Product Range
Product Information in detail
Product price
The IKEA catalogue has been a vital part of IKEA retailing since the first edition was published in Sweden
in 1951. Today, more than 100 million households around the world receive the IKEA catalogue, every
year, free of charge
10. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
POLITICAL FACTORS
Political instability: Indian politics is cacophonous and fractious with sharp social
inequities, a corrupt and inefficient bureaucracy, and poor accountability of
politicians
Instability- shaky coalition governments
11 general elections
9 prime ministers during the last two decade
Economic reforms are slow and inadequate
11. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
In 2011 – FDI in India- US$ 25 billion
FDI in China – US$ 228 billion (2012 report of UNCTAD)
12. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
ECONOMICAL FACTORS
India’s macroeconomic factors:
GDP and its components:
Real GDP growth – 6.9% in q2 of FY2011-12
It was 8% in year 2010
13. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
India’s export remained strong
during 2011
Inflation decline to below 5% in November
2011 from a high 11.6% in March
14. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
Current Industrial Growth Rate in India on Year-on-Year Basis:
April 2012 to June 2012: -0.10% Yearly
April 2011 to March 2012: 2.80% Yearly
April 2010 to March 2011: 8.16% Yearly
April 2009 to March 2010: 5.28% Yearly
April 2008 to March 2009: 2.52% Yearly
It was 9.45% in June 2011
15. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
Per capita income – Rs. 80,000 p.a.
The service sector remain buoyant and growing at the rate of 9.6%
Land resource constraint (real states rising)
5 reasons why India excites
The aggressively young population – 54% of the population is blow the age of 25
Spends patterns of splurge in the TOP and MOP
The investment mindset, and the change in life style
The poised Next-gen ahead – high education level
India’s metros as a magnet city
16. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
SOCIAL FACTORS
Diverse society
Different social beliefs and values
Traditional mind set
Social inequalities
17. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
TECHNOLOGICAL FACTORS
Poor infrastructure - Electricity, Roads, transportation
Poor supply chain
Resource challenge : Less skilled manpower
There are some underexploited or unexploited resources
18. Environmental Analysis of the Indian Furniture Industry
PESTEL Analysis
ENVIRONMENTAL & LEGAL FACTORS
Commercial Law and Government regulations: The Guidelines of the Ministry of
Industry effectively put the Indian companies in a position to dictate terms to their joint
venture partners and licensors of technology and trademarks.( amendment 1999)
Labor Laws
Tax and Tariff
51% FDI in retail allowed
Domestic market ruled by local player 86% market share- Unorganized sector
Too many government touch points
State- Centre conflicts
Lack of transparency & red tapes
Time Gap between the formation and implementation of policies
19. Market Outlook
With a middle class population of over 400 million and purchasing power on the
rise, the Indian furniture retail market has been classified by CSIL Milano as one of
the 14 largest furniture markets in the world.
The Indian furniture market is worth US$8 billion and is growing at 30%
compound annual growth rate in the organized sector which represents only 15%
of the whole industry. (worldfurnitureonline.com)
The branded furniture market comprising of residential and commercial furniture,
is valued at US$1.3 billion in 2008 and expected to reach US$3.7 billion in 2012.
(KPMG report)
Currently there are only 10,500 furniture importers in the organized sector and
they mainly import from Italy, Germany, Spain and Malaysia. (EconomyWatch)
Domestic demand is largely satisfied by local production. Nonetheless, as the
potential demand for foreign products is huge, imports are increasing at a very
fast pace. (worldfurnitureonline.com)
20. Decision Making Point 1
Are we going to do business in India?
Yes
High growth rate 5.9%
High purchasing power
Well develop cities
Aggressively young population
Change in life style
High education level
What is the scope of furniture industry in India.
21. Domestic Market
Facts about furniture industry in India
The Indian Furniture market is worth about US$ 8 billion
Constitutes 0.5% of the total GDP
Employs 300,000 people
Highly unorganized – only about 15% in organized sector
Organized sector growing at 30% CAGR
The Organized Sector includes domestic players as well as imports
There are about 5000 firms in the domestic organized sector, and nearly 10500
importers of furniture
Products are classified based on material used, and consumer segments
Wooden Home furniture is the biggest segment
22. Domestic Market
Facts about furniture industry in India
Key states for wood furniture: Gujarat, UP, Punjab, Kerala, Andhra, West Bengal
Household furniture designs are region-specific
Increasing trend of imported furniture in affluent households
Imports worth about US$ 150 million, growing at 60% CAGR
Imports are a rapidly growing segment, catering to urban, affluent households
Key countries imported from:
Italy
Germany
Spain
Malaysia
23. Industry Segments
The Indian furniture industry is mainly segmented into:
Residential – a major contribution from high-spending middle class
population
Office – expanding growth in real estate and office construction
Contract – driven by growing hotel developments and tourism demand
24. “Innovation in the industry”
Traditional furniture, modular kitchens and furniture made of
recycled wood are also gaining popularity in Indian market
Traditional
furniture
making a
comeback
Modular
Kitchens
emerging as
new growth
segments
Recycled
wood a new
source of
raw material
26. SWOT Analysis of the Indian Furniture Industry
Strengths:
Increasing demand in modern, clean, minimalist designs
Highly educated, skilled, young, capable & dynamic human resources
Established branding, tradition
Worldly-renowned outsourcing hub
Diversity vs. Ideas (Innovation, Integration)
Big democracy: big market & free media
27. SWOT Analysis of the Indian Furniture Industry
Weakness:
Inefficient stock control; outdated system
Lack of trust in external organizations
Fear of sharing knowledge & taking risks
Lack of effective & execution framework
Decreasing demand in traditional furniture
Industry has slow absorption of innovation & change
Lack of quality awareness
28. SWOT Analysis of the Indian Furniture Industry
Opportunity:
Big potential market in Design sector & emerging new market segment in
Services
Lower labor costs in outsourcing
Research & Development capability
More efficient production method
Hybrid solutions– balancing & blending
Need modernization of infrastructure
Very little competition in modern furniture design
29. SWOT Analysis of the Indian Furniture Industry
Threats:
Large fluctuations in stock control (new production method)
Inter-company collaboration is unknown
Rising cost of imported goods
Pioneering uncertainties
Clashes in Diversity vs. Imbalance
Fast change Internet (IT), new inventions (Technology, Innovations)
30. Why will IKEA succeed in India?
1. IKEA offers Everything under one roof
From its trademark foldable, pre fabricated, light furniture, to household items to stationery, to an
IKEA food store to the linen section to home accessories to kitchenware to decorative items, IKEA
has it all
2.IKEA’s pre fabricated furniture and goods represent modern Indian lifestyles
More and more working Indians living in suburban metros want shopping hubs that offer quick
service, a reliable brand name, wide options under one roof and quick delivery
3.IKEA is a familiar brand name amongst urban Indians
IKEA along with Starbucks and Walmart, has been made familiar to Indians because they keep
appearing in the media due to their constantly changing plans of entering the Indian marketplace
4.IKEA’s CSR operations in India
IKEA supports UNICEF’s water and sanitation program and funds initiatives in the carpet and cotton
regions in the country. In the coming years too, IKEA plans to spend in areas of women
empowerment, education, health awareness and industry-based programs that aims to benefit
about a 100 million women and children
31. Decision Making Point 2
To enter into a Joint venture
AV. BIRLA Group
Not in furniture business
Trusted Name In India
Significant Presence
Old Business House
Other retailers: Pantaloon retails, K Raheja group
Tata Group- Trent , Rpg Group, Land mark Group, Piramal group
Subhiksha, Bharti Wal-Mart, Reliance
32. Competitor Analysis
Competitive Advantage:
Differentiation- Concept of Fashionable & Stylish furniture not currently
present in India
High level of customization
Cost Leadership
85% Unorganized Sector
40. Other Big Giants in furniture retailing
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Pantaloon
Shoppers’Stop
Vishal Retail
Reliance
Tata group
Godrej & Boyce Manufacturing Co Ltd
BP Ergo
Feather Lite, Haworth
Yantra
Renaissance
Millenium Lifestyles
Kian
Tangent
Furniturewala
PSL Modular Furniture among others
41. Ranking of India as an Investment spot in comparison
to South Asia
Ease of doing
business
Starting a business
Dealing with
construction
permits
Getting electricity
Registering
property
Maldives
Afghanistan
Maldives
Sri Lanka
Nepal
Sri Lanka
Sri Lanka
Bangladesh
INDIA
Bhutan
Pakistan
Maldives
Pakistan
Nepal
INDIA
Nepal
Bhutan
Sri Lanka
Afghanistan
Pakistan
Bangladesh
Bangladesh
Bhutan
Maldives
Maldives
INDIA
Pakistan
Nepal
Bhutan
Nepal
Afghanistan
Pakistan
Afghanistan
Afghanistan
INDIA
INDIA
Bangladesh
Bangladesh
Sri Lanka
42. Ranking of India as an Investment spot in comparison
to South Asia
Getting Credit
Protecting
Investors
Paying Taxes
Trading across
Borders
Enforcing
Contracts
Resolving
insolvency
INDIA
Bangladesh
Maldives
Sri Lanka
Bhutan
Maldives
Nepal &
Pakistan
Pakistan
Afghanistan
Pakistan
Maldives
Sri Lanka
Sri Lanka
Bhutan
INDIA
Sri Lanka
Pakistan
Nepal
Bangladesh
Nepal
Afghanistan
Bangladesh
Maldives
Pakistan
Bangladesh
INDIA
Nepal
Afghanistan
Nepal
INDIA
Sri Lanka
Bangladesh
Nepal
Maldives
Bhutan
Afghanistan
Bhutan
Pakistan
Bhutan
Bangladesh
INDIA
Maldives
Afghanistan
Sri Lanka
Afghanistan
INDIA
Bhutan
43. Indian Consumption Behavior wrt furniture
Value for Money
Durability is important
High Involvement Purchase
Reasons to buy furniture
When
need
arises
Child
grows up
Wedding
Child
Birth
Transfer to
a new
city/house
44. Consumption Behaviour wrt furniture
High Value Furniture
Once in 15-20
years
During
occasions
Change
frequently
• Durability more important than design
• Price conscious, not brand conscious
• Buy when need be
• Wedding- Quality extremely important
• For children – Birth/when they grow up
• Change every 5 years or less
• Care a lot about being trendy and in tune with fashion
• Transferable Jobs
• Status Symbol – Business Men/ Black Money
• Price & durability not an issue
• Use & Throw Mentality
45. Consumption Behaviour wrt furniture
Dressing Table
Tables- Coffee Tables/Side Tables/Center Tables
Wall Units
Storage Units
Lighting
Buying Behaviour:
Furniture Shopping is a family affair
No Research before purchasing
Quality important
People go to the shop, feel the product and buy based on quality
and instinct
Low Value Furniture
Purchased much more
frequently
46. Segmentation
In India, IKEA should segment it’s customers, based on the below parameters:
Based on geography:
Urban Population
Based on income stream:
Upper Middle Class (open to experimentation)
Based on lifestyle:
People who shift houses frequently
People who are in transferable jobs
47. Target Group
After proper segmentation is done, customers can be targeted as below:
People running their own business
Professionals employed in the IT industry
Young Couples- newly married/about to get married
Couples who are expecting a child
Youngsters who love to design their room and crave for individuality
IKEA could also deliver its products to:
Colleges/Hostels
Start Ups
48. Positioning
IKEA should position itself on:
Fashion and Style
Furniture for the youth
Designer/Contemporary Brand
Customized/ Unique Furniture
Initial Positioning can focus on Affordable Price, but only
for a short period of time
49. 4P Analysis
Product
Trends come and go, but combining a low price with good design and function never goes out of
style
Profile:
IKEA caters to the need of people having limited budgets and limited space in their homes
The IKEA product range meets these needs by offering a wide range of well-designed,
functional home furnishing products at prices so low that as many people as possible will be able
to afford them
The IKEA range includes products for every part of the home
IKEA products have the label "Design and Quality, IKEA of Sweden“
50. 4P Analysis
Product
Design:
While most retailers use design to justify a higher price, IKEA designers work in exactly the
opposite way. Instead they use design to secure the lowest possible price
IKEA designers design every IKEA product starting with a functional need and a price
Then they use their vast knowledge of innovative, low-cost manufacturing processes to
create functional products, often coordinated in style
Then large volumes are purchased to push prices down even further
Most IKEA products are also designed to be transported in flat packs and assembled at the
customer's home. This lowers the price by minimizing transportation and storage costs
In this way, the IKEA Concept uses design to ensure that IKEA products can be purchased
and enjoyed by as many people as possible
51. 4P Analysis
Price
Low Price Strategy
Low price is a prerequisite for the IKEA Concept to realize the IKEA vision - "to create a better
everyday life for the many people". As the IKEA Concept aims to serve "the many people", the
IKEA product range needs extremely low price levels
IKEA designers do their part to keep prices low by using production capabilities from other areas
in unique and previously unimagined ways :
like having a shirt factory produce furniture upholstery
or using leftover materials from the production of one product to create an entirely new one
52. 4P Analysis
Price
After deciding product priority , a product developer would set the product’s target retail price using
what the company referred to as “the matrix”
The matrix consisted of three basic price ranges and four basic styles
Within each price range, the company would survey the competition to establish a benchmark and then
set its own price point 30% to 50% lower than those of its rivals
IKEA’s Price Matrix
53. 4P Analysis
Price
There was a separate matrix for each product type IKEA sold—that is, a
price matrix for sofas, a price matrix for kitchen tables, and so on
In addition to being used to set retail prices, the matrix was used to
identify gaps in the company’s product lineup
By plotting the company’s current product offerings on the grid and
looking for empty spaces, product managers could readily identify market
opportunities
54. 4P Analysis
Place
Metro cities- Delhi NCR, Mumbai, Chennai, Kolkata, Bangalore
Tier two cites- Hyderabad, Ahmadabad, Pune, Surat, Jaipur
55. 4P Analysis
Promotion
In India, IKEA will promote itself as a fashionable brand for homes
Media Channels covered will be: TVC/Print/Digital
Pull strategy will be executed so that the customers themselves pull out the product from the
shop
56. Marketing Strategy
• Furniture for your house
• New Designs
• Makes the house look
trendy and fashionable
• Peps up self esteem, since
its an international brand
• IKEA should
therefore sell fashion
and style
58. Marketing Strategy
Branding Idea
Consumer Desire
Brand Offering
Wants home interior to be
stylish & unique
Customized furniture in a wide
variety of designs
IDEA
Fashionable Homes
59. Marketing Strategy
Media Plan
PRINT
Put up on Bus Stops and Metro Station
Magazines- Living etc, India Today Home
Tie ups with fashion magazines- Vogue, Cosmopolitan, Femina, GQ
Newspaper Supplements- TOI/HT
TVC
Star Movies
HBO
Sony – Byah Humari Bahu Ka/ Bade ache lagte hain
Colors – Balika Vadhu/Big Boss
Travel and Living
MTV & Channel V
DIGITAL
YouTube
Twitter
Facebook
Blogs
60. Distribution Channel for IKEA in India
Supplier
(1 or more
than factory)
Distribution
Centre
(Warehouse)
Store
Customer
61. Budgeting
Budget- 1.27 cr /week.
Tv shows
Trp
Time Slot
Crime Petrol
4.06
10sec
Did little
champs
4.7
Diya Bati aur
Ham
Price (12-7
pm), mon-fri
5.3
Bade ache
lagte hai
4.8
Metro
advertisement
Slot
Slot
54000
150
sat-sun
1.8 lakh
20
reach
total
75 million
11700000
1000000
62. Possible Roadblocks Ahead
Huge competition from local players
Procurement and transportation might be an issue
due to poor logistics
Self-Assembly and self service concepts might not
be accepted by Indian customers
Indian customers are not used to driving to the city
outskirts for their shopping
1. In this process, they transport the goods from the factory to the distribution centre all over the world. Then according the condition of demand, they transport the goods to different stores. After the customers buy goods from the store, the store collect the information and send the information to the distribution centre. After analysis the information, IKEA send the new order to the factory. That is a loop. This way is the most common way IKEA used now.