Do you want to be prepared for any type of case study during internship or placement interviews? Do you want test your understanding of basic marketing concepts, frameworks and elements? Solve this case study, brought to you by InsideIIM in association with ABGLP and show off how well you know your marketing management curriculum!
Disclaimer: This is a fictitious case study developed for learning purposes only. It has no bearing on actual Ikea operations in India or the world.
Interesting Fact About ABG, our sponsors:
UltraTech Cement Limited is the largest manufacturer of cement in India and ranks among the world's leading cement makers. UltraTech's vision is to be 'The Leader' in Building Solutions. The company has a consolidated capacity* of 102.75 million tonnes per annum (MTPA) of grey cement. Whew!
And now onto the case study:
Introduction - The Protagonist
When the world's largest furniture retailer, IKEA, decided to enter the second most populous country in the world, it wasn't mere news. Founded in Almhulty (Sweden) and headquartered in Leiden (Netherlands), IKEA took 12 years to enter India with quite a few firsts (departure from its global practices) for its 'long-term' play. IKEA built a global business empire selling affordable, Scandinavian-design inspired furniture with DIY model. Having honed the IKEA WAY over 51 countries with 403 stores and $40.2 billion sales, IKEA's India entry was quite the news globally and in the Indian business landscape. IKEA's entry was a news for a few firsts as it entered India.
As of September 2018, IKEA's $1.9 billion investment had been India's biggest single-brand FDI. For the first time ever, IKEA was experimenting with an omni-channel retailing strategy starting from Mumbai in 2019. IKEA's Hyderabad store has IKEA's biggest restaurant with 1000-seater with customized Nordic - Indian menu. DIY seemed to be replaced with LUHY (Let Us Help You) with home-delivery (using e-vehicles) and assembling services (tie-up with UrbanClap).
For this case study, we’ll be focusing on IKEA’s market entry and market expansion strategy for India.
Get updates when a new part of the Learn Management Concepts With ABG #IRL is launched. Subscribe here:
India’s Furniture Industry
The market is expected to expand at a CAGR of 12.91% during the forecast period of 2016-2023. India furniture market growth is driven by various attributes such as rising trend for modular and state of the art furniture among the population living in urban cities, growing urbanization in Indian states, rising demand for durable and hybrid seating furniture. Moreover, the rising growth of wood industry in India further compensates the price of furniture. On the back of these factors the furniture industry is expected to propel in India. Further, the rising trend of online and mobile shopping in India is envisioned to bolster the demand for furniture through online channels.
Various furniture companies such as Pepperfry, Urban ladder and others are creating huge demand from these online channels. Apart from this, the demand for low cost plastic furniture is also increasing in commercial sector. The ease of business doing policies in India gives rise to new businesses across the country. In addition, these increasing numbers of small and medium businesses further boost the demand for low cost plastic furniture products. This factor is believed to foster the growth of India furniture market over the forecast period.
Rapid urbanization in India and growing demand for modular and compact furniture is expected to positively impact the growth of furniture market in the near future. Further, growing urbanization in Indian states such as Gujarat, Maharashtra, Tamil Nadu and others is supporting the culture of housing societies. Moreover, the corporate sector in India is uplifting on the back of ease of doing business reforms introduced by the government. These factors are believed to bolster the growth of India furniture market.
Further, growth of real estate sector in India is anticipated to boost the demand for modular furniture in urban areas in India. Apart from this, rising investment in retail sector by various national and international entities is anticipated to foster the growth of furniture market in India. Moreover, technological advancements such as availability of high speed internet networks such as 4G and spiked absorption of smart gadgets is boosting the e-retail sector in India. These advancements further provide ease to the customers to buy furniture through online channels. In addition, the rising number of smartphone users across the country and online shopping is encouraging the furniture industry players to introduce their products through online channels. The players such as Pepperfry, Urban ladder and others are generating significant revenue through online platforms.
Apart from this, 100 percent FDI policy for townships and settlements development project is attracting more foreign investors in the real estate sector which increase the quality of residential apartments. Further, rising demand for high-end and western style furniture is envisioned to bolster the growth of India furniture market by the end of 2024.
However, the low cost furniture product offerings by unorganized players further decrease the revenues of major market players in India. Further, the unorganized players sell their product through local shops which decreases the cost of branded furniture. The high cost of quality and durable furniture in India is the major restraint for furniture industry. The high cost of wood and leather further increase the cost of overall furniture product.
IKEA’s India Plans
IKEA's first Indian store was launched in Hyderabad on August 9th 2018 after postponing the inauguration once (slated for July 19th 2018). The 4-storied store in HITEC city (2 floors for parking) was built in 400,000-square-foot (37161.26 square metres) with 7,500 well-researched products (1,000 products selling below ₹200) had been quite a business disrupting force for Indian retailing industry in general, and for Indian furniture retailing industry in particular. While Hyderabad welcomed IKEA store with warmth, the CEO, Peter Betzel (Peter) stared at quite a few daunting challenges including product labelling (with MRP), taxes, IPRs, discerning Indian consumers and most importantly how the established competitors (offline as well as online) would ready their stealth weapons to take on India’s new guest.
There's also the possibility of other international players like H&M will soon give stiff competition to IKEA by launching their own home furnishings and furniture offerings in India. Not to mention, the challenge posed by the unorganised sector in the home furniture and furnishings space in India.
Considering all of this, how would IKEA set the ground to open 25 stores by 2025, as planned? If you're up for the challenge, answer the questions below (based on the case study and your conceptual clarity of course!):
Questions: (You don't have to answer all these questions, just the ones that interest you)
- Based on this data, analyse IKEA’s market entry strategy into India.
- Identify the target customers IKEA aims to serve.
- What channels are the most effective to reach IKEA’s target consumers.
- Analyse the factors involved in segmenting target customers.
- How do you think IKEA matches customers’ spoken and unspoken needs?
- Use the SWOT analysis framework to analyse IKEA in India.
- Define the types of markets IKEA caters to in India.
- Based on Porter’s 5 Forces framework, analyse which type of strategy IKEA focuses on in India - leadership, focus or differentiation.
- Use segmentation and group customers shopping at IKEA.
- What kind of pricing strategies do you think IKEA should focus on in Indian markets?
- You are the CMO in charge of IKEA’s India launch. How would you work on segmentation, targeting and positioning for your product?
Share your responses to this case study on IKEA on this thread.
This is a part of a series called Learning #IRL, brought to you by InsideIIM in association with ABGLP. Read on to find out more…
Why Learning #IRL?
Simple really. We are tired of reaching out for giant textbooks, or “researching” online for all the answers. We want out. And we’re sure you do as well.
– Planning to join b-school.
– Already in b-school and worried about placements.
– Someone who’s looking to shift jobs, upgrade their position, etc.
Everyone needs to know and remember the basics. And now, you can learn and refresh your concepts in a fun way! Simply read a comic strip or watch a video to understand management concepts. Or solve a quiz and case study to check your comprehension.
Get an overview on various concepts ranging from marketing strategies, operations concepts, basics of finance and HR tricks every month. Learn with the examples and instances from latest case studies and real stories.
Here’s to making learning fun and easy as pie. Subscribe now and receive updates every month.
What’s This Series About?
In this series, we bring you 4 fun things. Basically, instead of reading boring textbooks, or trawling through search pages on Google, here’s your shortcut to learning with fun.
Quiz: Solve a quiz based on management concepts in marketing, HR, finance and operations. Test your conceptual clarity and know how! Basically learn with fun. Check out the Quizzes:
Case Study: Solve a sector-wise case study every month! Don’t all interview prep experts tell you to sharpen your logical thinking and practise cases?! Well now, you can practise a case every month and find out how well you know various concepts! Check out the July Case Study On Operations Management for an OTT platform like Disney here. Share your answers on our community thread here.
Video: Check out this unique explainer video laying out the facts and figures for you. Whether it’s the 7 Ps of marketing or the Jidoka model in supply chain and operations, these videos tell you all. Have a specific concept you wish to understand? Let us know and we’ll help you comprehend it! Check out July explainer Video on an Operations Management concept called Hub & Spoke here.
Comic Strip: Reading reams of pages can be so boring. Now read comic strips and find out what’s what in your b – school curriculum! Wondering about Time Value of Money? Or perhaps HR strategies and tools? These comic strips will help you understand the same old concepts in new and refreshing ways. Check out July explainer Comic Strip on an Operations Management concept called Jidoka here.