Global Strategic Marketing Essay On IKEA's Entry Into Indian Market.

Task 1: Macro and Micro environmental analysis of the Indian market environment for IKEA

You are required to use IKEA as a basis for discussing the following relative global marketing issues. In this regard, you should begin by preparing a brief profile of IKEA
Prepare a global strategic marketing report to support the entry and expansion of the IKEA brand in INDIA. The report should include a consideration and discussion of the following issues:

1: Using appropriate and relevant analytical techniques conduct a comprehensive micro and macro-environmental analysis of the Indian market environment and their implications for IKEA?

2: Develop appropriate global marketing objectives and critically analyse the supporting corporate and business strategies to support the launch of the IKEA brand in India.?

3: State and evaluate the appropriate market entry method in India, with business case justification as well as the marketing tactics that will support the selected entry mode in the Indian market.?

4: Develop and discuss of the implementation of planned marketing activities in the new market with time lines?

In this cotemporary and competitive business world, each and every organization after operating in its own countries successfully wants to grow big and therefore aims in marketing globally. From this concept of marketing globally, the companies adopt various strategies that are suitable for the organization in order to gain success, profit and reputation on marketing successfully all around the world. Becker-Olsen et al. (2011) commented on the fact that global marketing refers to the process that involves adopting, adjusting and implementing the marketing strategies as per the various conditions of different countries. Moreover, for ensuring consistency of the organization along with the aim of elimination of duplication of attempts and effort, the strategies are therefore made for successful promotion and business transaction across the global market.

In this assignment the researcher has taken into account IKEA furniture retailer that wants to make an entry around May, 2015 in Indian market. For this, the researcher has well explained about the macro and micro analysis of the Indian market environment and the objectives along with business and corporate strategies. In addition to this, the evaluation of market entry methods is well explained along with development and discussion of the marketing activities in the Indian markets by the researcher.

IKEA is an international company that focuses on the designing and selling of the assembled furniture, motor vehicles, appliances and home accessories. The company came into existence in 1943 and around 2008 it became one of the global largest retailers in furniture (Guercini, 2012). IKEA is headquartered in Netherlands and mainly focuses in the self assembling of the furniture’s. The main areas of operation are Asia, Europe, Oceania, Africa and North America and currently around May, 2015, it is planning to have a grand market entry in India (Lee et al. 2014).

According to the outlook and opinion of Nwielaghi Michael and Ogwo (2013) when an organization plans to operate strategically outside the country and expand its market globally, both micro and macro environmental analysis need to be done. This is because; it helps in understanding the global market situation, market trends, needs, wants and requirements of the global customers. Moreover, the macro and micro environmental analysis helps in understanding the benefits as well as disadvantages of expanding the market globally by IKEA. The researcher has well explained the macro as well as micro environmental factors that are vividly explained below-

Macro Environmental Analysis

From the view point of Rahman (2013) the macro environmental analysis consists of factors that are generally uncontrollable factors that influence the performance and decision making of the organization. The researcher has discussed about the macro environmental analysis that includes Pestle Analysis and Porter’s 5 Force Analyses.

PESTEL Analysis: According to the outlook of Waelder (2013) PESTLE analysis is the acronym of Political, Economic, Social, Technological, Legal and Environmental factors that helps the organization to analyze these factors for making a breakthrough in a new environment. This analysis helps in better and in-depth understanding of the market that helps in accomplishment of the goals and strategies of the organization while marketing successfully globally.

Political- From the viewpoint of Steenkamp and Geyskens (2014) the political factors refers to the level and degree of the interference of the Government into the business of IKEA while it will be operating in Indian market. The instable Government, the tax policies, labor laws, environmental laws, tariffs, restrictions of trade etc. have a huge affect on the business of IKEA in India. Other than this, the introduction of new laws and tax imposing into the foreign companies for trading in India also need special attention. According to the outlook of Ziakas (2014) previously while trading in India by any foreign investor, only 51% of the stake can be hold by the foreign investor. But now days, late 2011 laws were made for allowing 100% ownership to the foreign investors. The foreign investors having more than 12 billion rupees need to have approval of the committee.

Economic- Persaud and Azhar (2012) commented on the essential fact that the performance of the economy of India have a good impact on the organization and have long term effects. This is because; it includes the inflation rates that affect the price of their products as well as services. The inflation rate of the country also affects in fixing the prices of the furniture of IKEA in India. Other than this, according to the outlook of Rana (2012) the economic factors also include the rate of interests of the country, the foreign exchange rate as well as the economic growth patterns. So, analyzing these factors also help in understand the performance of the organization in the competitive market in India in presence of the local as well as national competitors like Godrej, ERGO etc.

Social- As per mentioned by Steenkamp and Geyskens (2014) the social factors also include the demographics, culture population and living style and standard of the people. These factors need to be analyzed because, based on these factors IKEA will be able to know about the taste, preference, needs, requirements and wants of the people. Based on these factors, IKEA will be able to position the furniture’s in the Indian market.

Technological- According to the opinion of Prajapati et al. (2013) with the introduction of modern technology and innovations, the operations of the market of IKEA is dependent. With the introduction of assembling the furniture’s in the most innovative and new ways helped IKEA in gaining prestigious and respectable position in the world. In India too, the people are now becoming modernized and they tend to use self assembled furniture that not only provide them with excellence but also helps them in getting modern and trendy too.

PESTEL Analysis:

Legal- Yaksel (2012) commented on the essential fact that the legal factors also need to be taken care of while operating in the Indian market. These take into account the various angles and policies of the company as well as the country where it is operating. Previously when the foreign organizations wanted to do business in India, at that time there were certain laws for preventing such foreign investments. But later, these laws were reformed and hence the Government has given permission to the foreign countries for getting the full hold of the company’s stakes.

Environmental- There lays many factors that are not at all included to climate, geographical, global, climate as well as environmental factors. This is because, while manufacturing these products in India, the waste materials need to be processed in the most innovative and scientific way for adding less waste materials to the country. As commented by Persaud and Azhar (2012) the waste materials that need to be processed before disposal makes the organization important in terms of social responsibility. This results in the increase in reputation of the organization that helps in increase in environmental friendliness and customer database of the organization.

Porters 5 Force Analysis: As commented by Djordjevic and Djordjevic (2012) the Porter 5 Force analysis is a strategic framework that helps in analyzing the completion of the organization within as well as outside the organization. This includes 5 parts- bargaining power of buyers, bargaining power of suppliers, threat of substitute products, threat of new entrants and rivalry. The researcher has well explained the different parts vividly in the following context.

Bargaining Power of Buyers: As commented by O'Cass et al. (2012) when IKEA will be marketing in India, then it will be targeting the Indian buyers. It is a tendency of the Indian buyers that they love bargaining as well as they also want superior quality goods and products at nominal prices. The buyers tend to stay biased towards the organizations that are generally Indian based and on those organizations that are literally present in the country for number of years.

Bargaining Power of Suppliers: Issa et al. (2010) commented strategically that the suppliers on seeing the foreign organizations tend to increase the price of raw materials to some considerable extent. So, IKEA have to bargain with a lot number of suppliers to some considerable extent so that they get superior quality products at considerable prices. On the other hand, due to the global presence of the organization and global reputation, the suppliers will also tend to be the marketing partner of international companies for increasing their profit as well as reputation.

Threat of Substitute products: Mackert (2012) also commented strategically that the threat of the substitute products such as furniture from Godrej, ERGO etc are always a threat to the organization. Indians will generally tend towards the Indian companies provide g them the same product at considerable low prices. So, IKEA need to analyze the market extensively and vividly for understanding the whole market scenario and also need to be biased towards new and innovative technologies for preventing the substitute products.

Political

Threat of New Entrants: As per mentioned by Payaud (2013) the threat of new entrants is always a fear to the organization. This is because, in the market when the new entrants will be entering, then the prices can be low and those organizations may be providing same quality of products and goods but at low prices.

Competitive Rivalry: Al-Mohammad et al. (2014) also commented on the fact that the rivalries such as ERGO, Godrej etc. are the rivalries of the organization. IKEA need to be competitive enough as well as also need to analyze the market vividly before fixing the prices. The products also need to innovative and more technological that can automatically attract the Indians to great extent.

According to the outlook and opinion of Della Corte et al. (2012) the micro environmental analysis of the organization helps in understanding the internal situation of the market. In this context, the researcher has vividly discussed about the SWOT Analysis that helps in understanding the market scenario.  

SWOT Analysis: Firdaus and Kanyan (2014) commented on the fact that SWOT analysis helps in understanding the Strength, Weakness, Opportunity and Threat of the organization while operating in India. This depicts the internal factors of operation of IKEA. SWOT analysis is the acronym of Strengths, Weakness, Opportunity and Threat.

Strength: From the viewpoint of Hooper-Greenhill (2012) the strength of the IKEA is its global reputation and position. Moreover the organization’s innovation idea of automatic assembling of furniture was a major strength. In addition to this, the strength of the organization is its global prestigious position and global reputation of the organization.

Weakness: Kavle et al. (2012) mentioned that in India the political conditions of India is unstable that is a major weakness of India. Moreover, the products are also costly and that is a major issue with Indians who prefer quality goods at low prices.

Opportunity: According to the outlook of Makgosa (2012) the opportunity of IKEA is to have a market entry in India where the Indians already have used its products and every year, the company outsources its products to India.

Threats: As commented by Mackert (2012) the presence of Indian organizations like Godrej, Ergo etc in the market are the major threats. This is because; Indians will refer Indian global organizations than foreign companies in India.

Nakahara (2014) commented on the essential fact that the global market objectives are essential for each and every organization that helps them in understanding the strategies that need to be taken that helps in conducting successful global business. The global market objectives of IKEA are that it aims in focusing to the maximum profits made by the organization. The company also focuses on the increase in sales and volume of the products that helps in providing better profits to the organization. Other than this, as commented by O'Cass et al. (2012) allocation of resources for the maximum output also helps in increasing its opportunities that help in making the global business successful to the maximum extent. This not only increases the profit of the organizations but also increases the international prestige of the organization.

Economic

According to the opinion of Nwielaghi Michael and Ogwo (2013) the business strategies of IKEA for launching successfully in India is to penetrate through low pricing strategy as well as providing the Indians with innovative and new products. It is a common mentality of Indians to buy those products that are of low prices but are of superior quality. Other than this keeping in mind the economic, social and political condition of Indians IKEA need to launch its products for the middle class Indian families. This is because, as commented by Payaud (2013) keeping in mind the disparity in mentality and incomes of the Indians, the strategies of penetration need to made for Indian business. Other than this, the corporate strategies that are made keeping in mind the marketing strategies, HR management strategies, financial strategies and operational strategies.

According to the viewpoint of Becker-Olsen et al. (2011) IKEA should have excellent marketing strategies that focus on increasing the market sales and profits of the organization. The HR department makes the strategies for maximum recruiting the Indians in the organization and retaining them to the maximum extent. From the financial point of view, the organization doing business in the India also focuses on the contribution of revenues in the Indian economy that should have an effect on the Indian GDP. Again, as commented by Rahman (2013) the operational strategy also needs to focus on production of quality goods at reasonable prices that can be afforded easily by the organization.

Rahman (2013) also commented that for successful marketing in India, IKEA initially have to understand the Indian mentality as well as the Indian market scenario for making a successful market entry. A vivid research need to be done initially that will help in in-depth understanding of the market scenario along with the understanding of what products the Indians want and the potentiality of the Indian market.  According to the opinion of Nwielaghi Michael and Ogwo (2013) the in order to market successfully in India, the distribution channels also need to be effective enough for successful marketing of IKEA. It is also need to be remembered that the Indians have a snob appeal for the furniture and hence the organization also need to focus on the requirement and wants of the Indians.

In addition to this, Mackert (2012) also commented that IKEA also need to understand the target market in India and its potential customers initially and hence the products need to be manufactured as per their requirements. Promotional activities need to be done keeping in mind the Indian sentiment and thinking and also should focus on not hurting the sentiments of the Indians. Other than this, according to the outlook of Yaksel (2012) the agents and distributors and suppliers also need to be contacted for the fair distribution services. Apart from this, IKEA also need to understand and analyze the Indian economy, the political and the social conditions of the country. Analyzing these factors will help IKEA in making a sound marketing strategy that helps in sound marketing strategy.

Social

Prajapati et al. (2013) commented on the essential fact that the marketing strategies for the market entry in Indian market need both planning and successful implementation. The marketing activities in Indian marketing activities are therefore discussed below with the timeline.

Conclusion

This assignment deals with the global marketing issues that IKEA need to undertake while marketing successfully in Indian market. The researcher has well explained about the macro environmental factors with the help of Porter’s 5 Force analysis and PESTEL analysis. Other than this, the micro environmental analysis is also done through SWOT analysis along with the global marketing objectives is also discussed. The corporate and business strategies for supporting the launch of IKEA in India along with the methods of entering the market of India are also discussed vividly. The timeline that consist of planned marketing activities is also well explained that showed the implementation of successful marketing activities.

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