IKEA Case Study - Management PDF

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1) There are lots of reasons why the IKEA’s entry was delayed in entering the India’s Market. But the most reasonable one is, back in back in the days, the market of furniture were dry and with some competition from other little businesses and single furniture craftsman, where they considered more than 80% of the market. The people in India is looking for the value of their work and the uncommon combination of India’s society. This is the main reason why there’s only a small percentage of the market in India that is made up of leading manufacturers and large sectors of business. For about 10% up to 15% only. Another reason is the Foreign Direct Investment Policy (FDI). The FDI banned almost all the multinational brands. FDI changed their policy so that some business will be allowed like IKEA, but still this took a year. FDI told the business that they need to source 51% of their products to India. IKEA made a statement that they would establish the business in India when they are allowed 100%. IKEA was allowed but until on January 2012. The last reason is IKEA had a conflict with the government adding a rule that prohibits allowing home accessories and food cafes inside the IKEA store. The tagline “Experience IKEA” is becoming a problem for them. But later, they were allowed to carry on their model of the legitimate “Experience in IKEA”. 2) The strategy of IKEA started with the suppliers. Their application was approved by CCEA. IKEA wanted to have more associates in India by collecting more supplies in the country. They sourced textiles, carpets, steels, plastics, lightings, and natural fibers from India. IKEA had known from the start that their sourcing from India could cause a huge amount of labor force to maintain the volume. IKEA’s pricing never changed that’s why they are the same with their competitors. The company used the strategy called “Wholly-Owned Subsidiary” to make the company have more power. They began to make decisions faster and lessen the problems inside the company. 3) The reason why IKEA’s business model was successful is because of their products and “IKEA Experience. Every furniture in IKEA is made to be used easily and you can actually build the furniture yourself. This one is called “Do it yourself” strategy. IKEA promoted the “IKEA Experience” whenever you’re shopping in them. They also had other things inside the shop, a café store, and other children’s area to play with. This kind of strategy is very unique, and they are the only one who does this among their competitors. IKEA had an advantage in terms of being a stronger business culture on independence, continuity, and long-term approach. Some of IKEA’s profit were given to charities like the INGKA foundation. The INGKA foundation helped a lot of individuals who are victims of natural disasters. They made the IKEA’s name also popular even more.

4) Describe the bureaucratic and cultural challenges faced by IKEA in gaining approval to enter India. How did the company overcome these? IKEA encountered a lot of bureaucratic challenges in gaining approval to enter India. The biggest challenge that IKEA faced was the obligation of sourcing 30% of the value of goods sold in India. The business also has limits because of the restriction of them use food and beverages inside the store. Gift items, home, and office products were also prohibited. The culture challenges that they faced was the concept of the concept of Do-It-Yourself. Even though this has been IKEA was known for the Indian community did not liked it. To solve this problem IKEA complied with the rules of the Government and because of that the government had known that IKEA wants to build India. The government realized that they need international capital to have a solution for the deficit of the GDP gap. The government modified its sourcing clause. It was changed "mandatory sourcing. For them to solve the problem about the Indian people who dislikes that idea of DIY they were trying to sell the company's iconic flat-pack furniture for the next four years. This will have no assembling costs, and no shipping cost. They also promised the people that the exchange furniture would be given to the poor families. 5) Discuss the challenges that IKEA could face down the line in establishing its stores in the Indian Market. What steps should IKEA take to succeed in the Indian Furniture market? Even though IKEA already gained approval to enter the Indian market, the business still has conflicts in building its stores in the Indian market. IKEA’s main problem is the unavailability of space that complement the organization’s global strategy, in terms of both size, location, and accessibility. IKEA is also having problems to find a solution to DIY, green energy and also corruption. IKEA also faces problems about their prices because they are selling it in a poor country. IKEA’s main strategy is to adjust themselves to the culture of India. IKEA’s creating a cultural profile for the Indian market by having in conversation with the people to understand their values and attitudes. They made their prices lower since they were able to reach cheaper labor and raw materials, and their design is usually cost-free. Another solution is to find a much cheaper source of raw materials. It’s also better to lessen the cost of repair of their products. There is also a need to reduce the amount to of production by mass production and manage the supply costs....