VGSoM, Purvodaya’23

The Case Study Challenge

Team: Two to Tango

Chetan Chaurasia Saloni Jain

 Ikea’s Concept and Experience Indian Competitive Landscape

Concept Experience • Operate branded retail

• Offering a wide range of • The visitors are encouraged to take their time and get stores in prime locations
well designed , comfortable with IKEA home furnishing solutions and • Range of offering
functional home products in realistic room settings and real-life homes • High Quality, High Price
furnishing 1. To sit, lie down • Serves High-End and
• At prices so low that it is 2. Open and close drawers Upper-Middle Class
affordable 3. Compare styles customers
• The IKEA concept guides 4. Compare prices
IKEA products are • The IKEA Concept relies on customers to choose, collect,
designed manufactured transport and assemble IKEA products themselves • Operate in shopping
and transported sold and • All products in the store are supported by price and malls
assembled product information that is clearly marked on tags • Low quality, Low price
• Basic Designs
Pestel Analysis • Serves Middle-class
customers

P E S
• Operate Mom and Pop
• Allowing 100% FDI • Fluctuation of local • Large and young
stores
in Retail sector currency population,54%
• Basic designs
• Complex political • High inflation rate below age 25
• Low quality, low price
structure • Slow GDP growth • Different beliefs and
• Serves Middle-class and
• Slow economic traditional mind set
lower middle-class
reforms
customers

T L E
• Technology and IT • Customer protection • Customized Designs
hub regulations • Various Tax And • High/Low quality –
• Furniture industry • Government Tariffs depends on customer
has slow absorption preference towards • Climate Changes preferences
of innovation and home grown • Serves all kinds of
change companies customers
• Time Consuming
 Challenges Faced Market Entry Strategy Positioning As Focused Differentiation
Strategy : Glocalization
No “Do It Yourself” Culture
IKEA’s glocalised approach with its walk-in stores and famed
restaurants, selling a mixture of Indian favorites respecting social and
Had to Change Sourcing cultural setup of the country
Strategy
Entry Mode : Wholly Owned Subsidiary

Store Format – Low % of car IKEA was very certain that it did not want to have a joint venture or go
ownership by the mode of acquisition in India owing to India’s distinct socio-
cultural and economic conditions.

Competitors With Low Distribution : LDC (Local distribution Channel)

pricing
IKEA has focused on developing Local Distribution Centres (LDC).
These LDC’s in geographically vast India enabled IKEA to improve its
Low Home And Garden last mile connectivity. In this regard, IKEA made its first in Pune . There are various small and medium businesses operating in the
Expenditure Indian market. Among the major competitors of IKEA the optimum
Pricing : Low Pricing strategic position of businesses to ensure competitive advantage. IKEA
IKEA has focused on developing Local Distribution Centres (LDC). concentrated only on retailing and producing furnishings. As a result
Too plain design for Indian of this policy, the company’s strategy clock has been positioned to the
These LDC’s in geographically vast India enabled IKEA to improve its
Diaspora Focused Differentiation category.
last mile connectivity. In this regard, IKEA made its first in Pune .

Factors Considered

• Target areas consisting of • IKEA sells self-assembly

• The auto-rickshaw is

Furniture Assembly
products

Delivery Location
urban well earning • Ikea is as famous for its food something the whole of India
Store Location

• Understanding the Indian

Differentiator

population as it is for its furniture and associates itself with, so the

• Areas such as IT hub mindset and habits the store
this capability can be brand associating with it will
Hyderabad, Bangalore to be can provide staff for
leveraged to enter Indian only help customers
considered assembly of the furniture
Market associate with the brand
• Taking into consideration • Customer will never have to
• Ikea can target local taste of building a relationship with
demographics of the assemble anything and also
Indians and include those get the quality and status by the brand IKEA
population with respect to eateries in their store
the targeted area owning an IKEA product
 Segmentation Targeting Personas

Segmenting the market by income levels, we are targeting the Strivers and Seekers

Posh Prachi Techie Ankit

• Uniqueness = status symbol • Loves modular, easy-to-carry
• Loves to shop furniture
• Changes her furniture • Frequent traveller
frequently • Lives in small apartments

Student Kumar New-Wed Twarit

• Functional designs • Quick Furniture
• Looks for budget friendly • Just got married
furniture • One-stop-shop for new home
• Compact study table

Positioning
• Geographic: Urban Area Population
IKEA needs a different positioning statement that attracts this target market
• Demographic - Young people in the
age range of 25-40 years old “Your partner in better living. We do our part, you do yours. Together, we save money
residing in cities.

• Economic - Upper middle class.

• Nature - Environment friendly non

“ Made for all, IKEA is the world’s most loved furniture and maker of quality home
wooden furniture
design solutions, which will make your home unique, and most importantly – yours!”
 Pricing Strategy For Indian Diaspora

Strategy Why Impact

Penetration pricing 1. Gain in market share
Currently Major market share in the
2. Penetration pricing will
Offering a new product or service at a low initial industry is with unbranded players .
help IKEA penetrate in Tier
price to gain customers' attention. The goal is to Thus penetration pricing will help to
2 and Tier 3 cities as well
aggressively get customers in the door with low prices get the major chunk of market share by
3. It will be able to replace
and gain market share appealing the price conscious
the unbranded players
customers of India

• It can help increase sales by appealing to

Phycological Pricing customers’ emotions and making them
more likely to purchase a product.
A pricing strategy that takes advantage of the way • It can also help to create a perception of
people perceive prices. This strategy involves setting value, as customers are more likely to view
prices in order to make a product appear cheaper a product as a better deal when it has a
and more attractive to buyers. lower price.
• It can help to increase profits by allowing
a business to charge more than the actual
price of the product or service.

Festivity discount
Thus as per our research we 1. Emotional Connect with
have observed that the customers
Offering a attractive discount during major festivities furniture buying is a thing 2. Leverage increased
of India and creating a festival like the Great Indian during festivities and hence shopping behaviour
festival of Amazon IKEA Can provide occasional leading to enhanced sales
discounts to attract more 3. Enhancement in brand
footfalls visibility for IKEA
 IKEA Supply Chain: How It Works

The company identifies the The company distributes the The manufactured products
production requirements of IKEA representatives order resources for manufacturing are delivered to storage
each item, and determines the required raw materials and starts the production facilities and distributed to
the necessary logistics and from suppliers. process while adhering to its stores, and eventually,
related costs. quality requirements. customers.

IKEA Supply Chain features

Sustainable Manufacturing to save Cost Cost per touch IKEA inventory management Dedicated warehouse zones

• IKEA manufacturing and shipment costs are • Cost per touch means that the more times • IKEA warehouses are divided into automated
quite low because its furniture and home somebody touches the product during the facilities for fast-selling items and manual
accessories are made of recycled and shipment, the more costs the company carries, facilities for slow-selling items.
sustainable materials. because it needs to pay the procurement and
delivery staff. • This allows the company to reduce handling
• In such a way the company can use fewer costs for low-demand products and ensure the
materials and require fewer resources to • However, IKEA customers collect the most of the smooth flow of high demand products within
produce and ship new parts. items themselves, so fewer “touches,” and fewer the IKEA supply chain.
costs, are involved.
 IKEA Supply Chain features

• The most remarkable feature of IKEA furniture is that customers

assemble it themselves. • More than 1,800 suppliers in 50 countries sell raw materials to IKEA.

Long-term relationships
• The furniture is sold in pieces, which are placed into convenient, flat • The company uses 42 trading service offices around the world to

with IKEA suppliers

packages. manage relationships with suppliers.
DIY Assembly

• As a result, IKEA saves on transportation and fulfilment because the • It signs long-term contracts with the most trusted suppliers and thus
pieces take up less room in trucks. IKEA can ship more items at a gets materials at the lowest possible prices.
lower cost. • Besides, IKEA encourages its wholesale partners to be
• The DIY principle also allows the company to use the storage space environmentally conscious by giving them rules and guidelines called
more economically and thus save IKEA money on inventory the IKEA Way of Purchasing Home Furnishing Products (IWAY).
management. • Such an approach helps to improve quality standards and reduce
• Finally, many products are shipped directly from suppliers to the prices. This is what makes the furniture more affordable for
stores, a strategy that also significantly reduces warehousing and customers.
storage costs.

• IKEA values its customers above all and strives to deliver the best • With the IKEA inventory tracking system, the staff can set up both the

Reorder point and order

service possible.

quantity management
minimum number of products available before reordering, and
Customer-centric

• Constant monitoring of customer satisfaction is an integral part of maximum number of a specific product to order at one time.
IKEA’s business strategy. • These settings help the company nail down the perfect reorder point,
approach

• They analyze the number of complaints, returned products, demand and prevent understocking and overstocking issues.
for certain products and customer suggestions. Company • It keeps logistics managers aware of what is sold, and how much
representatives even visit the homes of their customers to gain inventory enters the store through direct shipping and from
feedback and ideas on products that customers might be looking for. distribution centers.
• The collected ideas are then used as the starting point of a new • They use this information to forecast sales for the next couple of days
design process. and order products to meet the forecast demand. If the sales data
• This encourages the customers to visit physical stores even in the era does not match the expected number of items that should have been
of ecommerce and online shopping. sold that day, the logistics manager does a manual stock take.
THANK YOU