Read Closing Case IKEA Entering
India, finally! on page 436 of your textbook. Then, design an
infographic that visually communicates your responses to the bullet points
below.
Tips on Designing an Infographic
An information graphic (infographic) is a
visual representation of a data set or instructive material. Infographics take
a large amount of information in text (or numerical form) and then condense it
into a combination of images and text highlights. This modern data
transformation technique allows viewers to quickly grasp essential insights
about a specific subject. Review this to see what elements go into creating an
effective infographic. It will provide some background on how to complete your
assignment for this week.
Get as creative as possible, and design a
well-organized, easy to understand infographic. You can visit Piktochart,
Canva, Venngage, and Visme online for infographic examples, tips on how to
create them, and templates.
IKEA Entering India, finally!
The Swedish home furnishings giant IKEA has
finally entered India in 2018 after more than five years of preparation
(including the last two years
building the stores). India had been on IKEA’s radar screen for some time, but
the company had been hesitant to
invest until 2012, when Indian changed the laws governing foreign investment
into its large and growing retail sector, for the first
time allowing single brand foreign retailers to establish 100 percent owned
operations in India. Up until 2012, retailers like IKEA
were only allowed to establish stores if they entered into a joint venture with
a local Indian partner, something IKEA was reluctant
to do.
Questions still linger, though: Can IKEA
adapt to the aesthetic wants and needs of Indian customers, and can the company
motivate the Indian customers to buy into the
do-it-yourself philosophy that is a symbol
of the IKEA brand? After all, many customers around the world think that IKEA’s
success was built on the “L-shaped” metal IKEA tool used to put together
virtually all of IKEA’s
furniture after you get the pieces out of the flat box. And no one knows what
to call the L-shaped tool—although there
is an official IKEA emoji for it on smartphones and a keyboard app for iOS and
Android phones for IKEA emoticons (the meatball
plate with a Swedish flag at the top looks interesting)! But is this a style,
emoji, emoticons, and lifestyle that will work in
India? How is it working so far?
India became the 51st country that the
largest furniture company in the world, IKEA, entered since its founding in
1943. Since its founding, IKEA
has become a $43 billion company in sales annually (€35 billion), which has
been the envy of the furniture industry
and the benchmarking model for companies across several industries around the
world. Flat packaging and high quality for
the price you pay (i.e., great value), as well as global supply chains, make
IKEA a superbly efficient company with a very effective
business model. Amazingly, the business model has been in place ever since
Ingvar Kamprad founded IKEA, with very minimal
changes except for being implemented on a much larger scale—growing rapidly
almost every year.
The IKEA business model and the company’s
assortment of products are now on the move to take over India like they have
been doing with other countries. After all,
IKEA’s market entry into China in 1998 went reasonably well. IKEA has three
stores in Shanghai, two
stores in Beijing, two stores in Chengdu, and one store each in Tianjin,
Guangzhou, Shenzhen, Nanjing, Dalian, and
Shenyang, along with 11 more stores across smaller cities in China. For India,
IKEA initially plans to open 25 stores but has marked
some 49 Indian cities that have potential to get an IKEA store in the future.
The 25-store plans call for an investment of about
$2 billion over 15 to 20 years. As we said in the opening, IKEA began its India
market entry planning in 2013 and started building
in 2016. The first construction took place in Hyderabad, a high-tech center
where companies like Microsoft have their Indian
headquarters. The Hyderabad store is 400,000 square feet and cost $110 million
to build.
To ease Indian customers into the IKEA
model before the store opened in 2018, the company unwrapped its first
experiential center IKEA Hej
(Hello) Home close to the IT hub of Hyderabad. The Hej Home small-scale store
provides some insight into IKEA
products and solutions, which future Indian customers could buy before the
store opened in Hyderabad. This also eased the
market entry into India and helped point out glaring problems that IKEA
management could tackle before opening the actual
large-scale IKEA store. The Hej Home, designed and built over a six-month
period, highlights what IKEA stands for and what
to expect. Ikea Hej Home reflects IKEA’s understanding of life at home in India
and its unique home furnishing solutions, including
food and room settings, for Indian homes.
The preparation to get to the IKEA Hej Home
concept—and, ultimately, to the first large-scale store opening in
Hyderabad—was a long,
research-oriented endeavor. The Swedish home furnishings giant with a
reputation for being very Swedish in almost everything
they do sent one of its top design executives, Marie Lundström, to India with a
mission to understand the Indian mindset
and aesthetic. IKEA had decided that it needed to learn everything it possibly
could about the Indian customers in a variety
of Indian homes, places, and settings. The entry into China in 1998 went well
but was also undertaken before the social media
world we now live in. India could not go wrong for IKEA; the brand depended on
it.
Marie Lundström didn’t leave a single stone
unturned. She visited nearly 200 Indian homes all across the large landscape of
India. She spent countless hours interacting with
Indian family members. IKEA also did the customary customer surveys with
a large cross-section of the potential customers. In
all, under the leadership of Marie Lundström, IKEA found some important
characteristics of the Indian customers that could be
effectively used by IKEA to make sure that their market entry into the
country in 2018 was as successful as it could possibly
be. Some of the findings indicated that Indians love color. Indians’ family
lives center around the couch. They watch TV while eating, which is not much
different than Americans and many other nationalities,
but nevertheless a finding that was helpful to understand India, the country’s
customers, and their characteristics.
Unfortunately, customers in India are not
also big fans of the IKEA trademark of do-it-yourself.
Taking all of this into account, IKEA could now plan accordingly. The company meticulously planned its large-scale store design and product range for one of the largest economies in the world with one of the largest potential customer populations. It is a remarkable journey that took IKEA through five years from initiation of the idea of entering India, to three years of detailed planning and research, and on to a couple of years of actually building the first store in Hyderabad. It is a fascinating story, journey, and a deviation from normal practice for IKEA—the company that prides itself on being Swedish in its processes, product names, and food served in its restaurants! To date, IKEA has about 400 employees in India, and the company has plans to increase that number to 15,000 employees by 2025, with half being women.
Case Discussion Questions
1. What do you think are the attractions of
India to IKEA?
2. Why did the company chose Hyderabad as
the location for its first store opening?
3. What are the biggest challenges IKEA
faces in growing its Indian
operation?
4. IKEA entered India by establishing a
wholly owned subsidiary. Why do
you think the company chose this entry
mode over other entry modes, such as franchising
the IKEA concept or a joint venture?
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