IKEA’s Business Strategy for Indian Market
Discuss about the Competitive Strategy of IKEA.
IKEA is a multinational Netherland based Swedish Company. It is the largest furniture retailers across the globe. Company is present in more than 44 countries across the globe including Russia, US, UK, Japan, China, and Australia. Organization was founded in 1943 by a 17-year-old Ingvar Kamprad. In relation with this, organization tried to enter into Indian market various times, but they failed till 2013 despite the fact that company was sourcing from Indian since 1980s. Company has grown and attained success in the international market due to their effective international strategies. Apart from this, critical success factors of the organization are also reasons for the organizational rapid growth (Ikea, 2017).
In this report, organizational business, corporate, acquisition and structure, cooperative and international strategies will be discussed in relevance with setting up an effective position in the Indian market. IKEA is leading furniture retailer in the international market; thus, their mission and vision with regards to Indian market are also concerned with attaining competitive advantage.
Business strategy is set of systematic approaches for an organization in order to attain desired goals and objectives. In relation with the IKEA operations, organization has amended its policies, standards and product offerings as per the target audience in Indian market. With regards to acquiring effective place in the Indian market, organization has analysed crucial factors in external and internal business environment so that appropriate business strategies could be adopted or developed. This will help the organization to develop an effective competitive strategy along with effective brand positioning in the target market (Hilman & Kaliappen, 2014).
In terms of business strategy, cost leadership strategy is an effective tool through which organization could attain competitive advantage by reducing its cost of production or by lowering its profit margins. This strategy is driven by organizational efficiency, size, scale and scope. Thus, major motive of cost leadership strategy is to produce high standardised products and services at one hand and on the hand, it is required for the organization to reduce its cost of production with the help of advanced and effective measures. This is done so that organization could offer high qualitative products amongst the target audience at low rates as compared to other companies in the market. Apart from this, organization could also reduce its profit margins for offering its products and services at reduced rates in comparison to other companies in the target market (Grant, 2016).
IKEA’s Corporate Strategy for Indian Market
In relation with IKEA’s present situation, it is required for the organization to adopt cost leadership strategy in order to gain competitive advantage along with establishing an effective position in the target market. It is one of the crucial elements of Porter’s Generic model and with the implementation of cost leadership strategy; organization would be able to acquire competitive advantage in the target market along with acquiring a large customer base. With the help of cost leadership strategy, organization would be able to accomplish its desired goals and objectives along with establishing an effective position in the Indian market. Target audience will get appropriate choices in relation with making selecting the appropriate product and service from the available options and IKEA will be able to acquire a large customer base due to their large product offering and effective competitive strategy (Rugman & Verbeke, 2017).
There are mainly three types of corporate strategy through which organization could enhance its performance along with acquiring sufficient share in the target market. Growth, stability and renewal are major types of corporate strategy.
- Growth: Growth strategy is a strategy through which organization expands its business in international or national market with same products and services or with new products and services. With the help of growth strategy, IKEA will be able to accomplish its desired goals and objectives along with attaining an effective place in the Indian market (Purce, 2014).
- Stability: In relation with stability, IKEA will continue to serve its existing clients by maintaining the same sort of quality in its products and services. Apart from this, organization could also adopt effective measures to enhance the quality of their products in relevance with increasing revenues as well as for maintaining the acquired market share. This strategy will act as the defensive strategy under which organization will not grow neither it will fall behind.
- Renewal: This strategy will be used by IKEA when their performance in the Indian market will start decline. With the help of this strategy, organizational managers will adopt certain effective measures and strategies in order to uplift organizational performance. It is also known as backup plan which will be implemented when company will not find itself in good position (North & Kumta, 2018).
These corporate strategies will help IKEA to measure its performance in the Indian market and these will also help the organization to determine several effective measures through which organizational performance could be enhanced along with gaining leading position in the target market.
In order to set up an effective image in the Indian market, IKEA could adopt effective market entry options such as joint venture, merger and acquisitions, etc. IKEA has already entered Indian market and in relation to this, organization has adopted joint venture strategy. In order to enhance organizational performance as well as to attain competitive advantage in the dynamic business environment of Indian market, it is suggested to the organization to adopt merger and acquisition strategy. Under this strategy, organization will acquire a small or large entity engaged in the furniture business or in other industries. By this way, organization will be able to set up an effective image in the target market along with ascertaining the market needs of Indian market in an effective manner. This strategy will help the organization to attain its desired goals and objectives along with acquiring an effective market share in the competitive business environment in Indian market (Barattieri, Borchert & Mattoo, 2016).
IKEA is a multinational corporation as its operations are expanded in various parts of the globe. With the help of international strategies, organization could easily communicate with entities in different countries. There are three types of international strategies such as multi domestic, transactional and global. Each strategy has its own uniqueness and capability to enhance organizational efficiency across countries along with fulfilling varieties of target and potential consumer’s demands (Lin, 2014).
- Multi Domestic: Multi domestic strategy is useful for those companies who produces and delivers the products as per local public’s preferences. For example: McDonald’s, Starbucks, etc. are multinational corporations and they have their unique speciality. But while entering into Indian market, they have customised their menu range as per Indian market’s requirements and wants. This is done to satisfy target customer’s demands as well as to set up an effective image in the target market along with acquiring leading position in the Indian market. McDonald’s, Starbucks and other multinational companies have customised their product offerings as per Indian market’s conditions so that they could develop an effective position in the target market. Thus, IKEA could also adopt this strategy in order to set up its effective image in the target market along with acquiring reputed position in the target market (Hitt, Li & Xu, 2016).
- Global strategy: This strategy is a complete opposite of multi domestic strategy. Under this strategy, organization does not amend its products as per target market requirements. Companies deliver the same products and services in the international market in order to gain economies of scale. Along with this, organizations make certain changes in its product offerings in order to meet with the target audiences’ demands and wants. This strategy will not be much useful for the IKEA to operate with in the Indian market because preferences and demands of the Indian audiences are quite unique and different and though growth strategy, organization will not be able to target large part of customer segments (Hitt, 2016).
- Transactional strategy: Transactional strategy is the mixture of growth as well as multi domestic strategy. With the help of this strategy, organization will be able to match up with the target audience’s demands and wants along with enhancing efficiency. For example, McDonald’s, KFC, etc. have adopted this strategy and delivers their original products with local tastes. This has helped them to acquire an effective and reliable position in the target market. IKEA could also adopt this strategy so that the organizational goals and objectives could be fulfilled along with attaining competitive advantage in the target market (Regnér & Zander, 2014).
Market Entry Strategies for IKEA for Indian Market
Cooperative strategy has bene adopted by large number of firms and it is attempt by firms to attain its desired goals and objectives through cooperation with other firms in relation with the partnerships and strategic alliances rather competing with them. In the global business environment, various companies have adopted this strategy in order to lead the market. For example, in 2004 Sony Corporation and Samsung Electronics collaborated with each other to produce effective LCD television in the global market. This strategic alliance was quite effective and thus, it helped them to produce an effective brand in LCD televisions i.e. Bravia.
With regards to this, IKEA could also collaborate with large furniture brands in Indian market. Some of the large companies in Indian market are Durian, Godrej Interio, Zuari Furniture, etc. Making strategic alliances with these companies will help the IKEA to set up it effective image in the target market along with attaining competitive position. Cooperative strategy has various significant advantages such boost up the efficiency, enhances knowledge and resources, lifts up organizational customer base, revenues, profitability, etc. Along with these advantages, cooperative strategy will also help the IKEA to reduce the level of risk factors because the risk will be divided amongst the partners in collaboration along with the distribution of profits and revenues (Armstrong, et. al., 2015).
IKEA will be able to enhance its reachability in the target market along with gaining competitive advantage. Along with this, organization is required to make its product offerings unique, distinct as well as effective from the existing companies in order to make its effective position in the target market. It is required for the organization to adopt certain effective and advanced measures so that the goals and objectives could be attained. With the help of these strategies, organization will be able to attain effective position in the emerging market conditions of Indian market. With this regard, organization will acquire the leading position in the target market along with attaining the desired goals and objectives (Wu, et. al., 2014).
India is a big marketplace for multinational corporations because it is in developing state and due to this; its economic conditions are growing rapidly and constantly. In relation to this, organization has several opportunities to set up an effective image in the marketplace with full of opportunities to grow and expand. Due to this, various multinational corporations have already entered in Indian market to enhance their revenues as well as to expand their business in international market. IKEA is also one of those multinational corporations which are present in more than 44 countries across the globe including Europe region, USA, UK, Russia and other such big countries. Organization could implement above discussed strategies in relevance with attaining competitive advantage along with gaining competitive advantage in the Indian market (Grant, 2016).
Conclusion
From the aforesaid information, it can be concluded that to attain competitive advantage, it is necessary for the organization to adopt appropriate strategies and the measures so that the goals and objectives could be attained in an effective manner. In this report, IKEA’s competitive strategies have been discussed in relevance with attainment of competitive advantage in the Indian market. Organization entered into Indian market in 2003 but since then, they were not able to set up an effective image and to enhance their performance, set of effective strategies have been discussed. With the implementation of these strategies, organization will be able to accomplish its goals and objectives so that it could make its significant place in the competitive business environment.
References
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction. Pearson Education.
Barattieri, A., Borchert, I. and Mattoo, A., 2016. Cross?border mergers and acquisitions in services: The role of policy and industrial structure. Canadian Journal of Economics/Revue canadienne d’économique, 49(4), pp.1470-1501.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hilman, H. and Kaliappen, N., 2014. Do cost leadership strategy and process innovation influence the performance of Malaysia hotel industry?. Asian Social Science, 10(10), p.134.
Hitt, M.A., 2016. International strategy and institutional environments. Cross Cultural & Strategic Management, 23(2), pp.206-215.
Hitt, M.A., Li, D. and Xu, K., 2016. International strategy: From local to global and beyond. Journal of World Business, 51(1), pp.58-73.
Ikea. 2017. About IKEA. [Online]. Accessed from: https://ikea.in/about [20th May 2018].
Lin, L.H., 2014. Organizational structure and acculturation in acquisitions: Perspectives of congruence theory and task interdependence. Journal of Management, 40(7), pp.1831-1856.
North, K. and Kumta, G., 2018. Knowledge management: Value creation through organizational learning. Springer.
Purce, J., 2014. The impact of corporate strategy on human resource management. New Perspectives on Human Resource Management (Routledge Revivals), 67.
Regnér, P. and Zander, U., 2014. International strategy and knowledge creation: The advantage of foreignness and liability of concentration. British Journal of Management, 25(3), pp.551-569.
Rugman, A. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.
Wu, D., Zhou, L., Cai, Y., Hu, R.Q. and Qian, Y., 2014. Energy-aware dynamic cooperative strategy selection for relay-assisted cellular networks: an evolutionary game approach. IEEE Transactions on Vehicular Technology, 63(9), pp.4659-4669.
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