Report on the global transactional businesses IKEA in India

Table of contents

Table of contents 1

1 - Introduction 3

2 - External factors for IKEA in India 3

2.1 Political 3

2.2 Economic 4

2.3 Social 4

2.4 Technological 4

2.5 Environmental 5

2.6 Demographic 5

2.7 Legal 5

3 - Porter five forces model 5

3.1 Bargaining power of suppliers 6

3.2 Bargaining power of customers 6

3.3 Threat from substitute product 6

3.4 Threat of new entrant 6

3.5 Level of competitive rivalry 6

4 - Cultural factors Cage analysis 7

4.1 Cross culture 7

4.2 Culture distance 7

4.3 Hofstede’s cultural dimensions 8

5 -Ethical considerations related to expanding into the Indian market 9

6 - Advantages/disadvantages that might be obtained by IKEA 10

6.1 Advantages 10

6.2 Disadvantages 11

References 12

Table of Figures

Figure 1: Prime Minister 4

Figure 2: India GDP Growth Rate 5

1 - Introduction of the global transactional businesses

In this report, there is brief information about the global transactional businesses. For that case, IKEA Company is chosen. It can be noted that after six years of the initial proposal, IKEA is going to open their first store in India. This store is located in the city of Hyderabad. The next thing is that this company is going to expand it into large emerging markets for the future. They have taken this initiative after expanding their presence in China in the first two decades of this century. Due to this they have got a lot of success in their Hyderabad store. After this they are going to launch more additional stores in three more locations around this country. These locations are Delhi, Mumbai and Bengaluru. Moreover, another thing is that after the results and response of the Indian market, IKEA has taken a lot of lesson. Based on these lessons they are going to alter their strategy and business model in India. Moreover, they are going to emphasis on the online retailing in a perfect way. 

In this report, there is complete information about the external environment of the IKEA Company. Moreover, there is also some explanation about the external factor that are giving power to this company for moving into Indian market. Then after this, there is also some brief knowledge on the cultural issues related to this case and also what are major cultural risk connected with IKEA Company operated in Indian market.  Moreover, the next section will discuss some important information about the ethical consideration of this company. This is because they are going to expand their business in the Indian market. In the last section, there is some information about the complete advantages and disadvantages of investing in emerging economics of India. This section will relate about IKEA Company and how much they have taken advantage while operating in this market. 

2 - External factors for IKEA in India 

There are some important external factors through which it is confirmed why IKEA company is going to operate in India. Due to these external factors this company was able to expand in that country with perfect. 

2.1 Political factors for IKEA in India

It can be noted that the political condition of India is extremely reliable. 

Figure 1: Prime Minister

Source: ("General Information - Prime Ministers Of India - Know India: National Portal of India", 2020)

As shown above India is experiencing stable government which suggest stability and continuity of government policies as continuity of prime minister.

The present prime minister of India just wanted its country growth in the international market. This can be don easily by promoting external brands in a proper way. Due to this, it will become extremely easy for the IKEA Company to expand in this country. This country is providing complete political support to IKEA so it will become extremely simple for them to expand their business in different parts of the country. There is one opportunity is that and it is related to the Prime minister. It shows that if the prime minster will be same for the next ten years then there will be improvement in this country. There will be huge economic growth can be seen in the future. On the other hand, there is only one threat and it is related to change in political parties in the future (John A. Wagner III, 2014).

2.2 Economic factors for IKEA in India

India is enjoying high GDP growth rate as shown bellow

Figure 2: India GDP Growth Rate

Source: ("GDP growth (annual %) - India | Data", 2020)

It can be seen that India is present at 85 from 175 countries on the basis of transparency international corruption perception index. Due to this, the economic condition of this country is fair. Overall, India is a developing country and their aim is to become super power. This is the reason why this country has complete focus on their economic condition for the future. The IKEA Company has viewed their future economic condition in a proper way. This was the reason why it becomes extremely easy for this company to expand their business properly in that country. There is one opportunity and it is related to the technological changes in that country. This country is moving towards technological changes due to this there will be growth in GDP value. Moreover, there is another threat and it is related to the global competition. This shows that if India is not able to improve its export in the next upcoming years there will be problem in its GDP value. (Bremann, 2017).

2.3 Social factors for IKEA in India

The next social factor is related to the social. It can be noted that there is huge effect of social barrier in this country. This is because there are a lot of people living in this country with different languages and cultures. Due to this, it will become extremely difficult for them to communicate with each other.  It can be noted that India is considered as socially strongest country. This is because there are a lot of people are living with different cultures. All of these people are quite concerned with this country and always work for its productivity. But this factor can be minimized easily by IKEA Company by hiring local individuals in that company for minimizing this barrier in a perfect way (Malobi Mukherjee, 2014).  

2.4 Technological factors for IKEA in India

It can be noted that India is a technological country. This country is taking advantages from the west and apply different technologies in their supply and demand. 

Source: (Jaganmohan, 2020)

Due to this factor, it will become extremely easy for IKEA Company to expand in that country. They know that there will be no burden during transportation. This is because they are dealing best technology in every field of business. Moreover, in any store there are a lot of issues related to space and power. It can be noted that IKEA is a huge furniture store, they are also focusing on lower power waste for perfect results. Furthermore, India has one of the best engineers from around the world. They are applying different technological techniques for minimizing power and increase efficiency. Due to this fact, IKEA felt confident to expand in such a technological country in the sub-continent. The next thing is that India is going to implement internet of things in its appliances. Due to this there will be huge change in the technological background of the country. It is also a huge opportunity for the company for the future. There is no threat to this country according to its technological advancement.  Moreover, another thing is that they are also going to achieve digital catalogues for their customers. 

2.5 Environmental factors for IKEA in India

According to the fact, IKEA is also investing in eco-friendly environment. In India, this company has put more than 1 billion dollars for the renewable energy resources. Moreover, this company is going to apply complete renewable energy stores in that country. Due to this, there will be complete clean environment for the people. The next thing is that they are also investing in solar and wind power plants. There is one opportunity for the company and it is related to the use of renewable sources. If they are able to convert whole branches as renewable energy stores then they can generate more profit in the future. Moreover, according to the reputation of this company there is no such threat for them in the market. This is because there is not any strong competitor present in the market.  They are also aiming to shift different materials like cotton, wood products. due to this fact, the government of India is extremely happy with planning and efforts of this company. This is the reason why it will become simple to expand in that country with perfection. 

2.6 Demographic  factors for IKEA in India

Another factor is related to demographic. It can be noted that there are many people living in this country that are financially stable and relax. Such people are able to generate a lot of money annually. Due to this fact, they are able to afford IKEA products with perfection. For that case, IKEA has planned properly about the demographic condition of this country. Due to this they have analysed that there are a lot of people in that country that are enjoying healthy life styles. It can be noted that the growth rate of India is 1.1% for the year 2020. On the other hand, the literacy rate is about 74% of this country. This shows that there are many people in this country that are quite aware about the technological products. 

Figure 1: Demographic information of India

2.7 Legal factors for IKEA in India

It can be noted that IKEA is considered as huge company. Due this fact they are susceptible to legal threats. According to this fact, they are going to follow an abundance of laws and regulations of that country in a perfect way. This shows that IKEA is operated in India so they are required to follow their rules and operate according to it. They are also required to stay up to date according to different labour laws. This shows that IKEA contains physical stores in this country then they are required to stay up to date about the labour laws in India. This is the reason why it will become easy to expand their business in this country. 

3 Porter Diamond model factors for IKEA in India

Porter diamond model is used here for the analysis of transnational education (TNE) across different countries and institutions. The model defines the framework for the strategic evaluation of attractiveness and analysis of transnational firms. The adapted model can be further used to measure the import and export balance. The originality and value must consider the expected growth and define the ways to analyse the lack of strategic tools. The proposed model is valuable for the strategic planning at global and country level.  

Factor conditions 

The factor production such as capital, labour, land, infrastructure, and natural resources induce impact on the economic activities. These factors determine the balance between imports and exports. Porter considered advanced factors as the factors that influence competitive advantage of a country. These factors are highly trained labour, national communication infrastructure, and capability of workers to do work (Tsiligiris, 2018). 

Demand conditions of IKEA in India

Despite the market globalization the demand conditions cause shaping of country. The model measure quality of home demand, standard, and catalyst of firm work. The existence of advanced factors defines the capability of country to develop products (Malobi Mukherjee, 2014).  

Related and supporting industries of IKEA in India

The existence of successful network supports the industries in developing positive spill over effect. It promotes the innovation by global flow of information and technology. The example is Silicon Valley cluster that is increasing use of computer, semiconductor, capital firm and software.

Firm rivalry, structure, and strategy of IKEA in India

The competitive advantage at the global level is linked with the firms, rivalry, strategies, and structure. The intensity of rivalry pushes the firms to review the operations in direct and intense condition. 

Role of government of IKEA in India

The government has a significant impact across the PDM however, the government is facilitating to create competitive advantage. The role of government is to push the firms and challenges by removing the barriers and to promote the creation of specialized factors (Tsiligiris, 2018). 

Porter five forces model of IKEA in India

In India, there are already different furniture stores are present that are providing goods at cheap rates. Now IKEA wanted to expand their business in this country, therefore, they are required to take a look on the five forces model in a proper way.

3.1 Bargaining power of suppliers of IKEA in India

It can be noted that it is considered as one of the huge stores in India due to this bargaining power of supplier is low. This company has an advantage to hire different suppliers at the same time.it is extremely easy for them to switch from one supplier to another. There are a lot of suppliers of this company, these suppliers are involved in supplying raw materials for making furniture products. The raw material will be in the form of wood, plastic and different things. This company has an opportunity to change its supplier after some time. Moreover, there is no threat to this company because bargaining power of the supplier is extremely low. Now it is not good for the supplier if he loses business from this company. 

3.2 Bargaining power of customers of IKEA in India

According to the fact, bargaining power of customers is moderate. This is because in that country many customers wanted quality reasonable products for their home and lifestyle. Due to this they can afford it. It can be noted that there are many people living in this country that are financially stable and relax. Such people are able to generate a lot of money annually. On the other hand, the literacy rate is about 74% of this country. This shows that there are many people in this country that are quite aware about the technological products.  On the other hand, it is moderate because there are a lot of other furniture stores are available in India. The customers that are not interested in quality are able to switch from one brand to another. 

3.3 Threat from substitute product of IKEA in India

IKEA is a huge company, due to this this threat is quite low. This is because the brand image of this company is extremely high. This company is always involved in providing quality furniture products to its customers. Moreover, the next important thing is that they are providing wide range of furniture products. Therefore, there is no as such competitor that is involved in providing products with huge variety. This is the reason why there is low threat of any substitute product. 

3.4 Threat of new entrant of IKEA in India

Furthermore, there is quite low threat of new entrant in the market for IKEA. This is because it is considered as huge company. Another thing is that it is not easy to enter in furniture market. It will takes a lot of years to establish properly in the market. Due to these facts it is making this threat quite uncommon for IKEA when they are going to expand their business in India. 

3.5 Level of competitive rivalry of IKEA in India

In India, there are some furniture stores due to this there is moderate level of competitive rivalry. But this company can easily overcome this competition without any difficulty.  It can be noted that for the future, the company can easily gain competitive advantage over its customers. Moreover, it shows that there will be huge opportunity of IKEA Company to expand its business in that country. On the other hand, there will be quite low threat to the company.  This is because they are offering high quality products to its customers.

4 - Cultural factors Cage analysis 

4.1 Cross culture of IKEA in India

It can be noted that culture is an umbrella term and it is related to the social behaviour and norms of the people that are living in same area or society. The next thing is that culture of India is unique and it is also famous in different parts of the world. In this it has been mentioned that most of the customers create decisions which is related with shop which has been depend on their behaviour regarding to their stores. In this it can also be said that customer’s experience nor the value which has been presented in product.  These values hold the single value contributor along with the starting of procedure which will move toward from the customer satisfaction for the retaining loyalty. In this regard it can also be said that in the company manager required to recognize the significance of developing (Kai & Hitt, 2018) value for their customers which has been attain as in the form of experience. While providing services or products isolate which is not appropriate in the organization and they should have to give their customers along with the satisfactory experience. Furthermore, it has been claimed that organization should have to advised to develop market experience by making places. As well as Experiential positioning portrays for brand.

4.2 Culture distance of IKEA in India

  Moreover, it is appropriately equal with the positioning statement along with typical management and marketing and this will also replace the imprecise positioning statement along with insight and usage of strategy element which is full of fantasy and related with the buyers and users of brand.  At this time the company should have to be work on interesting so that they have to launch creative applications. As well as there are some of the factors has been identified which mainly influence the customer decision while have shopping in IKEA (Enrico & Mrozek, 2019). Some of the social motives for customer along with the size of originations respondents which mainly brings the visitor IKEA both of the answerers. As well as while having this study some of the common factors has been attained. In which the most common reason has been observed is selecting  for shop to IKEA and it has been taken as the combination of store which has been taken as providing main cost advantage along with their products which is comparatively cheap despite from other buyers and the variety of product which is broader and changed consistently.

The location of IKEA retailers made it happens for their consumer to add something excessive to their shopping by visiting along with having a plan to move ahead. In this it can also be said that customer’s experience nor the value which has been presented in product. These values hold the single value contributor along with the starting of procedure which will move toward from the customer satisfaction for the retaining loyalty. In this regard it can also be said that in the company manager required to recognize the significance of developing value. In this regard it has been said that the case study is about IKEA group of industries and the company has been based mainly in Netherland. The IKEA is one of the greatest group of companies which holds 13 (Debobroto, 2020) branches with inter organization system. The company then develop a program which mainly boost up leaders of IKEA to make the dynamic and inclusive workplace along with the respect of co-workers and also enthuse them.

4.3 Hofstede’s cultural dimensions

In the globalized universe the company required to understand the cultural differences in India which has been obtain succession in the world of business. In this regard some of the theoretical framework has been used which mainly based on three main concepts which is as follow diversity, cross culture management and organizational culture in India. In this cross-culture (Adam & Schiehle, 2016)l management has been explained but first it is important to describe culture. Culture has been defined as the culture is the pattern which clear and implied it for any type of behavior developed and transferred by symbol. As well as it can also be said that culture has been formed by some of the previous activities of a specific group or their members as well. Moreover, cross culture management would be explained as the actions which has been done in the organization as planning and controlling individuals within cross cultural setting. In this regard it can also be said that the world of business is developed along with enhanced globalization and internationalization mainly.as well as cultural organization has been descried as the dimensional concept which has been impactful in various ways but despite from this it also develops and under consistent alteration by their own behavior. 

It can also be said that if the organizational culture has been accomplished then it has been preserved through various meanings. Furthermore, recently selected members of group may be learning the values by holding the story which mainly focus the values. In this regard it has been said that the case study is about IKEA group of industries and the company has been based mainly in Netherland. The IKEA is one of the greatest group of companies which holds 13 branches with inter organization system. the company then develop a program which mainly boost up leaders of IKEA to make the dynamic and inclusive workplace along with the respect (Markus & Riltoft, 2018) of co-workers and also enthuse them. As well as the company mainly works on the aspect on diversity which is illuminated mainly. Moreover, IKEA has also developed from many unique and respectful persons. Furthermore, some of the probable and benefits of holding diverse workforce. It is the basis of IKEA’s business policy and management panache whereas its values which has been given great significance in the evaluation of the employees with their manager of IKEA. IKEA's culture is closely related to the Swedish culture and it also discussed that IKEA did not only vend furniture but also Swedish lifestyle.

 This main Swinishness has been used as a diffident benefit, but is also stimulating to be recognized to the various cultures IKEA works in. IKEA has a moderately smooth classified framework that abandons for the usage of job titles or locations as status symbols, which will move toward to an unceremonious and reciprocal attitude within the workforce.

5 - Ethical considerations related to expanding into the Indian market

Some of the ethical considerations has been taken account in the company. The company has been worked on the vision to develop a better daily routine for most of the individuals. The main aim of the business is to support the insight by giving broad variety of well design, systematic products of home furniture at cheap people so that everyone can IKEA attempts to develop a better life for all of their stakeholders, involving consumers workers, contractors, and societies. It attains this through the application of 10 core values, a potent vision declaration, and its dealer code of behaviour. IKEA has developed a sustainability strategy that encompasses people and planet. The strategy has been based on the number of long-term deliberate objectives to i (Mandal & Chandra, 2020)increase IKEA’s some time IKEA desired to develop renewable consumption if energy. To make sure that it is on track, IKEA were creating revolutionary objectives that it could be utilized to quantify its advancement for petite time periods. Moreover in, 2015 the organization desired to create renewable energy which is almost least 70 percent from the overall rate of consumption. Along with this procedure, IKEA desired to be clear with its stakeholders, giving substantial exposes about their development. When employing workers, IKEA looks for people who can share the company’s vision and values. When building the values , Kamprad acquired values that had significant to him as a child being elevated in the societies of Småland in southern Sweden. Simplicity, humbleness, economy, and accountability has been all shared values that Kamprad produced up with in the societies of Småland. IKEA appearances for workers who stake same values. 

Some of the opponents have also said that IKEA’s critical corporate framework as an ethical issue. As it has been stated before IKEA’s corporate framework is extremely difficult and it has been run through private company which has been in turn run through non-profit organization. Detractors have said that the management framework is impervious and greatly ranked. Some of them thinks that Kamprad holds too much power as he was t (Emma, 2019) he chairman of commission which has been control the non-profit. They also said that the reason for including a non-profit is so that IKEA would be excused from taxes that will normally implement to them. If it is real, this can be observed as a devious way to evade taxes. Moreover, IKEA passionately rejects these allegations. They privilege despite from this that the framework made IKEA more competitive. Tax effectiveness is main point to this competitiveness, involving and having costs of goods reduce for the customer. IKEA do decide to commercialize its financial knowledge.

6 - Advantages/disadvantages that might be obtained by IKEA

In this regard company has some advantages and some disadvantages which they has been attained through IKEA program. 

6.1 Advantages of IKEA in India

In this it has been mentioned that company mainly tried to duplicate their present business model and products mainly. Tax effectiveness is main point to this competitiveness, involving and having costs of goods reduce for the customer. The strategy has been based on the number of long-term deliberate objectives to increase IKEA’s some time IKEA desired to develop renewable consumption if energy. Positioning statement along with typical management and marketing and this will also replace the imprecise positioning statement along with insight and usage of strategy element which is full of fantasy and related with the buyers and users of brand.  , IKEA were creating revolutionary objectives that it could be utilized (Andrea & Atkinson, 2019) to quantify its advancement for petite time periods. Moreover in, 2015 the organization desired to create renewable energy which is almost least 70 percent from the overall rate of consumption. In this it can also be said that customer’s experience nor the value which has been presented in product. These values hold the single value contributor along with the starting of procedure which will move toward from the customer satisfaction for the retaining loyalty.

6.2 Disadvantages of IKEA in India

As it has been stated before IKEA’s corporate framework is extremely difficult and it has been run through private company which has been in turn run through nonprofit organization. Detractors have said that the management framework is impervious and greatly ranked. In the globalized universe the company required to understand the cultural differences which has been obtain succession in the world of business. In this regard some of the theoretical framework has been used which mainly based on three main concepts which is as follow diversity, cross culture management and organizational culture. IKEA desired to be clear with its stakeholders, giving substantial exposes about their development. When employing workers, IKEA looks for people who can share the company’s vision and values.When building the values, Kamprad acquired values that had significant to him as a child being elevated in the societies. As well as cultural organization has been descried as the dimensional concept which has been impactful in various ways but despite from this it also develops and under consistent alteration by their own behaviour. Furthermore, some of the probable and benefits of holding diverse workforce. It is the basis of IKEA’s business policy and management panache whereas its values which has been given great significance in the evaluation of the employees with their manager of IKEA. IKEA's culture is closely related to the Swedish culture and it also discussed that IKEA did not only vend furniture but also Swedish lifestyle.

References of IKEA in India

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Bo Edvardsson, B. E. (2008). Values-based Service for Sustainable Business: Lessons from IKEA. Routledge.

Bremann, A. (2017). International Business Strategy. IKEA's Foreign Expansion into the Chinese Market. GRIN Verlag, .

Christopher, M. (2016). Logistics & Supply Chain Management. Pearson UK.

John A. Wagner III, J. R. (2014). Organizational Behavior: Securing Competitive Advantage. Routledge,.

Malobi Mukherjee, R. C. (2014). Retailing in Emerging Markets: A policy and strategy perspective. Routledge.

Tsiligiris, V. (2018). An adapted Porter Diamond Model for the evaluation of transnational education host countries. International Journal of Educational Management, 32(02), 01-10.