Final Assignment Strategic Marketing IKEA Essay Example

of both the market and the population. India's consumption patterns vary greatly from those in Europe and other emerging nations. The crucial factors for achieving success lie in determining the appropriate actions to take, executing them skillfully, and choosing the right timing.

The Indian Market

A Pestel Analysis

India is the largest democratic republic in the world. The president has limited power, as executive power lies with the prime minister and their council of ministers. India's political system comprises of two houses: the Rajya Sabha (upper house or senate) and the Lok Sabha (lower house or house of the people). In terms of taxes, India operates on a 3-tier federal structure encompassing urban and rural local bodies, the federal government, and state governments.

India is ranked 119th in terms of economical freedom, with an economical freedom score of 55.2. However, improvements have been made in managing public finances and reducing corruption. According to heritage.com, the top income tax rate is 30.9% with a 3% education tax. For corporate taxes, the top rate is 33.99% with a 7.5% surcharge and a 3% education tax. The overall tax burden amounts to 7.4% of GDP.

Government spending accounts for 27.1% of total domestic output, leading to a budget deficit, while public debt has increased to 68.1% of GDP. India's GDP stands at approximately $4.761 trillion, with a growth rate of 6.5% in the year 2012.

The labor force consists of around 486.6 million people, while the unemployment rate is at 8 .5%. Approximately <29. 8 %of the population falls below the poverty line.< p>

The inflation rate in India is reported as being at about
8 .6%, and foreign

direct investment (FDI) inflow amounts to $31.
6 billion.< p>

The population in late 2013 was 1,236,686,732 and the largest portion of the population, accounting for 29.2%, falls within the age range of 0 to 14 years old. The median age in the country is 26.7 years old and the population growth rate stands at 1.28%. In terms of expenditure as a percentage of GDP, it amounts to 3.3% while the literacy rate is recorded at 74.04%. Additionally, health expenditure constitutes about 3.9% of the GDP.

India has over thirteen official languages with Hindi being predominant at around 41%. Hinduism is followed by approximately 80.5% of the population as their major religion while Islam holds second place with a following of about 13.4%. India also has a unique caste system where each caste has its designated role; Brahmins occupy the highest privileged position whereas Pariahs or "untouchables" are unfortunately considered least favored within society.

In summary, India's social structure and key statistics can be represented by this schema.

India's technology sector, particularly in Information and Communication technologies, has witnessed impressive growth. The country has experienced a boom in trained engineers, leading to significant industry expansion in recent decades. This expansion is expected to create 230,000 jobs in just 2012 alone, providing direct employment opportunities for 2.8 million individuals and indirect employment opportunities for 8.9 million individuals. Mumbai, the capital of India, plays a crucial role in this sector.

Due to its vast size and hot climate, India benefits from its coastline on the Indian Sea which facilitates imports, exports, and general trade activities. The country is primarily comprised of plains but

also includes mountains and deserts. Natural hazards encompass floods, thunderstorms, and earthquakes; however, floods are particularly worrisome due to the increasing level of the Ganges River. Environmental challenges like deforestation, air pollution, and soil pollution resulting from extensive agriculture present significant issues.

India, a federal republic with 28 states and 7 union territories, operates under a common law system similar to England. The country is led by the prime minister, while the president holds a symbolic position without executive authority.

The customers

The consumption habits in India vary significantly among different castes, offering marketers a unique chance to understand consumer preferences and purchasing behaviors. Indians across all castes, including lower ones, tend to prioritize saving money. However, studies show that everyday consumption goods are used sparingly. For instance, lower-class individuals often buy only one unit of shampoo or soap per day or use a very small amount for each application. This preference for single-use products creates profitable opportunities for manufacturers producing them. Additionally, recycling holds great importance in the Indian lifestyle, particularly among the upper classes. This emphasis on recycling surpasses that of Western countries despite growing ecological awareness. As an illustration, locals may wrap food using newspapers similar to practices observed in England.

India is renowned for its extensive traffic, which is one of the highest globally. As a result, people prefer smaller cars or motorcycles due to the inadequate public transportation system's capacity to accommodate the growing urban population. Moreover, there is an ongoing economic crisis impacting the Indian citizens. According to a Credit Suisse survey, consumer confidence has been decreasing since 2011 due to unfavorable macroeconomic conditions. Compared to

2011, more individuals anticipate lower salary increments and foresee their personal finances worsening, making it challenging for significant purchases. Merely 5% of those surveyed expect inflation rates to decrease, and trust in the government is also diminishing.

The consumer profile varies depending on whether they live in rural or urban areas. Rural regions typically have lower incomes and quality of life compared to urban areas due to factors such as the concentration of industries in urban centers, resulting in developmental disparities between different regions. However, there has been a recent shift in this trend. According to a study by Credit de Suisse, the average household income has decreased by 3% in urban India but increased by 6% in rural India. Another important aspect of Indian consumers is the growing middle-class, which is adopting the Western standard of middle-class living.

The emergence of a middle class in India is challenging the traditional caste system, which historically divided the population into upper and lower classes. This trend is gaining popularity as the lower castes outnumber the favored ones. Furthermore, with the country's increased per capita income, individuals now have access to goods and a level of comfort that was once inaccessible. In India, being a member of the English-speaking middle class has become more important than adhering to the caste system. Money is gradually replacing the old Indian social hierarchy based on castes and family lineage.

According to Paivi Mattila, director of the Finnish league of Human Rights, society's focus on consumerism has increased. To promote economic equality and alleviate poverty in India, Mattila suggests abolishing dowries. An article states that India's emerging middle-class

can be divided into two groups: seekers (earning between 200,000 and 500,000 rupees or $4,376-$10,941) and strivers (earning between 500,000 and 1 million rupees or $10,941-$21,882). The presence of consumer goods like cellphones, TVs, and internet-connected computers is expected to drive rapid growth in this middle-class segment. Additionally, being connected to the global community will expose lower caste Indians to Western middle-class standards and give them a perception of comfort.

The middle-class in India has expanded in March, but a study shows that it is relatively small, with less than 100 million people. This middle-class is mainly found among the top ten percent and a few wealthy households. In comparison to middle-class societies in Latin America and mature Western democracies, India does not possess similar characteristics. Nevertheless, this growing class presents an intriguing target audience for IKEA and will likely form the basis of their strategy. Prior to determining the most effective approach for entering the Indian market, it is crucial for IKEA to assess their marketing mix and carry out a SWOT analysis as they have yet to establish themselves in India.

The competition Porter’s five forces:

Customers' shopping habits in the Indian market, such as favoring smaller shops and personalized furniture, affect their bargaining power. While Ikea may not be able to meet each customer's specific preferences, it will provide affordable furniture with a variety of options. Thus, Ikea should focus on expanding color and shape choices to meet Indian market demands and foresee the growing requirement for customized furniture.

Ikea acknowledges the influence suppliers hold in the Indian market. The demand shift will lead to price hikes

for specific products, particularly those manufactured by Ikea's wood producers. Additionally, Ikea can explore partnerships with Indian suppliers to enhance cost efficiency and logistics.

As IKEA makes its entry into the Indian market, it becomes one of the first foreign furniture retailers in the low-cost segment. This brings about a potential threat from new competitors. While IKEA's presence presents challenges for establishing itself in this unfamiliar market, it also offers an opportunity for rivals to observe and learn from IKEA's strategies, allowing them to adapt and succeed in India.

Despite the possibility of a potential substitute from an Indian furniture shop, IKEA faces minimal risk from substitute products due to being one of a kind. With their easily accessible and unique furniture kits, IKEA is expected to dominate the market with surprise and delight.

The competition in the Indian furniture market is fierce, with approximately 8 major companies controlling the majority of sales to large retailers. These companies possess extensive knowledge about the Indian market, its customers, and their preferences regarding furniture. They have customized their product offerings to meet the needs of various customer castes in India. This poses a significant obstacle for Ikea because these local suppliers are already well-acquainted with the Indian customer base and have established effective communication and sales channels.

IKEA

Situation analysis: The 3Vs model

IKEA targets all populations, offering furniture for people of all ages and practical products suitable for everyone. It is important for IKEA to open stores in both urban and rural areas due to declining performance in urban zones. Additionally, IKEA can use the emerging middle-class to

introduce a new lifestyle unaffected by the caste system. The company aims to provide products that cater to all castes and align with Indian style and preferences. Instead of imposing a new Western style, IKEA can develop collections that embrace this style while hiring both Indian and Swedish designers.

Hiring Indians in the staff will be advantageous for understanding and implementing the Indian market. To deliver efficiently, Ikea should enhance its home delivery system at a low cost, considering that Indian consumers often have small vehicles. Additionally, Ikea should adjust its advertising strategy to communicate that everyone from any socioeconomic background can find what they desire at Ikea.

The 4P’s Analysis

• Product: IKEA has a very wide selection of products that includes all types of housing furniture, such as office, kitchen, living room, bathroom and even storage rooms or garages. Not only does IKEA sell furniture, but also cutlery, carpets, plants, plates, glasses, lights… One can basically totally furnish his/her house with IKEA furniture, from A to Z. The product quality standard is very high with IKEA products, and a lot of these products are designed by renowned designers, mostly Swedish, and have their own name, which is a sort of ”label” as it is unique to IKEA. Products also concern every age, and not only sells furniture for adults. There is also a wide selection of furniture designed specially for children bedrooms. Products are simple, easy to use, very functional, and are for the most part sold as kits, very easy to mount, and that allow the customer to familiarize with the object.

Price: IKEA’s strategy concerning the price is to stay competitive, by being one of the if not the cheapest furniture dealer in the area, in order to penetrate the market by dominating the prices. Juggling between the aspects of uniqueness, as each product is labeled, combined with low prices, IKEA aims at the middle-class, that seeks comfort, but still at an affordable price. More luxurious product ranges are also available in the store, even though the image of IKEA is not a luxurious one. In short, the price range varies, but the core pricing aims at the middle class population. Reducing the costs is partly possible because of the fact that the furniture in IKEA isn’t assembled, as the customers mount them by themselves. And the few objects that have to be assembled are mostly assembles by IKEA itself.

kitchen model, created with IKEA furniture only. The customer is able to stop and take a look, even try out the reproduced room, and note down the reference of the furniture that interests him/her, to then retrieve it in the storage room situated in the store, or at least very near of it. The store also offers other services such as a kindergarten and a cafeteria.

Conclusion

India has a wide range of industries, including telecommunications, information technology, transportation, hospitality, real estate, financial services, education services, power generation, transmission and distribution, machinery and equipment, water and clean energy, franchising and retail. When purchasing products in India,some consumers prioritize quality and opt for world-class options

while others are willing to compromise on quality for lower prices. Additionally,the level of after-sales service provided by salespersons also impacts the buying decision.