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IKEA India- Competitive Dynamics

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 IKEA India- Competitive Dynamics

1.0 Introduction

IKEA is the largest furniture manufacturer in the whole world. The company has its showrooms in almost 45 countries and now the company is establishing its first store in India, Hyderabad. IKEA was trying to create its footsteps in India for quite a few years. However, the company was facing issues from Indian politics. Finally, the company was able to manage the local government’s acceptance in 2013, May 2. The retail market of India is quite excited about the launching of IKEA in India, not only India, the whole retail industry of the world is interested to watch the result of this new initiative of the Swedish retail giant. The report is focusing on what business procedure and corporate structure IKEA India is following as well as the challenges the company is facing.

2.0 Background of IKEA India

 

Juvencio Maeztu is the IKEA India’s CEO. The Swedish retail shop is finally able to pass through the procedure of Indian Government had assigned for the company. The company has bought lands in Mumbai, Bengaluru and Gurgaon, though the actual shops will only come up in/after 2019. The Swedish MNC until now has stores in developed countries mainly but with the changing business strategy, the company is preparing a plan to land its stores in various developing countries as well. To prepare proper plans CEO Juvencio Maeztu has even knocked at Indian citizens’ houses for a better understanding of the Indian market and its choices. Juvencio Maeztu has identified some critical ideas, which the company must follow properly- land acquisition to build its large stores, proper policy framework based on Indian buyers, price control and hiring 50% women employees from every background in IKEA stores of India. Juvencio Maeztu is satisfied with the result, as the company has not lost its track regarding all of the factors mentioned above. Juvencio Maeztu says, “We could have started selling earlier. But we wanted to create the right preconditions,” (The Economic Times, 2018).

The company had to lobby hard with Indian Government to enter into the Indian retail market. Now, following the new rule, the company can source its furniture from Indian entity of its choice. The previous rule that was imposed on IKEA of 30% products sourcing from the SMEs is been relaxed now for the single-brand retailers. The company is also focusing steadily on the improvement of its right supply chain. The report says a single-brand retailer must meet the requirement of 30% sourcing from local market with its operations’ five years time period. Ikea India CEO Juvencio Maeztu is confident about the company’s reaching up to the requirement of 30% sourcing from its local market. If the company is not able to hit up then the company will not be able to get their costs right. Juvencio Maeztu is hopeful about the Indian market and planning to employ 20,000 employees within the next 15 years (Things in India, 2018).

3.0 Indian retail industry

India is occupying a leading position in the retail industry with growing time. The fast and dynamic industry is able to achieve the current speed with the entry of multiple new companies. The retail industry is holding onto 10% GDP of the country’s total business and total employment’s 8%. With this huge scope, India is now placed in the fifth position of the global retail business. The retail industry of India has immense power due to its huge population of the middle class who are quite affluent in the changing economy of India. When it comes to discussing the growing retail market then the reasons must be underlined. The reasons, which are helping Indian retail business owners’ are- Changing lifestyle, growing salary and digital connectivity. On an average, the Indian retail market is expected to grow at a speed of 12%. However, the changing modern trend can increase the number up to 20% per annum.

Indian retail market can be divided into two parts- Organised Retail Market (covers 93% of the whole market) and Unorganised Retail Market (covers 7% of the whole market). Market researchers are expecting that India will soon become the speediest growing market in e-commerce industry due to the robust investment and growing number of users with internet access (Abrams, 2018). It is expected that the direct selling industry of India by 2021 will reach up to 159.3 billion. Researchers have high expectations from Indian market. Not only these, but luxury market is also increasing in India and it is expected that by 2018’s end the market will reach up to US$ 30 billion supported by Indian youths’ growing interest in international brands and increased buying power of the people who come from upper class and upper-middle class families. The modern retail is also growing in India. By the end of 2019, it is expected that the market will reach US$ 70.45 billion (India and India, 2018).

Not only has the growing buying power of Indian citizens lead to this growth of the retail market in India, the investment amount is growing as well (Agarwal, 2017). The retail trading of India has received equity inflows from Foreign Direct Investment (FDI) almost US$ 1.14 billion. With all of this Indian Government is taking initiatives as well to help the market and to attract foreign investors in Indian retail industry. 

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