Pestel Analysis Of IKEA

Statement of Proposition:

Looking to grab opportunities to expand its retail and sourcing base, IKEA is planning to enter Indian market. However, entry into the Indian market has always been complex owing to its socio-economic inequalities and absence of physical infrastructure required to support a retail business as big as IKEA’s. To zero down upon an entry strategy we have studied IKEA’s past entries into different markets, potential and peculiarities of India market and the probable impact India’s culture and economic policies could have on the entry strategies. After a profound analysis of the above, we are suggesting strategies that IKEA could take up to circumvent the drawbacks of Indian market and succeed in the long-run.

In the report,

A thorough and comprehensive analysis of the market is required to arrive at a decision. The aim of performing a PESTEL analysis is to assess the market conditions of India for the entry of Ikea.

Political Factors: Not Favourable for IKEA

India is the largest democracy in the world. It practices a federal form of the government. The political interests vary widely between the central and the state governments. The political environment is influenced by multivariate factors such as government policies, ideologies of various politicians etc. The government policies are subject to various risks such as

♣ Delayed decision making due to political instability

♣ Cultural problems, delays or legal disputes due to local partners and suppliers

♣ Labour unrest and industrial

Economies of scale:

IKEA sourced its products locally to hedge against exchange rate volatility and get a more stable profit development over time.

IKEA in China:

China was a different market for IKEA as the other markets IKEA was operating in were more mature in comparison, also the disparity among the cultures of the other markets were not as huge as was with China. However, IKEA’s value proposition of low prices was completely in line with Chinese market owing to huge population, developing economy and rising aspirations of the people. In 1998, IKEA entered China and positioned itself as a good quality, western styled aspirational brand for middle-class customers.

Customization:

Customization of designs to suit the local taste: IKEA changed its basic designs a little bit to suit the Chinese customer’s taste and aspirations.

Advertising:

IKEA advertised on Chinese social media and micro-blogging website Weibo to market its products.

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