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Strategic Marketing Plan for IKEA who are focusing on greater growth and development of the ‘middle class market’ in India

Strategic Marketing Plan for IKEA who are focusing on greater growth and development of the ‘middle class market’ in India

IKEA GROUP

Ikea is a Dutch worldwide company native Sweden specialized in the retails furniture. The company has been created in 1943 in Almhult (Sweden) at the vision is ‘’ To create better everyday life for many people” IKEA selling ready to assemble furniture. They have 338 store in the world in 41 country, in 2011 the group made a turnover of 25 Billions dollars and 3 billions dollars of net income. Actually they have more than 150 000 employees.

CULTURE AND TRADITION

The second population world rank, India, by its geography and its history, presents a multitude of peoples giving to its culture a wealth and a variety in term of religion, kitchen, art or garment.

An outstanding phenomenon in the Indian society is the law of castes, religious reality come from the Hinduism. In India, castes are subdivisions of four classes of the society. In the summit, Bhuminar are the priests and the teachers and can live as well in the misery. We find afterward Kayastha, noble persons which their function is to administer the society, the Kumi: storekeepers and farmers, and the Yodav: servants and artisans. Finally, there is also pariah or the untouchable, who are in precarious situation and are considered at the bottom of the social scale.

The cultural contribution of the various peoples is made by artistic manifestations. In architecture, the Moslems brought the motive for lotus and the medieval time, the religious architecture. The music and the dance also knew several influences which made it typically Indian arts. Finally, the cinema occupies an essential place in the Indian culture. As a matter of fact, the Indian culture, thanks to its variety of ethnic groups, of languages, religions and customs, knew how to build up itself its own
identity.

Every religion and every region has its own name-days, besides the numerous national leaves. One of the first events of the year is the holiday of the Republic. January 26th shows the birthday of India republic, in 1950. A spectacular military parade in New Delhi, the capital, constitutes one of the main attractions.

LANGUAGE AND RELIGIONS

One of the first peculiarities of the Indian culture is the variety of the religions; numerous religions live on the Indian Territory. We can find in great majority the Hindus (79,8 %), Moslems (13,7 %) and also Buddhists, Jews, Christians, Sikhs, Jaïn. These differences faiths are often source of tension but the customs and the numerous religious holidays remain shared by all and enrich the Indian culture.

The constitution of India recognizes twenty two constitutional languages. There are many other regional languages and a very big number of dialects, Hindi is the main language of 30 % of the population. There are mainly two families of languages: the indo-Aryan languages (family of the Indo-European languages) in the North and the Dravidian languages in the South. Besides, English is the working language for numerous occupations (justice, data processing) as well as the language of study about 5 % of the population.

WAY OF LIFE
The population is even today a very rural population, jobs are divided in: 60 % in the agriculture, is 17 % in the industry and 23 % in the services. It is the country which have most engineers in data processing and its impressive variety of tastes and colours through the cooking or the fashion bring at the Westerner’s this more and more marked tendency ” made in India “.

INDIA MARKET

The Indian GDP is 1 843 $ dollars in 2011 according to the World Factbook CIA. The GDP per capita was 3700 $ in 2011 according to World Factbook CIA. Based on the same Agency in 2011 Agriculture representing 18,1% of the GDP, 26,3 for the industry and 55,6% for the services. The India GPD is the number in the world but number 4 in terms of purchasing power after the United States, China and Japan. The Indian middle class has more than 70 million people and is constantly evolution. The sectors that benefit the environment are foremost, services and manufacturing. According to a study by Jean-Joseph Boillot, former financial advisor to the Economic Mission in New Delhi, India’s growth will outpace China by 2010-2015. And in his book “The Indian economy,” he predicts that India will be the biggest rival to China in 2020.

INDIA FURNITURE MARKET

In India Furniture Market Representing 0.5% GDP, for information is about 8 billions $. With a demand steadily increasing the importation. The Indian furniture market has been an increase of 2.9% over the five past years, and with the economic growth of the country provides forecasts upof 8% in the five next years

INDIA COMPETITORS

I reported 5 main competitors on the market:

1- Furniture brand: Godrej Interio
Parent Company: Godrej & Boyce Mfg. Co. Ltd.
Head office Location: Mumbai
Product Categories: Bedroom, Living Room, Study Room, Dining, Kids, Kitchen, Home accessories, Mattress, seating, desking, storage, carpet, healthcare, Lab, marine Store locations: Across India

2- Furniture brand: Zuari
Parent Company: KK Birla Group
Head office Location: Chennai
Product Categories: Home Furniture, Soft Furnishing, Home accessories, Lighting, Kitchens Store locations: Across India

3- Furniture brand: Home Town
Parent Company: Future Group/Pantaloon retail
Head office Location: Mumbai
Product Categories: Home Furniture, Soft Furnishing, Home accessories, Lighting, Kitchens Store locations: Across India

4- Furniture brand: @home
Parent Company: Nilkamal Ltd.
Head office Location: Mumbai
Product Categories: Home Furniture, Soft Furnishing, Home accessories, Lighting, Kitchens Store locations: Pune, Surat, Baroda, Mumbai, Kochi, Hyderabad, Ghaziabad, Ahmedabad,Chennai, Coimbatore, Banglore

5- Furniture brand: Evok
Parent Company: Somany Group/ Hindware(HSIL)
Head office Location: Gurgaon
Product Categories: Home Furniture, Soft Furnishing, Home decor, Flooring, Modular kitchens, Bath, decorative Lighting Store locations: New delhi, Indore, Kochi, Jaipur, Bangaluru, Faridabad, Ghaziabad, Gurgaon,Chandigarh, Lucknow, Pune, Noida, Hyderabad, Mumbai, Ludhiana

OPPORTUNITIES AND THREATS

India entices the biggest companies of the worlds and the opportunities offered by the Indian market are considerable. The idea to implant Ikea follows this movement. What is interesting to become established in India?

Its capacity of consumption makes of India one of the most important markets of the world, India is a source of growth in term of demand (350 million Indians have a purchasing power superior to 3.000 dollars a month) whereas the poor population decreases in 1 % a year. The potential market offered to Ikea in case of establishment would there be immense. Then India is brought
to raise itself among the major actors of the world economy thanks to its knowledge already recognized in sectors of services and the data processing. Today for Ikea settle down would be an advance referring to the competitors in term of market knowledge and the recognition concerning the population. Other key point, availability of the Indian manpower which is absolutely extraordinary. This availability brings earnings in term of cost, of time and in term of ability to react which is an unmistakable advantage.

India is a new El Dorado for the European and American companies, but risks of failure and market threats still present. The Indian market is protected, with slow administrative procedures so the difficulties often to make approve products in time can be a brake for Ikea Other risk is classic for emerging countries and concerns the financial or political crises. Important risks in protection of the intellectual property and the corruption still persist. On the other hand, the variety of the languages and the cultures in India is a difficult problem to manage for the foreign companies. Finally the lack of infrastructures is problematic, the country missing roads, railway, ports and airports which needs a modern economy to export.

MAKETING MIX

All marketing is based on IKEA business idea: They shall offer a wide range of home furnishing items of good design and function, at prices so low, that the majority of people can afford to buy them. The company’s target customers are people, who are looking for value and who are ready to do some work serving themselves, transporting the items home and assembling the furniture for a better price. The typical IKEA consumer is young low and middle income family. In India now the middle class is not far from 40% of the whole population, it has grown up on 200 million people after the production, trade and investment reforms in 1991. PLACE: Where do the target customers live? Where to sell?

India’s economy is a mixture of traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and the
multitude of support services. So, most of people live in small towns and don’t earn much. But IKEA is interested in those, who live in cities and towns, so, it is better to set IKEA shops first, in the capital, Delhi (there are several main shopping areas in Delhi like Sadar Bazaar, Janpath, Palika Bazaar, Connaught Place, Ajnal Khan Market, INA market, Greater Kailash, Green Park and many others). It has sense to set up a shop not far from at least one of these main shopping areas. Or, it could be set not far from the centre in one of those areas, where most of houses are situated, and then in the biggest cities in states with the highs level of urbanization, such as Munbai (Maharashtra), where about 38,7% of population live in towns, Gandhi Nagar (Gajart), with ratio of urban population about 34,5%, and Chennai (Tamil Nadu) where 34,2% of people live in towns. PRODUCTS: What to sell?

The product mix proposed by IKEA in India will be organized around four major styles:

“IKEA Mix”
It must be sufficiently wide and diversified to include attractive products for everyone and cover all the functions expected from interior furniture.

“Furniture Expert”
IKEA’s products are functional and attractive and enable the majority to improve their domestic Indian life through the offering of practical solutions to daily problems.

“The Function”

IKEA Indian’s products are based on a functional approach to design. This vision is reflected by attractive, practical and Indian customer – friendly products. They provide simple, functional and original solutions to satisfy consumer’ needs.

“Fair Quality”
The quality of a product is directly related to its possible use. IKEA’s
products are in accordance with national safety standards and undergo quality tests. The IKEA Concept is built on the following points: a wide range of IKEA home furnishing products, the IKEA catalogue and the IKEA trademarks. There are about 10 000 products in the total IKEA Indian product range. The core range is the same worldwide. Of course, not every shop, only the biggest, can carry all these range, so, each store sells a selection of these 12,000 products depending on the store size. The rest products are available by a catalogue. So, it will be the same case in India.

Price: How much does it cost?

IKEA’s success is based on the relatively simple idea of keeping cost between manufacturers and customers down. According to the Ingvar Kamprad, the founder of IKEA: “To design a deck which may cost $1,000 is easy for the furniture designer, but to design a functional and good deck which shall cost $50 can only be done by the very best. Expensive solutions to all kinds of problem are often signs of mediocrity.” Costs are kept under control starting at the design level of the value-added chain. IKEA also keeps prices at the low level by packing items compactly in flat standardized cartons and stacking as much as possible to reduce storage space during and after distribution in the logistics process.

Table: Support activities to the general policy of low prices developed by IKEA in India

Activity 1

Identify raw materials and materials at low prices: IKEA’s designers and customers constantly will seek alternative materials corresponding to a good quality and lowest cost. In particular, this will be reflected by the substitution of teak by beech components and by the diffusion and, later acceptance of cheap furniture made of pinewood and yellow wood. The development and adaptation of particle panels in the furniture industry also will follow that global vision.

Activity 2

In an effort to maximise production on the basis of available capacities, IKEA India will constantly seek non conventional suppliers. In this perspective, IKEA India will offer contracts relating to the production of tables to a car manufacturer, and the production of pillow covers to a tee-shirt manufacturer having an excess capacity. Quite often, designers will start from the material of a product before starting their conception. Therefore, IKEA will be able to keep its extremely favourable price level only by guaranteeing the safety and observance of the delivery programs of its suppliers and by filling the available production capacities of the latter.

Activity 3

Development of long term relations with suppliers: IKEA India will give support to its suppliers both technically and financially, sometimes, it designs their manufactured products, will pay for their machines and will start operations. By fixing and guaranteeing a high volume of orders, IKEA will encourags its suppliers to invest and to reduce their production costs. This often means that the supply chain strongly depends on IKEA. Some suppliers have no other choice than to follow IKEA’s stringent policy.

Exactly this approach at the minimizing costs will make IKEA furniture so attractive to the Indian’s consumers, because urban consumers Indian today are relatively less price sensitive than a few years earlier.

Promotion

To facilitate shopping, IKEA India provides catalogs, tape measures, shopping lists and pencils for writing notes and measurements. Effective marketing through catalogues usually attracts the customer at first, what keeps them coming back is good service. These catalogues are available in any IKEA store (prices are guaranteed not to increase while the catalogue is valid, which is again attracting consumers). The outlets in India can also make
success by sending the direct mail to the potential customers. Another good way of promotion could be television advertising, because of its wide auditorium. For example, the main canal, Doordarshan (The Indian National Television Network) has the maximum reach in the country. It covers approximately 85% of the Indian population. Large number of services, which IKEA provides to is customers, is also can be attractive for new consumers. Many IKEA stores offer a home decoration or kitchen planning service. The IKEA store also offers a home delivery service (which is not included in the product price) and a generous return policy.

Media penetration as of 2006

All India
Urban

Print
25%
46%
Terrestrial television
53%
80%
Cable and satellite television
20%
46%
Radio
22%
25%
Cinema
7%
11%
Internet
1%
3%

Top Business Magazine used for the promotion:

– Business World
– Business Today
– Business India
– Dalal Street Journal
– Business Newsweek

Popular non-English dailies in urban India used:

– Malayala Manorama (Malayalam daily)
– Mathrubhumi
– Daily Thanthi (Tamil daily with 14 editions and a circulation of 790,900)

Popular English dailies in urban India:

– The Times of India (7.05 million readers, IRS 2006)
– Hindustan Times
IKEA VALUES CHAIN
For Ikea Activities
1. Inbound logistics: Ikea has 27 distribution center wordwide and 10 000 products are manufactured by 2,000 suppliers. 2. Operations: IKEA operates in more than 38 stores and has more than 208 stores. They have own stores and franchises. 3. Outbound logistics: Customers have the choice to transport the product. Ikea provides the ability to deliver products, or put at the disposal of customers adequate transport vehicles. 4. Marketing and Sales: in the West the marketing message is aimed at household with small budget. In India the target is more of Upper middle class, young and fashionable people. 5. Services: Ikea based is business model on competitive price, it’s why charges should be the lowest possible, the number of employees at the stores is not very important, and the customer is not really attend. For supportive activities:

1. Firm Infrastructure: Big stores.
2. Human resources Management: The is a good training program development for the employees to assimilate process and company culture 3. Technology
development: R&D is based in Sweden.
4. Procurement: There is no production of own brand product, Ikea outsourced the production of furniture

MARKET SEGMENTATION AND POSITIONING

Bases for segmenting the market :
India is still an emerging country so that mean the are a big part a the population living below the poverty line. So we targeting an middle class connects to the world and having socials need on the pyramid of Maslow.

Our segmentation is the following :

1. Target by age:

-25 – 45 years old
-Young workers – thirties and forties

2. Segmentation based on Lifestyle:

-People attracted to western style
– Fashionable and attachment to ancestral traditions, modern people

3. Segmentation based on Revenues:

-The target is the Upper middle class
– 4500$ at 22000$ per Years

4. Segmentation base on geography:

-Urban Population
Positioning: Price should be abordable, proposition of multiple product with good value for money, proposition of modern and fashionable product for Indian middle class.

Why India is an ideal destination for IKEA?

To facilitate it sector after sector, the rules forbidding entry of foreign capital disappear, an establishment of IKEA in India would be simpler. The Indian population is also very demanding in quality product so the reputation of IKEA in the field of the furniture could be an advantage.

Become an inescapable partner, India offers very numerous trumps cards and presents opportunities which you should not allow to pass.

What IKEA is supposed to do to make a success in India?

Market which can offer numerous opportunities, become established in India for Ikea requires adapting itself to the Indian culture and its specificities in term of management.

Before giving in to the temptation to impose a European model, which is about marketing, about management or about strategy, Ikea will have to adapt its management to the local specificities. It is necessary to listen to what the Indian interlocutors have to say, sometimes expressing a different approach, but maybe partially or totally better adapted to the reality of the market. The Indian management being more organized into a hierarchy the European self-management is to be avoided.

To make a successful establishment, the French group has to develop a flexible common culture to make the bridge between both Indian and European manager cultures, by the help of local managers capable of making decisions quickly. Every States possesses its own rule, its own consumers, it is necessary to understand this different and requiring market to build stable and durable business connections.

Ikea will have to get ready to surmount the deficit of infrastructures especially at the level of the lack of electricity and its high cost. Finally answer to the working standards (The Ethics of Respect) which is more and more social responsibility of the big world companies will be
measure to be respected for Ikea

Conclusion

This subject shows how it is difficult to become established in a country with a different culture. It is advisable to analyze in depth the peculiarities of the country, its population to remove most possible information to be able to adapt its management, its products to the consumers.

For Ikea the advantages of a future establishment would be numerous (economically, fame, market share) however it would be necessary to respect the Indian culture without wanting to impose a European model of management

The culture of India has a new challenge: integrate, as she does since fifty centuries, the new tendencies while keeping its traditions and its values.

Bibliography

Books

G Hofstede, 2001. Culture’s Differences: Comparing Values, Behaviors, Institutions and Organizations Across Nations. 2nd ed. Sage Publications. Culture and Management in Asia, Malcolm Warner

WEBSITES

www.cultureofindia.net
www.culturalindia.net

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