What promotional mix can be adopted by IKEA Furniture LTD to increase its customer base in India

Document Type:Thesis

Subject Area:Business

Document 1

A good example of this market segment is the Indian market. In the realization of this, IKEA have devised strategies to ensure that the customers become highly attached and heavily reliant on their products, thereby, promoting the company’s popularity even more. The company has a catalogue of all its products and services ranging from fittings and furniture, to more complex and intricate assemblies to organize a wide range of home furniture. IKEA has managed to continuously maintain its relevance in the market by adapting to the dynamic business environment and consumer needs. They achieve this by constantly seeking to extend their customer base in the countries that they recently ventured into. Their marketing and promotional mix has been the key factor in boosting the growth of the customer base. Their designs have always been developed with fresh innovations and this has been a key differentiation key in their Indian market. The key for IKEA has always been to provide the business with a wide range of items and administrations in order to conform to their consumer needs. Therefore, this research attempts to propose a promotional and marketing mix that IKEA may use to expand their market base in India in order to attract more customers and cement their market position. INTRODUCTION ABOUT IKEA 1IKEA is a Swedish-founded multinational ​group, headquartered in the Netherlands that designs and sells ready-to-assemble furniture​, kitchen appliances and home accessories. It has been the world's largest furniture​retailer since at least 2008. It was founded in Sweden ​in 1943 by then-17-year-old Ingvar Kamprad​, who was listed by Forbes​in 2015 as one of the ten richest people in the world, worth more than 40 billion dollars.

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The company is known for its modernist designs for various types of appliances and furniture, and its interior design​work is often associated with an eco-friendly​simplicity. In addition, the firm is known for its attention to cost control, operational details, and continuous product development. The IKEA group has a complex corporate structure, which the European Union​has alleged was designed to avoid over 1 billion Euros​in tax payments over the 2009-2014 period (Baraldi 102). It is controlled by several foundations based in the Netherlands, Luxembourg and Liechtenstein. As of November 2017, IKEA owns and operates 410 stores in 49 countries. The IKEA website contains about 12,000 products and is the closest representation of the entire IKEA range. The Company is responsible for approximately 1% of world commercial-product wood consumption, making it one of the largest users of wood in the retail sector.

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IKEA’s Eco-friendly nature and unique approach in India will be an achievement for both the firm and the specific market. worldfurnitureonline. com/research-market/profiles-50-major-furniture-retailers-worldwide-00 58620. html • http://fortune. com/2016/02/12/ikea-tax-avoidance/ • http://www. ikea. ​TYPE OF RESEARCH Secondary Research SOURCE ▪ Business & Management Text Book ◦ Information to obtain:​For theories and concepts. Different tools and analysis. ▪ Web portals Information to obtain:​Research on marketing mix, how to use business tools • Articles Information to obtain:​About Ikea, its position and strategies in other countries, product development and variation, etc. MODELS AND BUSINESS TOOLS A business model or tool describes the reasons on how an entity formulates, delivers, and captures value. This description can only be related to social, cultural, and economic contexts. EVALUATIONS OF IKEA’S MARKETING STRATEGIES ​PESTLE ANALYSIS 5PESTLE is an acronym for Political, Economic, Social and Technological.

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This analysis is used to assess these four external factors in relation to your business situation. Basically, a PESTLE analysis helps you determine how these factors will affect the performance and activities of your business in the long-term. It is often used in collaboration with other analytical business tools like the SWOT analysis​and Porter’s Five Forces to give a clear understanding of a situation and related internal and external factors (Baker 32). PESTLE ANALYSIS FOR IKEA POLITICAL FACTORS 6The decision of IKEA to enter the Indian market and invest crores gives a positive signal to the other investors who have turned hesitant in view of the UPA government's policy drift on foreign direct investment. com/pest-analysis/ 6http://fortune. com/2016/02/24/ikea-india-rules/ ECONOMIC FACTORS India’s economy is one of the fastest growing around the globe and has an unexpected potential for heavy and basic industries.

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The government has to adopt measures to retain the entry of this company and reduce the power of private sectors in the market. The government aims to increase standards of living and reduce levels of unemployment and poverty, hence, initiating fast growth. They plan to have socialist objectives and adopt socialist patterns of development-based on equality-reducing inequality in income distribution The Indian Government announced a new industrial policy in July 1991, as a part of economic reformation, which includes the following characteristics (Douglas et al. The entire supply chain of IKEA turns absurd, increasing prices, reducing customer base, increasing competition from local stores offering furniture at lower and affordable prices (Ferrell 76). Furniture is not a fast moving consumer good, it is hard wearing and aims to last long which gives the consumers a perception of not removing the good but seeing it be serviceable even now.

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All these factors might affect IKEA’s margins and profitability in the Indian Market. SOCIAL FACTORS Population 1,210,193,422 (2011 est. nd) Growth Rate 1. years (2009 est. Infant mortality 30. deaths/1,000 live births (2009 rate est. Age structure 0-14 years: 31. male 190,075,426/female 172,799,553) (2009 est. TECHNOLOGICAL FACTORS New technologies create new products and new processes. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organizations providing the products. Online shopping, bar coding, and computer-aided design are all improvements to the way business are done. India, in the past decade, has witnessed a technological growth unparalleled. Legal changes can affect a firm’s costs and demand. This consists of legislation that is passed by the parliament and state legislatures. Examples of such legislation specifically aimed at business operations including the Trademark Act 1969, Essential Commodities Act 1955, Standards of Weights and Measures Act 1969 and Consumer Protection Act 196 (Ivarsson et al.

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ENVIRONMENTAL Environmental factors include the weather and climate change which affect businesses or firms. Changes in temperature can impact many industries including farming, tourism, and insurance. There are certain mediums — ATL and BTL Objectives — using which IKEA might be able to create the bridge between its company and the consumers. The company needs to analyze the market and decide its strategy for attracting consumers. IKEA is a globally renowned company which serves all classes of people, it has an extravagant product and price range allowing people from all sections of society to walk in (Jonsson et al. The company’s defining characteristics is its steady low price, entertainment and an inviting experience for all customers. Choosing between the two methods of promotion can be confusing for the market heads since India is an extremely volatile country.

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BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential.  It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and it’s potential.  It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive position (relative market share). These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose of the analysis is to help understand, which brands the firm should invest in and which ones should be divested.

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It also needs to do this in order to compete with the comparatively low prices of Indian furniture. Establishing a domestic production base in India will help IKEA to work toward reducing its price while also not compromise on the IKEA quality, something which is an extremely vital selling point. After working on this, IKEA is working to redraw and mould its marketing strategy in accordance to the Indian subcontinent, and for this, it will not only use below the line, but above the line technology too since it shows immense potential and is the best way to acquire Indian customers in the current dynamic market. It will do this by focusing on its cash cows and products which show promise to Indian customers. Thus this mix of reducing prices, as well as using above the line promotion to make India aware of the IKEA quality and working on creating an image of utmost luxury for IKEA, is what will help IKEA not only acquire customers, but also retain them for a lifetime, in hopes to create an IKEA ecosystem of products in India, in the foreseeable future.

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IKEA’s no delivery business concept will make it difficult for low-income earners to take their purchased products home since a majority of the Indian population do not own their own vehicles as they rely on public transportation. Moreover, the company’s DIY concept will not suit the image of IKEA in India since most of the buyers prefer to pay for an already assembled product. Therefore, IKEA will need to redefine its market segment and focus its resources on ensuring they cater for the needs of this segment. As illustrated in the PESTLE analysis, the Indian market is quite different to that seen in the developed markets. Brand awareness in India is low and Western designs may not be popular in this market. IKEA should, therefore, communicate with its target customers through social media since the active monthly users is currently more than 100 million people in India.

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LIMITATIONS OF RESEARCH • Any reports validity must be considered. • Articles can be biased, have false information and be inaccurate. Information is often distorted or skewed and cannot be entirely relied on. Works Cited Baker, Michael J. Doole, Isobel, and Robin Lowe.  International marketing strategy: analysis, development and implementation. Cengage Learning EMEA, 2008. Douglas, Susan P, and C S. Craig. Ivarsson, Inge, and Claes Göran Alvstam. Upgrading in global value-chains: a case study of technology-learning among IKEA-suppliers in China and Southeast Asia.  Journal of Economic Geography 11. Jonsson, Anna, and Nicolai J. Foss.

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