International Business Management

Winter 2024
Assignment-2

Submit a short essay on the following case study questions (maximum 2-4 pages in APA
format). You are expected to demonstrate the ability to think critically; organize and
synthesize knowledge; convey judgement; and communicate in simple, clear, and precise
terms. Please support your views with relevant examples. To help your analysis, refer to the
textbook and lecture slides, and read relevant materials to substantiate them.

CASE: IKEA Entering India, Finally!

Summary
The Swedish home furnishings giant IKEA finally entered India in 2018 after more than five
years of preparation (including the last two years building the stores). The question still lingers
though, can IKEA adapt to the aesthetic wants and needs of Indian customers, and can the
company motivate the Indian customers to buy into the do-it-yourself bug that is a symbol of
the IKEA brand? After all, many customers around the world think that IKEA’s success was
built on the “L-shaped” metal IKEA tool used to put together virtually all of IKEA’s furniture
after you get the pieces out of the flat box. And no one knows what to call the L-shaped tool—
although there is an official IKEA emoji for it on smartphones and a keyboard app for iOS and
Android phones for IKEA emoticons (the meatball plate with a Swedish flag at the top looks
interesting)! But is this a style, emoji, emoticons, and lifestyle that will work in India? How is
it working so far?

India became the fifty-first country that the largest furniture company in the world, IKEA,
entered since its founding in 1943. Since its founding, IKEA has become a $43 billion
company in sales annually (€35 billion), which has been the envy of the furniture industry and
the benchmarking model for companies across several industries around the world. The flat
packaging, high quality for the price you pay (i.e., great value), and global supply chains make
IKEA a superbly efficient company with an effective business model. Amazingly, the business
model has been in place ever since Ingvar Kamprad founded IKEA, with very minimal changes
except for being implemented on a much larger scale—growing rapidly almost every year.

The IKEA business model and the company’s assortment of products are now on the move to
take over India like they have been doing with other countries. After all, IKEA’s market entry
into China in 1998 went reasonably well. IKEA has three stores in Shanghai, two stores in
Beijing, two stores in Chengdu, and one store each in Tianjin, Guangzhou, Shenzhen, Nanjing,
Dalian, and Shenyang, along with 11 more stores across smaller cities in China. For India,

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IKEA initially plans to open 25 stores but has marked some 49 Indian cities that have potential
for an IKEA store in the future. The 25-store plans call for an investment of about $2 billion
over 15 to 20 years. As we said in the opening, IKEA began its India market entry planning in
2013 and started building in 2016. The first construction took place in Hyderabad and is a
400,000-square-foot store at a cost of $110 million.

To ease Indian customers into the IKEA model before the store opened in 2018, the company
unwrapped its first experiential centre, IKEA Hej (Hello) Home, close to the IT hub of
Hyderabad. The Hej Home small-scale store provides some insight into IKEA products and
solutions, which future Indian customers could buy before the store opened in Hyderabad. This
also eased the market entry into India and helped point out glaring problems that IKEA
management could tackle before opening the actual large-scale IKEA store. The Hej Home,
designed and built over a six-month period, highlights what IKEA stands for and what to
expect. Ikea Hej Home reflects IKEA’s understanding of life at home in India and its unique
home furnishing solutions, including food and room settings, for Indian homes.

The preparation to get to the IKEA Hej Home concept and ultimately to the first large-scale
store opening in Hyderabad was a long, research-oriented endeavour. The Swedish home
furnishings giant with a reputation for being very Swedish in almost everything they do sent
one of its top design executives, Marie Lundström, to India with a mission to understand the
Indian mindset and aesthetic. IKEA had decided that it needed to learn everything it possibly
could about Indian customers in a variety of Indian homes, places, and settings. The entry into
China in 1998 went well but was also undertaken before the advent of the social media world
we now live in. India could not go wrong for IKEA; the brand depended on it.

Lundström didn’t leave a single stone unturned. She visited nearly 200 Indian homes all across
the large landscape of India. She spent countless hours interacting with Indian family members.
IKEA also did the usual customer surveys with a large cross-section of potential customers. In
all, under the leadership of Lundström, IKEA found some important characteristics of Indian
customers that could be effectively used by IKEA to make sure their market entry into the
country in 2018 was as successful as possible. Some of the findings indicated that Indians love
colour. Indians’ family lives centre around the couch. They watch TV while eating, which is
not much different than Americans and many other nationalities, but nevertheless a finding that
was helpful to understand India, the country’s customers, and their characteristics.
Unfortunately, customers in India are not big fans of the IKEA trademark of do-it-yourself.

Taking all of this into account, IKEA could now plan accordingly. The company meticulously
planned its large-scale store design and product range for one of the largest economies in the
world with one of the largest potential customer populations. It is a remarkable journey that
took IKEA five years from initiation of the idea of entering India, including three years of
detailed planning and research and a couple of years of actually building the first store in

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Hyderabad. It is a fascinating story, journey, and a deviation from normal practice for IKEA—
the company that prides itself on being Swedish in its processes, product names, and food
served in its restaurants! To date, IKEA has about 400 employees in India and the company has
plans to increase that number to 15,000 employees by 2025, with half being women.

Discuss the following critical thinking questions.

1: How well has IKEA been able to adapt to the Indian market? Explain.

2: Has IKEA used the same market entry strategy in different global markets? Explain.

Note: Assignments that are late will receive a 10% per day penalty deduction. Without prior
extension/approval I will not grade assignments submitted more than 3 days after the due date.

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