IKEA and India Assignment Example | Topics and Well Written Essays - 4000 words

IKEA and India - Assignment Example During 1960s-1970s, it became the prominent furniture manufacturer in Sweden. In the 1980’s, IKEA expands dramatically into new markets such as USA, Italy, France and the UK (Ikea, 2012). At present, Ikea has operations in more than 40 countries in the world. However, it has no business units in India at present even though India is one of the most rapidly developing economies in the world. Many people believe that India may become a superpower both in terms of economic growth as well as military power in near future itself. Moreover, it is often said that global wealth is currently shifting from less heavily populated American and European continents to the more heavily populated Asian continent because of the rapid growth witnessing in India and China like countries. Prominent international companies are currently competing each other in establishing business units in India like emerging markets. Under such circumstances, it is difficult for Ikea like MNC’s to avoid I ndia completely while formulating their international business strategies. This paper analyses the merits and demerits of India as a market for Ikea’s international business operations. Analysis and justification of Indian market Porter’s Five forces Model Michael Porter has identified five competitive forces which may affect the competitive power of an organization. They are; Threat of substitute products, Threat of new entrants, Intense rivalry among existing players, Bargaining power of suppliers and Bargaining power of Buyers (Porter’s Five Forces Model, 2009). The figure given below illustrates Porter’s five forces theory. (Porter’s Five Forces Model, 2009) Threat from new entrants is the first force in Porter’s five forces model. â€Å"Microeconomics teaches that profitable industries attract new competition until the downward pressure on prices has squeezed all the economic profit from the firms. New firms in an industry put downward pressure on prices, upward pressure on costs and an increased necessity for capital expenditures in order to compete† (Porter’s Five Forces- Threat of New Entrants, 2012). Furniture market in India is not much competitive because of the absence of prominent companies. In fact furniture manufacturing is a small scale industry in India and hence MNC’s like Ikea can easily overcome the resistance of small scale furniture manufacturers in India. In other words, Indian furniture industry is highly fragmented and Ikea can exploit such situation to their favor. Less threat from new entrants or competitors will help Ikea to increase their profits in Indian market. â€Å"Competitive rivalry will be high if there is little differentiation between the products sold between customers† (For Marketing Learners Globally, n. d). As mentioned earlier, Nokia may not face much competition in Indian market because of the absence of any furniture manufacturing MNC’s in Indian market. Small scale furniture manufacturers in India may not have the financial capabilities to compete with Ikea like big companies. â€Å"Supplier power exists when there are only few suppliers. It also exists when the switching cost becomes more for the organization to move from one supplier to another† (For Marketing Learners Globally, n.d). Availability of wood for manufacturing furniture is different at different locations in India. For example, India’s southernmost states such as Kerala have immense forest resources whereas North India has