IKEAs plans to enter India

International Distribution

Nikhil Garg Lov Loothra Emilie Perrussel Anne-Laure Laclau

SUMMARY

Summary
I.

II.
III.

Presentation of the company IKEAs General distribution strategy IKEA in India: 3 possible strategies
Plan A: Leverage the Global Production & Distribution Network Plan B: Setup a Production & Distribution centre Plan C: Identify established player for a Joint Venture

IV. V.

Suggestion Conclusion

I. Presentation of IKEA

IKEA

Founded in Sweden (1943); HQ in Netherlands Privately held, international home products company Specialized in affordable self-assembly furniture 338 stores in 40 countries in 2012 27,5 billion turnover of which

80% made in Europe 15% made in the US Only 5 % in Asia!

I. Presentation of IKEA

The IKEA Vision

Offer

well designed, functional home furnishing products Low prices in order to ensure affordability by most people The IKEA VISION guides the way IKEA products are designed, manufactured, transported, sold and assembled

II. Distribution strategy

Hallmarks of IKEAs Distribution

Global Network
Large Volumes Flat Packages Low Costs

II. Distribution strategy

Distribution Statistics
27

distribution centers 11 customer distribution centers in 16 countries 41 trading services offices in 30 countries 1380 suppliers in 54 countries Most supplies purchased from Europe 9500 products

II. Distribution strategy

Success Factors

Sourcing materials close to the supply chain to reduce transport costs Building DCs closer to seaports so that it can use more of ocean transport and less of road transport Delivering products directly from the supplier to IKEA stores to cut handling cost, reduce road miles and lower the carbon footprint Warehouse attached to retail stores

II. Distribution strategy

Success Factors

Using flat packs: reduce costs through reduced transportation expenses, lowered storage space requirements, decreased transportation damage and reductions in labor costs Transporting goods where possible by rail and sea Utilizing fuel-saving techniques that allows to be cost-effective and environmentally friendly

II. Distribution strategy

Success Factors

Implementing JDA supply chain management tools

Advantages:

JDA Demand JDA fulfillment

Consolidated suppliers base, helps focus on low cost suppliers Improved forecast accuracy to drive profits Cost saving due to long term commitments achieved from near accurate forecasts Increased overall supply chain visibility Better coordination in sales, capacity and distribution

III. IKEA in India: 3 possible strategies

Foray into India

On

21st January 2013, Indias Foreign Investment Promotion Board (FIPB) provided its clearance to IKEA to invest in India plans to open 25 stores, investing about 1.5 billion over the next 15 to 20 years

Ikea

III. IKEA in India: 3 possible strategies

Distribution Challenges in India

Infrastructure Low % of car ownership & No DIY culture Low Home and Design expenditure Competitors with very low prices No brand awareness

Sourcing strategy
Legislative and social aspects Scandinavian design too plain

III. IKEA in India: 3 possible strategies

Ikea Design vs. Indian typical style

III. IKEA in India: 3 possible strategies

Plan A
Leverage the Global Production & Distribution Network Pros

Already established: no initial setup costs Reliable Consistency of Quality Costly Decreased viability in the long run Legislative constraints

Cons

III. IKEA in India: 3 possible strategies

Distribution Center (China)

Rail / Trucks

Swedwood Production Center (Europe)

European Suppliers

Multimodal

Retail Stores/ Warehouse (India)

Multimodal

Indian Suppliers Personal Vehicles

Personal Vehicles

Plan A

Customers

III. IKEA in India: 3 possible strategies

Plan B
Setup a Production & Distribution center in India Pros

Easy to meet local demand Better coverage possible Will create jobs for locals Huge initial time and cost Infrastructure can be a hindrance

Cons

III. IKEA in India: 3 possible strategies Huge Initial Cost

Distribution Center (India)

Indian Production Center

Rail / Trucks

Rail / Trucks

Rail / Trucks

Retail Stores/ Warehouse (India)

Personal Vehicles

Plan B

Indian Suppliers

Customers

III. IKEA in India: 3 possible strategies

Plan C
Identify established player for a Joint Venture Pros

Cons

Can leverage contacts/infrastructure of the partner Valuable insights and experience into an untapped but growing market

Imbalance of expertise and/or investment may create conflicts Initial establishment of a working model may prove to be difficult

III. IKEA in India: 3 possible strategies

Distribution Center (Indian Partner)

Rail / Multimodal

Production Center (India / Europe)

European Suppliers

Rail / Multimodal

(Partner)

Rail / Multimodal

(Partner) Retail Stores/ Warehouse (IKEA + Indian Partner)

Rail / Multimodal

Personal Vehicles

Plan C

Indian Suppliers

Customers

IV. Conclusion

Conclusion
Our

distribution plan suggestion patience

Exercising Therefore,

a well-developed strategic plan with both short-term and long-term goals is extremely important to finally be successful in a huge, diverse, and fastgrowing country as India

REFERENCES

References
1. 2. 3. 4.

5. 6. 7. 8.

TREBILCOCK Bob, "IKEA: Think global, act local for warehouse distribution", Modern Materials Handling, 25 August 2011 SHARMA Amol, HANSEGARD Jens, IKEA Says It Is Ready To Give India a Try, The Wall Street Journal, 24 June 2012 SHARMA Malavika, IKEA India Plans Give Scant Reassurance to Foreigners, Bloomberg, 10 January 2013 ROY Rajesh, AHMED Rumman, Indian Agency Clears IKEA's Proposal to Open Stores, The Wall Street Journal, 21 January 2013 DAS Sohini, "Local players give thumbs up to IKEA's entry in India", Business Standard, 28 January 2013 http://www.youtube.com/watch?v=11AehTPD-Vg http://franchisor.ikea.com/about.html http://www.swedwood.com/about-swedwood/

Thank you for your attention!