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

IKEA and India - Assignment ExampleDuring 1960s-1970s, it became the prominent furniture manufacturer in Sweden. In the 1980s, IKEA expands dramatically into new-fangled 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 super office both in ground of economic growth as well as military power in near future itself. Moreover, it is often said that global wealth is before long 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 another(prenominal) in establishing business units in India like emerging markets. Under such circumsta nces, it is knotty for Ikea like MNCs to avoid India completely while formulating their international business strategies. This paper analyses the merits and demerits of India as a market for Ikeas international business operations. compendium and justification of Indian market Porters Five forces Model Michael Porter has identified fivesome competitive forces which may affect the competitive power of an organization. They are affright of substitute products, Threat of new entrants, Intense rivalry among existing players, Bargaining power of suppliers and Bargaining power of Buyers (Porters Five Forces Model, 2009). The see to it given below illustrates Porters five forces theory. (Porters Five Forces Model, 2009) Threat from new entrants is the first force in Porters five forces model. Microeconomics teaches that profitable industries attract new competition until the down(prenominal) pressure on prices has squeezed all the economic profit from the firms. New firms in an indu stry put downward pressure on prices, upward pressure on costs and an increased necessity for capital expenditures in order to compete (Porters 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 outmatch industry in India and hence MNCs 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 assistance Ikea to increase their profits in Indian market. Competitive rivalry will be high if at that place is little differentiation among 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 MNCs in Indian m arket. Small scale furniture manufacturers in India may not have the financial capabilities to compete with Ikea like big companies. 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 timberland for manufacturing furniture is different at different locations in India. For example, Indias southernmost states such as Kerala have immense forest resources whereas North India has