Ikea - Expanding Wings to India

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International School of Management

IMBA Full Time Track
Case Study I
IKEA: Expanding Wings to India

Jean-Jacques Charro

05/11/2016

ABSTACT

In 2012, 100% FDI in single brand retailing was permitted under the administration endorsement course in India. This was liable to specific conditions, for example, neighborhood sourcing commitments. IKEA, the 25 billion euros Swedish furniture retailer chain, which had arrangements to enter the Indian retail industry, put its proposition to set up its stores in the nation. Through there were beginning hindrances, for example, nearby sourcing requirements and setting up its mark bistros at its stores, by mid-2013, IKEA had gotten full endorsement to set up its stores keeping in accordance with the 'IKEA idea'. Numerous remote retailers were hoping to open stores in India, since blossoming white collar class was progressively adjusting Western items and tastes.

1. INTRODUCTION

IKEA, the world’s largest furniture retailer, is famous for its low prices and functional furniture. It combines the elegancy of high end furniture with prices affordable to the public. IKEA offers a unique shopping experience inside its stores, vast spaces, large pathways, coffee shops, and a variety of colors entertaining shoppers inside. This famous shopping experience, allowed 775 million people to visit IKEA last year, and the IKEA catalogue printed in 210 million copies is twice as popular as the Bible. An implementation of IKEA in the Indian market is a huge challenge, but offering IKEA an exposure to over 1 billion people residing in India. In this case study, the Foreign Direct Investment (FDI) will be discussed, as well as the strategy adapted by IKEA to enter the Indian market, while exploring the many opportunities and challenges facing IKEA in India.

1. FDI in Indian Retail Sector
   
   2.1 FDI timetable in Indian Retail Sector

Foreign Direct Investment (FDI) is a source of investment flow in developing countries like India. In 2004, the High Court of Delhi defined the term ‘retail’ as a sale directly to the consumer, on the contrast of wholesale which is a sale to be submitted to further processing. In such a definition, retailer is selling goods for an individual consumer at a margin of profit.  With the economic liberalization in 1991, India a member to the World Trade Organization’s, had to unlock the retail sector which happened in 1995. This unlock included wholesale and retailing services.  In 1997 FDI in cash and carry (wholesale) with 100% rights allowed under government approval route was carried in India. As of 2006, FDI in cash and carry was brought under the automatic route, as well as 51% FDI in single brand retail is permitted. In 2011 100% FDI in single brand retail. [1] Until 2011, the Indian government didn’t allow foreign direct investment in multi-brand retail, thus forbidding foreign groups of opening chain stores within the country. This was to sell multiple products from different brands to the customers. On the 24th of November 2011, Indian Prime Minister Manmohan Singh announced that India will allow 51% FDI in multi-brand retail.[1] In this move, Indian government has reformed its vision regarding FDI in retail sector. It now keeps the interest of small unorganized retailers and farmers, and also opened the market to attract FDI in multiple brand retail.