IKEA in Qatar - Research Paper Example

Number] IKEA in Qatar The role of political, social, economical, and technological factors in prevailing IKEA strategy: Qatar is a country with a politically stable landscape. The power went to The Emir; Sheikh Hamad bin Khalifa Al-Thani in 1995 and ever since then Qatar has been open to the global market despite its traditional conservative society (Fromherz 77). The highlight of Qatar’s political landscape is its developing and flourishing relations with the US which has brought in regional peace and stability, and strong trade and investment ties (Kamrava 5). Qatar is a member of the WTO and regarding their obligations, there have been reduced tariffs, unnecessary restrictions and barriers are being lifted, and foreign investors are given more opportunities. Moreover, there are also possibilities of a Free Trade Agreement. Also, the currency in Qatar is stable and no foreign exchange controls are imposed (Zahra, 2014). IKEA in Qatar has to go through a detailed political insight before establishing their business. Qatar is open to the foreign businesses and the political factors will help IKEA to prevail their policies. The stable currency allows IKEA to carry out their strategy of good quality products in affordable prices. Reduced tariffs and no unnecessary trade restrictions would allow IKEA to carry out their sales without hindrance (Fromherz 112). However, there are certain tender bond requirements and joint venture requirements for international businesses that may hinder IKEA’s smooth growing in Qatar. Moreover, there is an increasing tax on corporate income which may threaten IKEA’s future profitability (Healy 53). Qatar’s socio-cultural factors are highly important in considering the market for international businesses. Qatar has a small population of about 1 million and out of those only one-fifth of the population is Qataris while four-fifths are foreign workers. The resources, stable government and political system, and the strong economic system are leading to a population growth gradually. Qatar has a diversified culture with many locals and foreigners from South Asia, Iran, Jordan, Egypt, and other countries. The reform minded government is currently spending heavily on the infrastructure and construction sectors to improve the lifestyle and standards of living of the people (Algethami, 2013). The affect of socio-cultural factors on IKEA’s strategy will be notable. These are important as they would determine the acceptance of IKEA and their products in the local market. IKEA will face challenges as they will have to fulfil the demands and expectations of locals who belong to different cultures rather than one. This means IKEA will have to amend their products as per the expectations of every type of people in Qatar. This can be a threat for IKEA in the Qatari market as preferences are different and there is no majority to follow upon (Sminia 167). Moreover, the IKEA marketing department will face threats with the increasing rate of diversity which means they will have to update their product design range and variety every now and then. Moreover, IKEA will have opportunities for higher sales and profits with the increasing population and more spending on infrastructure and construction sectors. Qatar is one of the most economically stable countries of the world. Its economy is expected to expand in the coming years at a rapid pace. The potential for economic growth is tremendous with a current GDP of more than 200 billion USD. Qatar enjoys one of the highest standards of living with a high national income and an inflation rate of as low as 3%. Investment rates are high especially foreign investment and the rate of Gross National Savings was about 56% (Morrison 233). IKEA in Qatar and its strategies are affected by the economic stability as it ensures the future profits and stability in the local market. The higher national income and investment and saving rates means that locals have a stronger spending pattern and their high standards of living means that would spend on expensive furniture. This means IKEA has a strong market in Qatar. Moreover, the potential rate of growth of the economy means that IKEA has brighter opportunities in the Qatari market and they must prepare their future strategies and policies. Since the population is rising and the economies are unpredictable, any minor change in the economy can pose a threat to IKEA’s business thus they must be careful and vigilant. Technological environment in Qatar is rising and advancing with every passing day. One of the sectors in which there has been immense growth is the IT sector. There are new technologies being used in the government sector, businesses, and education as well. Government has been spending on the latest technologies that could lead to development and advancement in exploring and expanding (Wilson 173). IKEA in Qatar would be greatly affected by the technological environment as technology is taking over every aspect of our lives rapidly. Every business today needs a wide range of technologies that would help them prosper in their fields; especially when the businesses are international. These technologies allow easy trade and communication between businesses. It also allows businesses to reach customers through various new methods such as online shopping, feedbacks, online subscriptions, etc. IKEA can avail the technological environment to increase their opportunities for growth and better customer relations (Scott, 2014). However, it can also be a threat in the long run as they need more skilled labour, experts in IT, and more funds to setup the machinery and systems. Global and Local Strategies: Since IKEA is an international business, it is vital that there is a balance between its global strategies and local strategies. The global strategy of IKEA is to sustain its high quality products and use of materials, to maintain the affordable prices which has been the overall agenda of IKEA and for which it has made several loyal customers throughout the years. IKEA also strategizes its product designs as per its typical style of depicting Sweden furniture and essences of modern tastes (Mellahi 420). IKEA’s local strategy in Qatar includes the focus on customer service as they have to be accepted in the society and must promote their dedication towards the locals and their culture. This is why IKEA has trained their staff with Arabic language, about their products, and knowledge about materials so they could give customers a wonderful pre and post sales experience (Zahra, 2014). The other strategy is the ways and options of delivery offered to the customers free of cost. This improves relations with customers. In Qatar, IKEA provides free delivery for all products over QAR2,500. IKEA also strategizes to ensure that customers are getting a family experience in IKEA and thus they have a restaurant and a play area which entertains the visitors (Shoeb, 2013). SWOT Analysis: SWOT Analysis IKEA in Qatar Political Environment: Strengths: There is a politically stable environment. Reduced tariffs. No unnecessary restrictions or barriers on trade. Encouraging foreign investors. Weaknesses: Tender bond requirements and strict joint venture requirements. Opportunities: Possibilities of Fair Trade Agreement. Threats: Increasing corporate taxes. Socio-cultural Environment: Strengths: Small population. Diversified culture would help in prevailing existing product designs without any major amendments to match the local culture. Weaknesses: Cultural diversity would lead to challenges in acceptance and coping up with customers’ expectations and tastes. Opportunities: Higher standards of living and more spending on furniture would increase sales and revenues in near future. Threats: Growing population may make it even more difficult to adjust with cultural diversity and consumer demands. Economical Environment: Strengths: Rising GDP and great potential for economic growth means greater profitability for the business. Higher national income. Higher rates of investments and national saving. Weaknesses: Need strong strategies and policies to cope with the growing economy side by side. Opportunities: Greater profits and revenues in the future and more sustainability in the local market. Threats: Minor changes in the economy may pose threat to the business. Technological Environment: Strengths: Advanced society. Government spending on IT. Weaknesses: Need for skilled labour and high costs for setups. Opportunities: Developing stronger customer relations, relations with government, and enhancing trade and communication. Threats: Rapidly advancing technologies means continuous updating and investing in machinery and technological equipment. Work Cited Algethami Sarah. Ikea eyeing expansion in the GCC. U.A.E, Gulfnews.com, 2013 Fromherz Allen. Qatar: A Modern History. USA: I.B. Tauris, 2012 Healy Paul. Business Analysis and Valuation. NY: Cengage Learning, 2007 Kamrava Mehran. Qatar: Small State, Big Politics. USA: Cornell University Press, 2013 Mellahi Kamel. Global Strategic Management. USA: Oxford University Press, 2011 Morrison Janet. International Business: Challenges in a Changing World. NY: Palgrave Macmillan, 2008 Scott Victoria. IKEA introduced online shopping as it begins second year in Qatar. Doha: Doha News, 2014 Shoeb Mohammad. IKEA opens Doha store today. Doha: The Peninsula, 2013 Sminia Harry. The Strategic Manager. USA: Routledge, 2014 Wilson Mark. Global Information Society: Technology, Knowledge, and Mobility. USA: Rowman & Littlefield Publishers, 2013 Zahra Farwa. The Ikea effect: How has it impacted furniture retail in Qatar. Qatar: The Edge, 2014 Read More