Understanding Contemporary Marketing - Example

IKEA Marketing Plan for India Student’s Name Institutional Affiliation Course Name Date of Submission IKEA Marketing Plan for India Executive Summary Developing a winning marketing plan is currently at the heart of every contemporary business. Having an effective marketing plan is important for every company because it provides a roadmap on how best a company should approach a particular market, gain market share and grow. This report presents IKEA’s strategic marketing plan as it seeks to enter the Indian market. The report will be based on the market audit to determine the suitability of the market, external factors that might impact IKEA and the marketing strategies that the company should employ to adapt effectively in the market and grow. The market audit is conducted with the help of PESTEL and SWOT models. Finally, the report will conclude with a summary and recommendations for IKEA as it prepares to enter the Indian furnishing market. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Competitive Analysis 5 PESTEL Analysis 6 Political Factors 6 Economic Factors 6 Social Factors 7 Technological Factors 7 Environmental Factors 8 Legal Factors 8 SWOT Analysis 8 Strengths 8 Weaknesses 9 Opportunities 9 Threats 10 Marketing Objectives 10 Marketing Strategies 11 Segmentation 11 Targeting 11 Positioning Strategy 12 Marketing Mix 12 Product 12 Price 12 Place 12 Promotion 13 Advertising 13 Sales Promotion 15 Conclusion & Recommendation 15 References 16 Introduction IKEA is a Swedish multinational furnishing retailer. The company was founded in 1943 by a Swedish tycoon, Ingvar Kamprad and has since grown to become a leading furnishing retailer in the world (Wagener 2008, p. 4). The company is headquartered in Delft, Netherlands and is known for its Scandinavian style. IKEA provides a range of products numbering about 9,500, including home furniture and accessories. The company has experienced immense growth since it was founded and currently operates more than 373 retail stores in about 50 countries across the globe (Czinkota and Ronkainen 2006, p. 34). About 18 of these stores are in Britain, which form one of the company’s major markets. As part of its growth strategy, IKEA has diversified its product portfolio by venturing in the hospitality industry. Currently, IKEA operates restaurants and Cafés that sell Swedish cuisines (Lewis 2008, p. 11). The current largest markets for IKEA include Germany, UK, Sweden, France and the U.S. However, the company has plans to expand its market reach to some of the emerging countries in line with its growth plan. This report present IKEA’s marketing plan that aims to promote a competitive edge in India. Competitive Analysis India presents a huge market opportunity for IKEA furniture brand. It is for this reason that the company plans to expand its business to this second most populous country in the world. However, because IKEA is not the only company that will provide furniture in India, it will have to compete with the local and international companies that have already established a position in the in Indian market. Some of the major competitors that IKEA will have to compete with in the market include H&R Johnson, the German Nobilia, Godrej Interio, HomeCentre among other local and international companies (Chillibreeze n.d, p. 4). Most of these competitors have not only established strong distribution channels in most parts of India that makes it easy for them to reach their customers, but also charge relatively lower prices compared to what IKEA charges in its markets. As such, for IKEA to gain a competitive position in the Indian market, it will have to reconsider its pricing and distribution strategies. PESTEL Analysis PESTEL is an environmental analysis model that a company used to evaluate the external environmental factors that might impact the business operations in an industry. Political Factors The India’s political environment will have a huge impact on IKEA operations in the country. In particular, IKEA will find it difficult operating in India because of the restrictions put by the Indian government on foreign direct investments. For instance, the Indian law will require IKEA to source at least 30% of its entire production from the local Indian market (Chillibreeze n.d, p. 4). In fact, India has rejected IKEA’s request to have the rules on purchasing materials from the local market, a development that might affect IKEA’s operations in India. Economic Factors The prospect of India’s economy will impact greatly on IKEA operation and prosperity. Fortunately, from the economic point of view, India is a lucrative market for IKEA. India is currently one of the fasted growing economies with a GDP of more than $4.457 per purchasing power parity. The economy of India has also been growing at more than 6.5% since 2011. Inflation, interest rates and unemployment rates have also been falling as the middle class Indians continue to rise. This trend implies increased purchasing power of the majority of the Indian population that favors IKEA. However, the constant fluctuation in the prices of raw materials and commodities in the Indian market will result in high cost of buying for IKEA. Additionally, the rising cost of fuel will impact negatively on IKEA’s supply chain. Social Factors IKEA’s operations in India will be affected by a number of socio-cultural factors. Because Indians are more savers than spenders, this might result in low sales of IKEA furniture. In India, the majority might prefer to save for the rainy day than spend on buying new furniture. On a similar note, the more affluent Indians who might be willing to spend may not see the need to buy IKEA furniture because of the company’s reputation of requiring consumers to assemble the furniture themselves (Chillibreeze n.d, p.14). Nonetheless, the high Indian population that stands at 1.2 billion people favors IKEA as it implies many customers for the company. Additionally, India being a collective society, this might result in bulk buying and reference to IKEA products by customers (Advani 2006, p. 33). Technological Factors Technology also has a huge influence on the furniture industry. In particular, Radio Frequency Identification Device (RFID) technology is becoming a trend in the retail market as it allows retailers to streamline their supply chain (Advani 2006, p. 18). Accordingly, the use of RFID helps in lowering the cost for retailers because of effective inventory management. The furniture industry also has to adopt the use of the internet as a marketing tool to succeed. Environmental Factors Because of the increased problem of climate change, the Indian government has enacted laws that require companies to minimize their carbon footprint that are likely to affect IKEA operations. The government also conducts regular inspections on companies to ensure they comply with the noise, air and water regulation laws. Legal Factors IKEA operation in India will be affected by legal issues, such as the Indian employment laws, minimum wages, health and environmental laws. SWOT Analysis Strengths IKEA has a number of strengths that it can use to beat its competitors in the Indian market. The first major strength is its strong brand reputation and market presence. IKEA is known for manufacturer of quality furniture in Scandinavian style. At the same time, the company has a strong brand presence that stands at more than 50 countries across the globe (Wagener 2008, p. 43). The company also has diversified product portfolio which is major strength. IKEA’s brand portfolio consists of more than 9,500 products and accessories (Lewis 2008, p. 9). IKEA’s pursuance of perfection through innovation is another major strength that the company can exploit to its advantage. Other strengths include strong brand awareness and supply chain integration. Weaknesses IKEA have a number of weaknesses that affects its performance. Negative publicity is one of the major weaknesses. Just recently, the company suffered reputation damage after it was criticized for using Photoshop to change the images of women in its catalogue in Saudi Arabia. The company also suffered reputation damage in Germany after it was found that the company used forced labor (Wagener 2008, p. 24). Again recently in 2013, the company was criticized after its meatballs were found to contain horse meat. Weak presence in Asian market is another weakness of the company. In 2014 financial year, IKEA generated only 9% of sales in Asia and Australia while 69% of its revenue came from Europe, a market that is getting saturated. Other weaknesses include decreasing quality and lack of flexibility due to its large size. Opportunities IKEA has numerous opportunities that it can exploit to ensure growth. Firstly, IKEA has opportunity to expand into the emerging markets and developing countries due to growth of middle income household in these countries. Secondly, IKEA has opportunity to exploit the growing online sales by venturing into e-commerce business (Lewis 2008, p. 17). Thirdly, the company has opportunity to diversify its product portfolio further by introducing premium range of products. Other opportunities include forming strategic alliances and putting more emphasis into CSR to enhance its corporate image. Threats IKEA face a number of threats that it must overcome to ensure growth and success. The first major threat has to do with high competition. In the Indian market, IKEA will face stiff competition from some of the established brands, such as H&R Johnson, the German Nobilia, Godrej Interio, HomeCentre among others (Wagener 2008, p. 16). Secondly, IKEA is threatened by global economic crisis and recession. Additionally, the company is threatened by laws on environmental regulations that limit felling or trees, thereby making it difficult and expensive for IKEA to get raw materials. Marketing Objectives The marketing objectives of IKEA in India include the following: a. To position the IKEA brand as the best in the furnishing industry in terms of quality and comfort. b. To adopt strategies that adapt to the local Indian culture c. To maintain high sales of IKEA furniture all the time d. To make IKEA furniture be in every Indian household and business The marketing objectives of IKEA will involve developing different marketing strategies to ensure that the product is effectively marketed to the targeted customers in India. The strategies will include the following: a. Effectively segmenting the market to ensure that needs of each market segment is understood and furniture developed that meets the specific needs of each market segment in India. b. Develop an effective marketing strategy that will attract its targeted customers in the Indian market to choose company furniture instead of those of the competitors. Accordingly, this will help increase IKEA market share and profits in India. c. Adopt aggressive promotional programs to create brand awareness and persuade Indians to buy IKEA furniture. Marketing Strategies Segmentation IKEA will ensure that the market is properly segmented to ensure feasible targeting and positioning of the IKEA brand to each customer segment. The market will be segmented according to geographic, behavioral and demographic. Geographic segmentation will assume that Indians living in the same geographical region provide a homogenous market. There is also assumption that demographic characteristics of individuals from same generation, such as youths and the elderly share similar attitude towards a given brand, thus creating a market that is homogenous. Behavioral characteristics evaluates the feasibility of each market segment with regards to rate of usage and brand loyalty as doing so will enable IKEA understand how the behavioral characteristics of the Indian market will affect the operation of the company. Based on the bases of market segmentation, IKEA’s Indian market will be segmented as followed: Geographically IKEA will target mainly the Indians in urban areas. The company will also target young Indians between 20 and 50 years who are fashionable and love state-of-the-art furniture and accessories. Additionally, IKEA will target low and upper middle class customers. Targeting IKEA will evaluate the suitability of these market segments in light of the company’s marketing objectives after which the company will provide these segments with the brands that suits their needs. This is because they are in line with IKEA’s objective of maintaining high sales throughout the year. Positioning Strategy The success of IKEA will be determined with how well it positions itself in the minds of the Indian customers. Accordingly, IKEA will position itself as a quality, elegant and fashionable brand to enable it attract huge demand from Indian people. Marketing Mix Product To succeed in Indian market, IKEA will serve Indian customers with high quality furniture built on Scandinavian style. The furniture will come in different styles and colors that not only suit the diverse needs of the Indian customers, but also their culture. The furniture will have their accessories, as well. An after sales service will be provided to all customers that buy IKEA furniture. Price The pricing strategy adopted by IKEA will determine whether or not the company is successful (Sullivan and Adcock 2002, p.46). Because the majority of Indian customers are price sensitive, IKEA will sell its furniture at prices that the Indians are willing to pay. The prices will be competitive to reflect the value that the customers will get by buying IKEA furniture instead of the competitors’. Place IKEA also understands that it will have to make its products easily reachable to its targeted customers to succeed. As such, IKEA will establish stores and showrooms in all major cities in India, such as Mumbai, New Delhi, and Bangalore among others, where customers will be able to buy the company furniture. At the same time, because Indians like buying from supermarkets, IKEA will partner with major supermarkets in all Indian major cities and towns to allow customers to get IKEA products easily and within their geographical locations. Additionally, IKEA will adopt e-commerce technology in which it will sell its products online to Indian consumers who might want to buy products at the comfort of their homes and offices. Promotion Advertising IKEA will use diverse advertising strategies to reach its targeted audience. Television ads will be the first advertising strategy that IKEA will use to promote its furniture products. TV ads is chosen because it will enable the company reach a wide Indian audience considering that more than 80% of India’s over 1 billion people have access to TV (Ambani 2014). The TV ads will feature Indian celebrity that will be used as the brand ambassador. Secondly, IKEA will promote its furniture using newspapers. In India, the majority of the urban population begins their day with newspaper reading. Accordingly, IKEA will take advantage of the wide readership of newspapers in India to advertise its products in popular newspapers in India. The ads will be featured in English and other Indian major languages. IKEA will also advertise its furniture on popular lifestyle magazines. Lifestyle magazine ads will give IKEA the opportunity to reach the young, fashionable and middle income earners most of who read lifestyle magazines as a way of following the fashion trend in the market. Below is a typical ad that will be featured on the Indian lifestyle magazines. Sponsorship is regarded an effective way of promoting a company products (Boone and Kurtz 2015, p. 42). IKEA is one of the companies that normally sponsor events as a way of promoting its brand. The company will use the same strategy to promote its furniture in India. This will include sponsoring major sporting events such as cricket leagues being that the majority of Indians love cricket. Social media is the other communication tool that IKEA will use in promoting its brand in India. Currently, more than 154 million Indians are active internet users (Shu 2015). The majority of these Indian internet users use the internet to access different social media sites, such as Facebook, Twitter, Instagram and Whatsup. Therefore, IKEA will take advantage of social media to reach a wide audience in India (Tech Desk 2015). Additionally, the company will post its furniture on its official website where customers can view the different furniture designs that the company has in store. Snapshot of IKEA social media ad to be used in India Sales Promotion Trade and sales promotion is the other promotional strategy that IKEA will use in India. Trade promotion will involve giving customers who buy IKEA furniture discounts for choosing IKEA products. The discounts will involve giving any customer that buys more than one product (Mullin and Cummins 2008 p. 71). Additionally, free products will be given to customers that buy in bulk as a way of encouraging bulk buying (Lamb and McDaniel 2011, p. 16). Moreover, because India is a collective society with many festivals held each year, IKEA will use an Indian celebrity as its brand ambassador to promote its brand during these festivals. Further, IKEA will provide free bags to customers that buy its products with the bugs having enticing marketing gimmicks persuading Indians to identify with IKEA. Conclusion & Recommendation India presents a suitable market for IKEA furniture. Economically, the majority of Indians have a high purchasing power due to the growing economy and increasing middle-income earners. However, IKEA will have to deal with the challenges related to government restrictions on sourcing, cultural issues and high competition. These require that IKEA develop an effective marketing plan that not only help IKEA respond to the Indian market environment, but also enable it adapt to the Indian culture. Accordingly, this marketing plan presents the best way IKEA can respond to the Indian market and establish a strong position in the market. References Advani, A. H 2006, Business India, issues 726-731. A.H. Advani, New Delhi. Ambani, N 2014, During opening week 170 million Indian TV viewers tuned in to ISL, accessed 11 Dec. 2015 http://www.firstpost.com/sports/opening-week-170-million-indian-tv-viewers-tuned-isl-1771385.html Boone, L., & Kurtz, D 2015, Contemporary marketing. Cengage Learning, London. Chillibreeze n.d. Home furnishing industry in India. Chillibreeze, New Delhi. Czinkota, M., & Ronkainen, I 2006, International marketing. Cengage Learning, London. Lamb, C., Hair, J., & McDaniel, C 2011, Essentials of marketing. Cengage Learning, London. Lewis, E 2008, Great Ikea! A brand for all the people. Marshall Cavendish Business, New York. Mullin, R., Cummins, J 2008, Sales promotion: How to create, implement & integrate campaigns that really work. Kogan Page Publishers, New York, NY. Sullivan, M., & Adcock, D 2002, Retail marketing. Cengage Learning EMEA, Mason, OH. Shu, C 2015, India will have 500 million internet users by 2017, says new report Accessed 11 Dec 2015 http://techcrunch.com/2015/07/21/india-internet-growth/ Tech Desk 2015, IAMAI says India will have 500 Million Internet users by 2017, accessed 11 Dec. 2015 http://indianexpress.com/article/technology/tech-news-technology/iamai-says-india-to-have-236-million-mobile-internet-users-by-2016/ Wagener, D 2008, IKEA. Strategic competences and capabilities. GRIN Verlag, Berlin. Read More