ikea's distribution strategy in india
DESCRIPTION
In this presentation, we explore the various challenges IKEA would face while setting up distribution in India and highlight the various strategies it could adopt to overcome the said challenges.TRANSCRIPT
IKEA’s plans to enter IndiaInternational Distribution
Nikhil GargLov LoothraEmilie PerrusselAnne-Laure Laclau
SummaryI. Presentation of the company II. IKEA’s General distribution strategyIII. 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. SuggestionV. Conclusion
SUMMARY
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
I. Presentation of IKEA
Hallmarks of IKEA’s 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
JDA Demand JDA fulfillment
Advantages: 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
II. Distribution strategy
Foray into India On 21st January 2013, India’s Foreign
Investment Promotion Board (FIPB) provided its clearance to IKEA to invest in India
Ikea plans to open 25 stores, investing about €1.5 billion over the next 15 to 20 years
III. IKEA in India: 3 possible strategies
Distribution Challenges in IndiaInfrastructure
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 ALeverage the Global Production & Distribution Network Pros
Already established: no initial setup costs Reliable Consistency of Quality
Cons Costly Decreased viability in the long run Legislative constraints
III. IKEA in India: 3 possible strategies
Swedwood Production
Center (Europe)
EuropeanSuppliers
Rail / Trucks
Distribution Center(China)
IndianSuppliers
Multimodal
Plan A
Retail Stores/Warehouse
(India)
Customers
Multimodal
PersonalVehicles
III. IKEA in India: 3 possible strategies
PersonalVehicles
Plan BSetup a Production & Distribution center in India Pros
Easy to meet local demand Better coverage possible Will create jobs for locals
Cons Huge initial time and cost Infrastructure can be a hindrance
III. IKEA in India: 3 possible strategies
Indian Production
Center
Distribution Center(India)
IndianSuppliers
Rail / Trucks
Plan B
Retail Stores/Warehouse
(India)
Customers
PersonalVehicles
Rail / Trucks
HugeInitial Cost
Rail / Trucks
III. IKEA in India: 3 possible strategies
Plan CIdentify established player for a Joint Venture Pros
Can leverage contacts/infrastructure of the partner Valuable insights and experience into an untapped
but growing market Cons
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
Production Center (India /
Europe)
EuropeanSuppliers
Rail / Multimodal
Distribution Center(Indian Partner)
IndianSuppliers
Rail / Multimodal
Rail / Multimodal
Plan C
Retail Stores/Warehouse
(IKEA + Indian Partner)
Customers
Rail / Multimodal
PersonalVehicles
(Partner)
(Partner)
III. IKEA in India: 3 possible strategies
Conclusion Our distribution plan suggestion
Exercising patience
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 fast-growing country as India
IV. Conclusion
References1. TREBILCOCK Bob, "IKEA: Think global, act local for
warehouse distribution", Modern Materials Handling, 25 August 2011
2. SHARMA Amol, HANSEGARD Jens, “IKEA Says It Is Ready To Give India a Try”, The Wall Street Journal, 24 June 2012
3. SHARMA Malavika, “IKEA India Plans Give Scant Reassurance to Foreigners”, Bloomberg, 10 January 2013
4. ROY Rajesh, AHMED Rumman, “Indian Agency Clears IKEA's Proposal to Open Stores”, The Wall Street Journal, 21 January 2013
5. DAS Sohini, "Local players give thumbs up to IKEA's entry in India", Business Standard, 28 January 2013
6. http://www.youtube.com/watch?v=11AehTPD-Vg7. http://franchisor.ikea.com/about.html8. http://www.swedwood.com/about-swedwood/
REFERENCES
Thank you for your attention!