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After the changes in their own policy IKEA became successful in China and is now planning to open 2 more store and bringing their total to 10 in 2010.
#IKEA THREAT OF NEW ENTRANTS FREE#
IKEA changed it policies and used the cheap labor available in China and provided its product with a free delivery and fully assembled product. But IKEA’s policy of do-it-yourself did not work due to social differences in different countries (Anonymous, 2009). Among all the developing countries china was one of the fastest and strongest economy and IKEA took that advantage and opened the first store in Shanghai. Many countries around the world have changed or modified their county policies for international companies to boost their own economy (“Pan”, 2007). The period after 1990’s is said to be the booming period. According to Scherrer, 2003 consumer preference, purchasing pattern and condition under which the product can be sold are affected by the social culture changes. Social culture environment includes taste, behavior, basic beliefs and consumers lifestyle. Due to strong economy in Europe people with lower incomes can also afford products available from IKEA, whereas due to strong and cheap local market it was very hard for IKEA to sell its products in China (“Facts and figures”, n.d.). IKEA is established around the world but its major source of business is from Europe. IKEA adopts different strategies in different countries around the world by providing wide range of products which are well known for the quality at the price which can be afforded by most of the people.h3 As per (Scherrer, 2003) growth of the country reflects by its economic climate which influences expectation. Economical:-Įconomical environment consists of factors that affect the consumer buying power and spending pattern. In India the current policy holds IKEA to own and establish a business with 100% Foreign Direct Investment (FDI) and dismantles its plans to open a store in India (“IKEA dismantles plans for stores in India, 2009“). IKEA has to compromise in some countries where there is less political stability whereas due to lot of legal factors IKEA cannot compromise its policies in India.
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IKEA has to adopt a complete new policy to make business working in China (“IKEA’s Globalization Strategies and its Foray in China”, n.d.). IKEA operates around the world and have to follow different political and legal factors in different country for e.g. Every country has different political and legal factors.
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Political environment includes Government funding, policies, grants and initiatives where as legal environment includes rules, regulations, legislations, regulatory business and trading policies. The PESTEL analysis is the tool which helps in determining the future of IKEA. These are the important factors as per the present time. The macro environmental factors which affect to the organization are political, economical, social, technological, environmental and legal. IKEA came in to existence in Keeping on mind this vision and ideas of selling furniture at low cost. There business plan supports their vision by providing well designed furniture at low price so everyone can afford it (Our business idea, n.d.). IKEAs vision is to “create a better everyday life for the many people”. IKEA is planning to open about 15 new stores in 2010 in china, Italy, Spain, Poland and many other places (Coming store openings, n.d.). IKEA managed this environmental situation very well by coming up with more strong business strategy for healthy future of the organization. IKEA was one of the businesses which got affected by the global downturn and it resulted in many job losses in the company. The current global economic downturn has turned many businesses around and forcing them to close down the business. Estimated sales revenue in 2009 financial year was 21.5 billion euro’s with the help of 123,000 co-workers in 25 countries (IKEA group stores, n.d.). At present IKEA grand total of 301 stores in 37 countries among that IKEA itself owns 267 stores in 25 countries. After receiving positive response IKEA opens their first store in Almhult, Sweden in 1958. IKEA started selling furniture product in 1947. Ingvar Kamprad “IKEA” came into existence in 1943, when he was just 17 in the small village of Agunnaryd in Sweden (IKEA History, n.d.).