The global environment is related to multidimensional issues like cultures, economics, technologies, laws and many more (Weiss, 2014). The international business is directly or indirectly controlled by these multidimensional factors. During expanding any business these factors are analyzed to evaluate the viability of the decision. Besides, different ethical and social issues take place for the sustainable expansion of the business. When a business is considered as socially reliable, it is considered as the trustworthy or reliable (Hartman et al., 2014). This paper explains different issues regarding the expansion decision of the Ikea in the Indian and Chinese market. The report emphasizes more on the Indian issues. This paper also examines the internal and external conditions of the Indian market and also indicates strategic approaches to adapt to the situation. Besides, the recent ethical issues are also discussed considering the Ikea and its CSR activities.

1. Assessment of the favorability of the Market Condition

1.1 PEST Analysis

It’s very important for IKEA to conduct PEST analysis before making such investment on expansion in Indian and China. The PEST analysis consist of analysing the political, economic, social and technological factor (Henry and Herzog, 2008). The current condition of a country is basically reflexed through the PEST analysis and gives the indication of making any investment decision. So the PEST analysis is showed below:

PEST Analysis

(Ahlstrom and Bruton, 2010)

Political

The political condition of India is stable and most of the political parties have rational thinking and concern for the development of the country (Ahlstrom and Bruton, 2010). The political unrest sometimes create chaos and make it harder for companies to conduct their operations. However in most of the cases, the countries’ policy makers and government are very consistent about development and progress issue (Rollinson and Dundon, 2007). So, IKEA can actually invest as the Foreign Investment Promotion Board has cleared the proposal of investing in their land.

Economic

Although the country’s economy is rapidly growing and the GDP is going up very fast, the two fifth of the population are still below poverty line. So it must be taken to consideration that, IKEA have to design certain products specialized only for that subcontinent (Henry and Herzog, 2008). On the other hand they should follow volume metrics to survive in the large market. However, the furniture industry may not be as profitable in India as other big companies in different industries because the predicted unit sales growth is estimated lower (5.44%) compare to other countries like Vietnam and China (Ahlstrom and Bruton, 2010).

Social

The social condition of the country is challenging as the countries’ culture, norms, language etc. are very different and it varies from state to state (Rollinson and Dundon, 2007). Apart from that, the countries’ major population is hard working people who is not used to luxurious product and lifestyle. So it has to be content with the urbane middle class and upper-middle class family.

Technological

One of the most important factor of PEST analysis is the technological factor which are determined based on the technological advancement and efficiency of the country (Ahlstrom and Bruton, 2010). It’s very astonishing and also considerable fact that, the country is technologically advanced and proficient in production and operations as they need to serve a large number of population regularly.

Country Attractiveness

The country has a large population, proficient labor, the size of the market is huge and growth rate is higher. So it’s highly attractive and vertical expansion is more compare to the horizontal expansion. So IKEA can make the investment as the ROI will be higher and also the volume metrics can be applied to increase the profit margin (Henry and Herzog, 2008).

1.2 Critical Analysis of Internal and External Factor in Holistic globalized Strategy

The company has potentialities in international market and the scope of investment in foreign countries have opened a new dimension (Rollinson and Dundon, 2007). However it also becomes more challenging to conduct a critical assessment on the internal and external factor as the different market condition are added. The global and local selling, the company has to imply different strategies as it’s already discussed (Ahlstrom and Bruton, 2010). There are still couple of facts that must be taken under consideration before making any changes in business strategies.

The Internal and External Factors

The Strength, weakness and opportunity, threats are internal and external factors of the company which are assessed based on the holistic globalized policy. The sales goals and objectives and conduct market research to provide efficient furniture. For an example in Mumbai, the latent demand is for less space consuming sofa which can be used as bed as well etc. (Henry and Herzog, 2008). The internal factors are critically analysed below:

SWOT ANALYSIS

Figure 2: (Henry and Herzog, 2008)

Strength

· The company has large financing and large number of cash flows to invest (Henry and Herzog, 2008)

· The company provides quality products with new & innovative design, shapes and colors

Weakness

· The company doesn’t have enough trained proficient workers (Ahlstrom and Bruton, 2010)

· The high pricing of current products are not affordable to a large number of population

· Top-level management in different region as well as the workers in order to make them updated and functional with the requirements (Rollinson and Dundon, 2007).

Opportunity

· The company can use country labors and workers for recruitment and train them

· The company can gain positive perceived value by accomplishing CS responsibilities.

Threats

· The social values and cultural difference is a great threat for the company (Rollinson and Dundon, 2007)

· The political unrest may hamper operational activity of the company

1.3 The Holistic Concept and Key Elements

The holistic concept is basically the total procedure of conducting the whole business from top to bottom level and in this sector, the market is very detailed and consequence based (Henry and Herzog, 2008). For IKEA to conduct a PEST analysis before making such investment on expansion in Indian and China. Analysis consist of analysing the political, economic, social and technological factor (Henry and Herzog, 2008). The integrated market starts with the 3V model which is described below:

Value Segmentation

The whole market need to be segmented based on the earning and demographic variable. The urban upper middle class family should be targeted at first (Ahlstrom and Bruton, 2010). Political condition of India is stable and most of the political parties have rational thinking and concern for the development of the country (Ahlstrom and Bruton, 2010). Unrest of politics sometimes create chaos and make it harder for companies to conduct their operations.

Value Positioning

The positive perceived value must be captured by the company which will create a positive image of the company (Rollinson and Dundon, 2007). The countries’ policy makers and government are very consistent about development and progress issue (Rollinson and Dundon, 2007). IKEA can actually invest as the Foreign Investment Promotion Board has cleared the proposal of investing in their land.

Value Networking

The company have several options which are establishing factories and start manufacturing and selling at the same time or import it and sell it in local market. The most important factor of analysis is the technological factor which are determined based on the technological advancement and efficiency of the country (Ahlstrom and Bruton, 2010).

2. IKEA localization Vs Globalization Strategy

2.1 Identification of Strategic Orientation

The company has to imply different strategy based on the selling nature and conducting business. If the company is currently operating in local market only, then the strategic formulation will remain unchanged, otherwise, the strategy should be:

· Both short termed and long termed related to sales

· IKEA can use Competitive parity method (Henry and Herzog, 2008)

· They can use AIDA model which maintain the sequence of creating attention, interest, desire and finally action (Ahlstrom and Bruton, 2010).

· Using Integrated marketing channel

2.2 Various Pertinent of IKEA business

The company have other association with food and beverage industry but the supply of these are limited by the country government (Rollinson and Dundon, 2007). Apart from that, the company has corporate social responsibility and can actually contribute by developing certain factors in those areas like China, India etc. Country’s economy is rapidly growing and the GDP is going up very fast, the two fifth of the population are still below poverty line. The IKEA have to design certain products specialized only for that subcontinent (Henry and Herzog, 2008).

2.3 Advantageous Areas of IKEA and their Implication

The biggest advantages of IKEA is the size of the company which made it competence and reliable of providing large quantity of population (Henry and Herzog, 2008). In addition to that, the company has stable economic condition and strong financing which allows the company to offer more designable and customized product at cheaper rate than the competitors.

2.4 Recommendation for balancing Optimum balance of Globalization and Localization

To balance the global and local selling, the company has to imply different strategies as it’s already discussed (Ahlstrom and Bruton, 2010). However, there are still couple of facts that must be taken under consideration before making any changes in business strategies.

· Rotating top-level management in different region as well as the workers in order to make them updated and functional with the requirements (Rollinson and Dundon, 2007).

· Company has potentialities in international market and the scope of investment in foreign countries have opened a new dimension (Rollinson and Dundon, 2007). It also becomes more challenging to conduct a critical assessment on the internal and external factor as the different market condition are added.

· Specify the sales goals and objectives and conduct market research to provide efficient furniture. For an example in Mumbai, the latent demand is for less space consuming sofa which can be used as bed as well etc. (Henry and Herzog, 2008).

3. The ethical challenges and approaches to corporate social responsibility of Ikea

Every business has some responsibility towards the society where it belongs to. This corporate social responsibility becomes more vivid for the multinational organization. But to undertake different programs regarding corporate social responsibility, a good and effective plan is essential. But for the conflicting interest and priority problem different difficulties come out about the corporate social responsibility (L’Etang, 1995). Besides, the ethical issues play significant roles. The ethical corporate social responsibility is essential for the sustainable development of any company. The Ikea undertakes different programs of corporate social responsibility considering the environmental issues. The company faces different challenges regarding the issue and to solve this problem the proper approaches of the corporate social responsibility is essential. Social condition of the country is challenging as the countries’ culture, norms, language etc. are very different and it varies from state to state (Rollinson and Dundon, 2007). The countries’ major population is hard working people who is not used to luxurious product and lifestyle.

3.1. Ethical issues in the Indian Market of Ikea and the Challenges it faces

Ethical issues in India are severely mixed with the corporate social responsibility. In India, the ethical issues are closely related to the culture. In India, corporation faces corruption and it is divided into two major types that are political corruption and administrative corruption (Aga, 1994). To expand the business in India, the Ikea has to consider this corruption and undertake internal plans to face it ethically. Besides, the environmental deterioration in India is severe. The company need to collect raw materials from the local market and the wood materials is directly related to the environment. The Ikea may face protests from different social organizations related to the environment.

3.2. Current CSR activities in the Indian Market and the involvement of Ikea

In India different corporate social responsibility programs are undertaken by different corporation. The issues become more illustrated when some of the Indian leaders raise the ethical movement ( (johnston, 2007). Anna Hazari, Momota Banargy and some other leaders raises program against different governmental and private firms which are engaged in unethical issues. The Ikea can engage themselves in the environmental movement and social issues.The goverement of india has implemented some code of ethics for any company after this incident to safe guard sexual harrasement and other issues that are already enforced within the developed world one such example of controlling incident that have been on all channel is the Rape case (india, 2015). The rape is one of the major issues in India now. The company can formulate a corporate code of conduct considering the sexual harassment. Besides, the ethical issues play significant roles. The ethical corporate social responsibility is essential for the sustainable development of any company and IKEA can be a role model using its operational and strategic policies and procedures they have already practiced and implemented in both developed and under develop coutries. Another great example of IKEA localized approach in India’s is it undertaking of different awareness and training programs of corporate social responsibility considering the environmental issues that is now become a global factor and this will help the country to go towards Global Green Environment[i]. The company faces different challenges regarding the issue and to solve this problem the proper approaches of the corporate social responsibility is essential. The Ikea also can engage itself in environment pollution movement, water pollution movement, proper sanitation movement and so on.

3.3. The CSR activities of Ikea in India and global integrated strategy

The Ikea has conducted different corporate social responsibility program in India. The company is related to women empowerment program in India since 2000 (Ikea, 2015). The company has a foundation named “Ikea Foundation” which donates in different countries every year. In the year 2013, the foundation got €101 million as a donation from the Ikea. The Company also engaged itself in child survival and protection program along with UNICEF in India (UN-Business, 2015). The company spends a lot of amount in the corporate social responsibility program throughout the world. The global CSR program of the company is to contribute to the human welfare while earning profit. The company considers the sustainable development in all its activities. The Ikea has a positive impression for its engagement in the social issues all over the world.

3.4. International Business and CSR strategy of Ikea and its impact on different stakeholders

The Ikea is globally recognized multinational company and it has business in many countries. The company audits its working condition and environment for the employee safety in each level of the company. The company is concerned about the social need of the area where it works. As a result the stakeholders become benefited in different ways. The ethical corporate social responsibility is essential for the sustainable development of any company. The Ikea undertakes different programs of corporate social responsibility considering the environmental issues. The company faces different challenges regarding the issue and to solve this problem the proper approaches of the corporate social responsibility is essential. The sustainable profitability is ensured which provide a constant growth rate of the return that benefits the stockholders. The employee and suppliers along with the customer’s interests are also considered in its international business strategy.

Conclusion

India is 2nd largest populated country after china and the peoples standard of life and trends are changing and people like to purchase high quality product which is IKEA’s trademark. The world is getting more morally and socially connected as compared to late 90’s so globally people and companies are more tide up with their social responsibilities. India is also in its reformation stage where IKEA localized approach using its Globalized vision from its developed world can lead other companies to implement and execute best CSR and policy that will help IKEA and other companies to acvhieve their strategic targets with fulfilling their corporate social responsibilities. Every business has some responsibility towards the society where they belongs to. This corporate social responsibility becomes more vivid for the multinational organization like IKEA. But to undertake different programs regarding corporate social responsibility, a good and effective plan is essential. As a result, other competitors of the company has been engaged in unethical activities which is both opportunity and threat for the Ikea. The company needs to formulate more customer oriented strategy considering the ethical issues and it also needs to engage in the social activities in India.

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CREATIVE INSIDE LEARNING VISION

IKEA EXPANSION INTO THE INDIAN MARKET

Table of Contents

Introduction