PEST

Table of ContentAbout IKEA - kanakIndia Market Overview - kanakPEST Analysis - kanakSWOT kanak/AbhishekCompetition Mapping - SakshiAvailable Competition - SakshiIKEAs Strength for India Market - sakshiDistribution Strategy - AbhishekMarketing Strategy - AbhishekTarget and Segmentation - AbhishekPositioning and Brand Personality - AbhishekLaunch Plan x-30,x,x+30 Abhishek/ PankajPricing Strategy - sakshi

Market Overview

Indian Retail Market:

The Indian retail market stood at USD 396 billion in 2011-12 and is likely to grow further at 12% to increase to USD 574 billion by 2015The market is highly fragmented where around Eighty-five to Ninety per cent of national production comes from regionally small size firms falls into the unorganized sector and remaining comes from the organized sector comprising of leading manufacturer, importers and dealer/distributors.

Size of Furniture Industry:

Indian furniture and furnishings sector stood at about Rs 66,500 crore in 2010It estimates the market size to reach Rs 1,12,000 crore by 2015*Furniture segment compromises of 65 percent of the home market and 35 percent of institutions.

The furniture sector of India makes a contribution of 0.5 per cent of the total GDP. According to the World Bank survey, 20 percent of the furniture industry grows per year and this growth is expected to come from the rapidly growing consumer markets of Asia, which signifies that there will bew growth in Indian furniture sector.PEST Political factorsPolitical & Legal

Economic reforms are slow and inadequate. Political risk2. FDI100% FDI in SBRTPermission from respective State governments would be necessary to open new stores30% manufactured products should be sourced from small and medium enterprises (SMEs). FDI is likely to be permitted only in the six big metros(Delhi, Mumbai, Kolkata, Chennai, Bengaluru and Hyderabad)3. Growth of Retail Industry Organized RetailGrowth of 10.6% between 2010 and 2012 and is expected to increase to USD 750-850 billion by 2015.Organized retail, which constitutes 8 per cent of the total retail market, estimates put the share of organized retail as 20 per cent by 2020.

Source: India Retail Report 2013, Images Group

Source:Bradstreet retail sector overview, Indian retail Report 2013, Images Group PEST Economic factorsEconomic Factors

Source:http://www.worldbank.org/en/publication/global-economic-prospects/data?region=SAS1.GDP GrowthGDP growth is projected to improve to 6.2 percent in 2014 and then to rise to 6.6 percent in 2015 and 7.1 percent in 20162.Currency Fluctuation: In the past six months, the dollar/INR exchange rate has fluctuated by approx. 8 per cent. This may put considerable currency risk on any foreign investment in India.

3. Low 4 wheeler penetrationPEST Social factorsSocial Factors1.India is not one market: States in India differ in terms of culture, language, socio-economic development etc. Further, different spending power results in different customer segment even within a state. This makes it imperative on the part of the international retailers to customize their offerings to suit regional Indian tastes.

Source:OECD, Morgan Stanley Smith Barney as of jan 2010Indias middle class is forecast to outpace growth in spending over both a 10 year and 20 year horizon with a projected growth of in 10 year horizon at 25%2.Indian middle class to spend more: Contd

3. Rise in income levelAs income rise, spending will shift away from basic necessities like food and apparel and into other are such as education, recreation, communication, transportation, personal care product and services. 4.Young Population and Home OwnershipIndia has a very young population as compared to that of other major countries.Home ownership rates for India are among the highest in the world

PEST Technological factors1.Infrastructure Challenge: Roads, ports, electricity are some of the infrastructure challenges, which increase the operational cost of the retail chain.

2.Skilled Manpower: One of the major challenges faced by the existing players is the availability of skilled manpower; any foreign retailer planning to enter India will have to face similar challenges.Technological FactorsFurniture and Furnishings Category faces stiff competition from small time traditional retailers as well as individual carpenters For furniture retail, options for investment in back-end infrastructure lies in creation of manufacturing facilities/warehouses Some of the furniture products could be sourced from the SME segment FDI in furniture retail is not expected to face major political deliberations Specialty retail outlet is best suited structure for this segmentSWOT AnalysisOppurtunity100% FDISteady GDP growth forecastGrowth of organized retailRise in Income levelIncrease spending by middle income groupYoung Population and high home ownership

ThreatsFalling Rupee value affects importsDiverse socio-economic culturePoor InfrastructureHigh Real estate value/rentThreat from other low cost homeware specialist such as Walmart etc

StrengthsStrong global sourcing capability.Established Brand ImageIncreasing Demand in Modern, clean, minimalist design

WeaknessesStiff competition from unorganized retailers 30% local sourcing could affect IKEA quality standards.Maintaining price leadership due to high dollar rate etc

Indian Consumption Pattern - FurniturePurchase Decision

Value for moneyDurabilityHigh involvement Purchase/family affairLess or no research before purchasePurchase decision based on instinct and product feel at the shopPurchase OccassionSegmentation

Source: BCG India Consumer Survey 2010

Note: Total No. of households: 239 millionsSource: Euromonitor, BCG AnalysisAll figures are in percentageSource: BCG India Consumer Survey 2010Target & PositioningTargetProfessional AffluentUrban AspirerTraditional AffluentAge Group27 yr - 40 yrs27 yr - 40 yrs27 yr - 40 yrsHouselhold Income15Lacs+5Lacs -14Lacs15Lacs+Profile HighlightCredit Card User, Own a house,Indulge and Purchase in Luxury BrandsDreams of owning a house, Does online banking, use durables of large brandsInvests in gold, Avoids taking loan, family own numerous consumer durablesPositioningTrendy,Stylish and ContemporaryYoung and ExperimentalInitial position could be focused on affordable price but only for a short notice periodPrimary TargetSecondary TargetDistribution StrategyIKEACOCO StoreCOFO StoreDistributor/FranchiseeSIS modular Set upCompany Owned Company Operated StoreDirect to RetailLocated in Malls or Stand Alone storesCompany Owned Franchisee Operated StoreFranchisee shares the operating expenditure of the storeLocated in Malls or Stand Alone stores

SIS primarily to have presence in local furniture hub. Eg Panckuian road, Tilak nagarPromotional PlanObjective:

The main objective of the communication plan will be to create news about the launch of the brand and to create awareness about its presence in India

Announce the launch of the brand Highlight and create awareness of IKEAs collectionLong term relationship with our stake holders, distributors/franchisee and consumersLaunch city Delhi

Affinity towards brandsTrend spotter/ followerIndulges in style and luxuryAttributeswe need to influence purchase decisions at every stagePre StoreRecommendation from friendsand colleaguesFeatures/articles in the mediaAdvertising before you go to the storeInformation from website/internet

In storeInstore display materialServices offeredAmbience

Sales StaffInfluence in making the decisionShowcase of the range and the possibilitiesUnderstanding of the consumers needs

marketing planStages of Brand FunnelConsumer MindsetCommunication TaskTouch PointsAwarenessWhat is IKEA?To inform consumers about the origin and heritage of IKEA range.Newspaper, DM (acquired base & existing base), Online, Launch Event, In-store merchandising, PRConsiderationHow good is the IKEA Furniture?.To demonstrate quality, craftsmanship, care for detailsPrescriptive Media, Tie up with Banks and communicate to their platinum/gold card holders, In-store demonstration, catalogue distributionPreferenceIs there any other furniture better than a piece by IKEA? I would rather get something madeTo provide customized coordinated living room as a brand experience

Advertorials in key publications, Participation in consumer and trade fairs

PurchaseIs it worth spending?To emotionally engage the consumers and establish as the affordable premium brandFlyers, Tie up with banks (for EMIs),Price point communicationLoyalty

Why should I go back to IKEA and continue using its products?To showcase there is more in store for the consumer and create pride of ownership and label valueCRM,Relationship calls, Online, exclusive invites, PR, Events with like minded brands

.must communicate at each stage of the brand funnel Launch PlanLaunch day -360 degree

Live Outdoor near the storeJacket for leading TOI and HTRadio spot announcing the IKEA store launchCelebrity to Launch the StoreFashion Show inside the store Followed by Press conferenceStrong PR coverage

BTLFlash Mob around the storeCreate IKEA Waiting Lounges at T3 , Movie theatres and MallsDMDM to TG database DigitalLaunch of India website and online catalogueLaunch of catalogue AppBannersAdwords, FB page contest and gift vouchersCompetition

IKEAs Competitive Edge:Cost leadershipConcept and design based furnitureAlmost 85% unorganized sectorPricing StrategyObjective:To achieve 10% of Organized furniture market share by 2015E. Aprox 2240 Cr

Penetration Strategy: Cost leadershipProfit based on volume sales not on value sales Profit maximization in the long term.To offer the price sensitive TG the lowest price in the category as compared to Hometown, Style Spa, Godrej Interio.