Evaluation of Ikea’s Entry to India Using Pestle and Market Segmentation Analysis

PESTLE Analysis

Political

The current corporation tax is being gradually reduced to 25% from 30%, but regulations may affect foreign investments. The government also does change in power frequently and each focus on their own agendas, posing a risk of power and budget for the furniture market.

Economic

India has one of the fastest growing economies at around 7% annual GDP growth, which is supported by an increase in investment (India’s average 2018), and employment, and thus expenditure. However, the introduction of Goods and Service Tax may slow down India’s economic growth rate (GST).

Sociological

With globalisation, Indian culture, typically traditional and religious (Overgaard 2010), has increasingly moved towards imported furniture, also due to the influence of international lifestyle trends as well as higher disposable income.

Technological

India had poor research and development performance but have improved it with an increased budget and investment. India has an impressive network of science and technology institutions with experienced manpower. Local Indian furniture market competitors are increasing with the e-commerce market.

Environmental

The furniture market may produce e-waste, increasing carbon footprint. Transportation of the furniture may include extra packaging materials like plastics or cardboard, increasing waste if they are not recyclable.

Legal

Employment laws in India differ by state. India does not have specific legislations on privacy and data protection, but the Information Technology Act, 2000 protects electronic data to a certain degree, such as collecting, processing, and storing of personal data.

Overall, IKEA’s entry to India is feasible as regulatory laws are gradually becoming less stringent and is increasingly interested in global lifestyle trends, making it a great business opportunity.

Market Segmentation

Demographic

IKEA should focus on customers of adult age, both males and females, that may be students or professionals with some disposable income. As IKEA focuses on a variety of household goods, it could focus on all life-cycle stages; singles or married couples improving their homes, with products aimed for children as well.

Geographic

Customers preferably living in urban, modern spaces, which fit the ideal demographic.

Psychographic

Customers of middle-income or working class with high disposable income and have a personality to keep spending on products they do not necessarily need, or impulse buy.

Behavioural

Middle-income customers that would visit IKEA for inexpensive, quality products, and potential or first-time users that would retain then becoming loyal customers are ideal. These customers should be heavy users of IKEA’s products and promotional efforts should be focused on them to retain their loyalty.

Due to IKEA’s mass production, the above market segmentation best suits its needs and ability to deliver quality and quantity. However, India’s geographic terrain and amount of languages may prove a challenge for IKEA as they would need to cater products for different temperatures or terrains, or may affect promotional strategies. Spending power may also be limited due India’s slow increase in disposable income.