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Identify and evaluate strategies adoped by a firm to persue an international growth opportunity related to emerging economies.
Emerging economies offer several business opportunities which are advantageous for the performance of a multi-national company. The growing population, consumer preferences, growing infrastructure and diversification are the drivers for business opportunities. This case study analyses the entry of IKEA into the Indian furniture market.
IKEA is a leading multination furnishing retailer with presence all across the globe. Despite its issues in acquiring land for its stores, IKEA has planned to open 25 outlets in India by 2025. This is mainly due to the market attractiveness in terms of consumption which is expected to be double that of the global rate. According to BCG Research, consumption in India would triple to $4 trillion by 2025 resulting from the increase in affluent in consumer behaviour and higher spending patterns. IKEA has planned to capitalize on this through a first mover advantage as the first major foreign retailer to receive approval from the Indian government to set up its stores in the country.
Through the value chain and VRIO analysis it is evident that IKEA has necessary resources and ability to invest in India to set up its stores and distribution centres. The PESTEL and Porter's Five Forces analysis shows that the Indian furniture market offers an opportunity for IKEA despite the intense competition. The CAGE analysis shows that there is significant difference between its country of origin – Sweden and destination – India. This indicates that IKEA has to localize its product range to meet the customer requirements in India. IKEA adopts the cost leadership strategy, and also differentiates its products from competitors through unique designs at lower price. Carr's and Collis' concentration ratio shows that competition is intense among the major players operating retails stores as well as online furniture retailers. IKEA has to devise strategies to position itself as a preferred brand among furniture consumers with appropriate targeting and advertising the key features of its products range.