Title - Survival Strategies for
local furniture retailers vs. IKEA in India
____________________________________________________________
1. Introduction
1.1. Background
In its Annual Cabinet Meeting of 2012, the Indian
government passed regulation regarding FDI. A 100% foreign direct investment
was approved in the retail segment, but only for single brand products
(Slaughter and May, 2012). This move on the part of the Indian government was
one of the key reasons for the Swedish furniture giant IKEA, to make entry into
the Indian furniture market with an investment budget of around $ 2 billion.
Specific conditions were laid down by the Indian Government as to sourcing a
certain percentage of finished products locally and after a few negotiating
rounds, India has now approved of IKEA’s investment (Reuters India, 2009). The
furniture Industry in India is valued at about $8 billion. This Industry
belongs to the unorganised sector. Reports suggest that more than 90 percent of
the Industry belongs to the unorganised sector. The Industry is also highly
fragmented but at the same time it has a few big retailers who supply a large
portion of the home furniture segment.
The major retailers are AT Home, Durian Industries,
Godrej Interio, Lifestyle. These are the established retailers and have their
presence all over the country. Since IKEA is now entering the Indian furniture
and home furnishings market , all major retailers are at a risk of losing their
market share as IKEA is known for supplying innovative designs at attractive
price making it a value for money package, which is exactly what Indian consumers
look for (Reuters India, 2009).
Since this would be a cause of concern for Indian
furniture retailers, this research paper focuses on different possible
strategies that can be used by these retailers in order to gain a competitive
advantage over multinationals like IKEA.
The literature review begins with defining the
concepts of what exactly MNC’S are and also defining what competitive advantage
means. The literature review for this paper can be looked at in 2 perspectives.
First are the different sources by which a firm can gain competitive advantage.
This deals with different sources with which a firm can generate and develop an
edge over other competitors in the market. The various sources highlighted in
this paper are, the resource base of a firm as a major source of competitive
advantage. The other sources were cultural diversity as a source of competitive
advantage and generation of customer value as source of competitive advantage.
The literature on competitive advantage is more on a general basis however it
is important to understand the different sources available at a firm’s
disposal. The more narrow study of the papers literature review focuses on
survival of local firms vs. MNC’s mainly focusing on emerging markets. The
review is interesting and there is literature to support both sides of the
argument. Some authors clearly identify MNC’s as the superior power with
regards to resources and experience , however there is past evidence that shows
that emergence of home grown champions in emerging economies is also something
Indian furniture retailers can be inspired by. The literature review also
manages to highlight certain strategy frameworks which have proved to be
successful in the past.
In terms of the methodology the researcher has managed
to conduct structured interviews with important personals from the 5 major
retail stores in order to gain their insight. The author has chosen to use
qualitative primary data as the main source of research in order to analyse the
response to various strategies that these retailers would wish to employ. In
terms of research philosophy the researcher has focused on positivism and
interpretivism. The researcher would focus on inductive research as the main
approach which deals with adding to existing literature by gaining valuable
insights from interviews carried out. A combination of both inductive and
deductive approaches has been used. Although more focused on inductive
approach, the deductive approach focuses on comparing the data collected with
existing literature and then developing a hypothesis on the same.
The research paper then focuses on analysing the data
collected via interviews and analysing the same with various approaches that
have been adopted by the researcher.
1.2. Aim and Objectives of the study
The main aim of the research is to analyse the
strategies that can be adopted by Indian local firms to attain competitive
advantage over foreign multinationals like IKEA. A key aspiration of the study
is to analyse the survival strategies that can be used by local firms to defend
themselves and sustain profitability in presence of global corporate giants
like IKEA.
Based on the Aim the objectives of the present
research work can be specifically listed as:
Ø
To
analyze the influence on performance when interaction between local firms and
MNCs takes place
Ø
To
study the relation between the effect of entry of Multinational firm and the
strategy adopted by the local firm
Ø
To
review the strategies that can be adopted by local firms to attain competitive
advantage over foreign multinationals.
Ø
To
analyse the Indian retail future market and find out how the entry of IKEA will
influence the performance of local firms
Ø
To
analyze strategies that can be adopted by Indian local furniture firms to
create competitive advantage over IKEA.
To
read more…….
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