Table of Contents

Executive Summary ........................................................................................................................ 3

1.0. Introduction: ............................................................................................................................. 3
1.1. Selected Organization and Selected International Market ................................................... 4
1.2. Sources of Information ........................................................................................................ 4
1.3. History of IKEA:.................................................................................................................. 5
1.4. VMO of IKEA: .................................................................................................................... 5
2.0. Rationale for choosing Bangladesh ......................................................................................... 5
2.1. External marketing environment analysis of Bangladesh .................................................... 6
3.0. Literature Review..................................................................................................................... 9
3.1. Relevant Industry Analysis of Bangladesh .......................................................................... 9
3.1.1. Porter’s Five Forces: ..................................................................................................... 9
3.2. Competitors of the relevant business in Bangladesh ......................................................... 12
3.2.1. 3 I Model (Immediate, Impending, Invisible) ............................................................. 12
3.2.2. Perceptual Mapping of Walmart’s potential incumbent ............................................. 13
4.0. SWOT Analysis ..................................................................................................................... 14
5.0. Marketing Mix ....................................................................................................................... 14
6.0. International Distribution Strategy ........................................................................................ 17
6.1. Factors influencing the choice of channels ........................................................................ 17
6.2. Tailor made distribution channel ....................................................................................... 18
7.0. International Strategies & Entry Mode Strategies ................................................................. 18
7.1. International Strategy of incumbent company to enter Bangladesh .................................. 19
7.1.1. Entry Mode Strategies................................................................................................. 19
8.0. International Marketing Communications Models ................................................................ 22
8.1. The most relevant model for distribution strategy: ................................................................ 23
8.1.1. Analysis of AIDA Model ............................................................................................ 23
8.2. Integrated Marketing Communication Planning (IMC) Model ......................................... 24
8.2.1. Analysis of Integrated Marketing and Communication Planning Model ................... 25
8.3. Integrated Communication Model ..................................................................................... 25
8.3.1. Analysis of Integrated Communication Model ........................................................... 26
9.0. SWOT Analysis ..................................................................................................................... 27
10.0. Marketing Mix on the Online Activities .............................................................................. 28
11.0. International Strategies & Entry Mode Strategies ............................................................... 29
11.1.1. Entry Mode Strategies............................................................................................... 29
12.0. International Marketing Communications Models .............................................................. 30
12.1. Most relevant model for IKEA’s online strategy ............................................................. 31
12.1.1. Analysis of AIDA ..................................................................................................... 31
12.2. Integrated Marketing Communication Planning (IMC) Model ....................................... 32
12.2.1. Analysis of Integrated Marketing and Communication Planning Model ................. 32
12.3. Integrated Communication Model ................................................................................... 33
12.3.1. Analysis of Integrated Communication Model ......................................................... 33
13.0. The justification of the online activities based on the culture of Bangladesh ..................... 34
14.0. The advantage of globalization to enrich IKEA’s online maneuvers in Bangladesh .......... 34
15.0. Conclusion ........................................................................................................................... 35
16.0. Recommendations ................................................................................................................ 35
Reference: ..................................................................................................................................... 36
Bibliography ................................................................................................................................. 38
Appendix:...................................................................................................................................... 42
Appendix A: IKEA’s VMO ...................................................................................................... 42
Appendix B: IKEA’s History.................................................................................................... 42
Appendix C: SWOT Analysis ................................................................................................... 43
Appendix D: Pestel Analysis .................................................................................................... 44
Appendix E: AN OVERVIEW OF BANGLADESH FURNITURE INDUSTRY .................. 46
Executive Summary

IKEA is the world’s largest furniture retailer. However, there are still so many opportunities to

expand in the global market and grow even bigger as an organization. The market place of

Bangladesh is one of the foreign market where IKEA can expand its business. With a fast

growing economy and the recent development in the retail industry, Bangladesh holds the

potential to be a profitable business expansion market for IKEA. Along with that, the popularity

of IKEA in Bangladesh makes it even more compelling for IKEA to enter into the market. With

a suitable entry strategy, IKEA can establish itself in the market fairly fast since its brand value

puts it in an advantageous position over the available competition. Since, IKEA has both online

and offline sector, it should try the joint venture strategy for their offline sector and acquisition

for their online sector. Furthermore, to keep the communication coherent and continuous, IKEA

can follow a few well established integrated communication model

1.0. Introduction:
For an organization to enter an international market there are lot of factors to consider because

the present demands of the global market are very high. There has to be a clear reason to why an

organization decides to enter a particular market. With a clear reason being set, it is fundamental

to have explicit research data to comprehend the potential of that market’s economic growth.

Furthermore, the organization also needs to assess the risks and downfall that may occur and act

accordingly to prevent such incidents. While it is overlooked by many, it is of vital importance

for any organization that wishes to enter an international market to get sufficient knowledge on

their culture, values, necessities and so on to understand the customers demand more accurately
which is essential for a successful marketing campaign (AgarwalSridhar & Ramaswami, 1992).

A successful marketing campaign has the power to decide the fate of the organization’s success

in the market they wish to enter. IKEA has recently decided to expand their network in the

marketplace of Bangladesh. It has been the leading and the most prominent furniture retailer

worldwide for a long time, (Edvardsson, 2006). As more and more companies are making their

entry in Bangladesh’s market, IKEA intends to make use of the ever-growing demand of elegant

and affordable furniture and institute their place as the first choice when people look for

affordable and well-built furniture. This report will look into various aspects related to foreign

market entry regarding how IKEA can make a successful and profitable entry into the market of

Bangladesh.

1.1. Selected Organization and Selected International Market

IKEA has recently decided to expand their network in the marketplace of Bangladesh. It has

been the leading and the most prominent furniture retailer worldwide for a long time. As more

and more companies are making their entry in Bangladesh’s market, IKEA intends to make use

of the ever-growing demand of elegant and affordable furniture and institute their place as the

first choice when people look for affordable and well-built furniture.

1.2. Sources of Information

The survey data collected from the research conducted with a set of questionnaire for the sole

purpose of entering into the local market will be the primary source of information. Different

peer reviewed articles, newspaper articles, official documents from website, and various

magazine articles will be the secondary source of information.

1.3. History of IKEA:

IKEA was founded in 1943. It is a Swedish company. In the beginning it was mainly a mail-

order sales business. From 1948 it started their journey as furniture retailer .The first IKEA store

opened in 1958 in Sweden. In 1980, IKEA established themselves in the market of Italy, France,

and USA. In 1990, IKEA for children was announced (IKEA, n.d.).

1.4. VMO of IKEA:

IKEA has the same mission and vision statement which makes it much simpler to follow.

2.0. Rationale for choosing Bangladesh

The first and foremost reason behind the decision to enter into the market of Bangladesh is its

economic development in the last couple of years. Furthermore, its retail industry has also been

revolutionized in the recent times (The Daily Star, 2018). Moreover, since the demand for ready

to assemble well-made furniture has increased over the last couple of years due to the
development in retail industry of Bangladesh it makes perfect sense for the largest furniture

retailer in the world to enter the market.

2.1. External marketing environment analysis of Bangladesh

Political:

 49 percent limit is placed on foreign investment in local market ventures. However, the

Government decided to change the limit to hundred percent after consideration which is ideal

for IKEA to operate here, (The Daily Star, 2018).

 Bangladesh government encourages investments from foreign organization, and in most

of the cases it provides the same facilities and restriction to the local and foreign

industries for example the incentives behind investing, which offers : hundred percent

proprietorship in almost all the sectors; and tax exclusion

Economical:

 For the last couple of years, the economy of Bangladesh has been on good shape.

Bangladesh has an average growth rate around 6.2% for the last few years and considered

to be 46th largest economy with regard to GDP

 The GDP grew in the agriculture sector about 4.2%, in the industry sector about 12% and

in service areas about 6.4%, (Star Online Report, 2018).

 Inflation rate

Social:

 Bangladesh still has a long way to go before the corporate industry starts to comprehend

the gravity of social responsibilities and how it affects the economic progress. However

they are becoming more aware of the importance of consumer rights.

 Native businesses are gradually becoming aware of the fact that social responsibilities

another long term investment for the future of the business.

 Consumer expenditure

Technological:

 In Bangladesh, the dependency on foreign technologies are huge, therefore, if a foreign

organization wishes to enter the market, it will have to plan accordingly to adopt those

technology in their advantages.

  Although, the dependency on foreign technology is very large, Bangladesh has been

trying to reduce the dependency by developing technologies on its own

Environmental:

 Environmental deterioration

 Obliviousness and lack of awareness towards environmental policies

As a part of maintaining the sustainability of the environment IKEA already focuses on waste

management.

Legal:

 Trading laws for foreign companies

 The way of approaching foreign organizations

•Political instability
P •Lack of good governance

•Inflation rate
E •Poverty reduction

•Social changes
S •Consumer expenditure

•Technological advancements
T •Heavy dependence on imported technologies

•Environmental deterioration
E •lack of awareness

•Trading laws for foreign companies (The Daily Star, 2018)

L •Approach towards foreign organizations

Figure: PESTEL analysis

3.0. Literature Review

In the furniture industry, while manufacturing, labor cost takes up a major portion of the total

cost According to a research, about 40% cost is the labor cost, (Whelan & S.Maklari.S, 2002).

This is why furniture manufacturer are moving to countries with less labor cost. To cut labor

costs which in terms will cut the manufacturing cost organizations are moving to other countries

that has a lower wage scale. Compared to United States, countries like china have wages as

lower as sixteen times, (International Labour Organization (ILO), 2003). Organizations are

trying take advantage of that lower labor cost. There are some methods followed by furniture

retailers to remain ahead of their competitor such as, products that are semi-customized, fast

completion of orders, establishing an overseas network (Raymond, 2002).

3.1. Relevant Industry Analysis of Bangladesh

IKEA is the biggest furniture retailer in the world that provides various range of products from

ready to assemble furniture to kitchen appliances. IKEA is planning to enter into the market of

Bangladesh. In the last couple of years the retail industry of this country has experienced

groundbreaking changes. However, the furniture industry still leaves something to be desired

which is a great opportunity for IKEA to enter into the market. Porter’s five forces technique can

be used to evaluate the furniture industry of Bangladesh.

3.1.1. Porter’s Five Forces:

1. Negotiating Control of Buyers: Reasonably high

  Very competitive market

 Lots of alternatives for consumers from local and global furniture retailer

2. Negotiating Control of Suppliers: Not substantial

 Various substitute factories are ready to supply IKEA

 Substitute factories have adequate capability too

 Long term association with the suppliers

3. New entrants: Considerably low

 High investment cost

 The demand of high quality products with low prices

 Experience and expertise are necessary to establish a solid distribution management

Figure: New entrant’s barriers

4. Power of Substitutes: Low

 The brand value of IKEA

 There aren’t so many companies that can match the range of products that IKEA can

offer

5. Rivalry amongst existing businesses: Quite high

 Competition from major furniture retailer in the local market

 Furniture at a discount price policy by the incumbents as well

Figure: Porter’s Five Forces

3.2. Competitors of the relevant business in Bangladesh

In furniture business there are lots of big fishes in Bangladesh. Before entering into the market

IKEA needs to know their competitors and study their approach, policy so that it can plan

accordingly to stay competitive and to serve that purpose 3I Model can be used.

3.2.1. 3 I Model (Immediate, Impending, Invisible)

Immediate competitors are not the only competitors in the market, however, many businesses

usually focuses on the immediate competitors. In any case, when an organization decides to enter

into the global arena, it needs to take all sort of competitors it may have in the market into

account. Therefore, it needs to conduct a wide research to figure out the impending and invisible

competitors. Furthermore, to stay ahead of the competitors, it is vital to know the strength and

weaknesses of the current, looming and potential competitors. Otobi, HATIL will be considered

as the immediate competitors of IKEA in Bangladesh. These are the biggest furniture retailer in
the country. They have a large number of outlets around the major cities. Akhtar Furniture and

BROTHERS Furniture can be categorized as the impending competitor for IKEA in Bangladesh.

They have a large customer base as well. The invisible competitors in the furniture market for

IKEA will be various changes in regulations, entry cost, and changes in industry demand.

3.2.2. Perceptual Mapping of Walmart’s potential incumbent

High price

Low quality
Low quality High quality

Low price
 Part 1: Offline Market

4.0. SWOT Analysis

• Cost leadership
• Brand value
S(Strengths)
• Strong relation with the customers (Jurevicius,
2013)

• Do It Yourself (DIY) policy

• Maintaining quality with low cost (Namburi,
W(Weaknesses)
2016)
• Maintaining environmental issues

• Expanding into developing countries (Pratap,

2016)
O(Opportunities) • The ecofriendly business structure as more
people are getting aware of this issue
• Possible future expansion

• Increasing competition (MANAGEMENT

STUDY GUIDE, n.d.)
T(Threats)
• low price strategy by incumbents
• Economic Crisis

Figure: SWOT Analysis of IKEA

5.0. Marketing Mix

7P can be used to analyze the marketing Mix of IKEA which is the extended version of

traditional 4P.
 Product:

 Creating long term relationship with the suppliers

 Introducing wide range of products such as (marketingteacher, n.d.)-

o Furniture

o Children’s IKEA

o Clothes and textiles

o IKEA FAMILY products

o Kitchen appliances

o Sofas, tables & chairs

o Tools & hardware

 Price:

 Offer products in low Price by cost leadership strategy

 Statement such as creating a better everyday life for consumers.

 Designs can play a vital part in deciding their price

 Various procurement approaches and bargaining power with the suppliers help them

keeping a low price

 Various purchasing alternatives

 Quality and stylish products at an affordable price

 Place:

 Identify major divisions to set up stores.

 Set up outlets tactically in an advantageous position

 Convenient of distribution medium for delivering products

 Promotion:

 Offer discount to attract more customer

 Promote itself as a reliable and stylish brand

 Usage of slogans like “everyday low prices”

 Use commercial such as advertisements to reach out to the customers

 Reliable warranty policy

 People:

 Getting technical support from expert

 Having qualified stuff

 Process:

 Having flexible return policy

 Effective call center

 Physical evidence:

 Installing large parking lots

 Easily understood catalogue

6.0. International Distribution Strategy

A proper distribution channel is necessary for making sure that the products and services from

the production center reach the customers through distribution center and retail stores. The

production center are directly connected with the suppliers. IKEA approximately has about 1800

supply chain around the world. To look after the relations with the suppliers IKEA appointed 42

trading service offices worldwide. Furthermore, it also has twenty eight centers for distributing

its products (IKEA, 2018).

6.1. Factors influencing the choice of channels

There are various aspects that will have to be well-thought-out before deciding the distribution

channels. Some of the major factors are marketing aspects, product, incumbents, and

manufacture related factors (Samiksha, 2018).

6.2. Tailor made distribution channel

Joint
Distribution
center of IKEA
and its partner

Supplier1

IKEA
Supplier2 Production
Center in
Bangladesh
Retail stores
Supplier3 Retail stores
Retail stores

7.0. International Strategies & Entry Mode Strategies

IKEA always looks to follow the transnational strategy while entering into a foreign market. Its

marketing plan is shaped centrally. They need to maintain the same strategy when they enter the

marketplace of Bangladesh because it will help them to remain competitive.

7.1. International Strategy of incumbent company to enter Bangladesh

At present there is no direct incumbents company that is planning to expand their business in

Bangladesh.

7.1.1. Entry Mode Strategies

Where? When? How? These are the three questions a company must ask itself before deciding to

enter a foreign market. The first step is to select the market then an estimated time to enter the

market and finally the selection of entry mode.

Rationale
for entry

Market
selection

When to
enter

How to
enter/ Entry
mode

Figure: Foreign market entry

 Figure: Market entry mode

In a market place like Bangladesh where there are people from various ethnic and religious

backgrounds it is best to form a joint venture. In that way, IKEA will be able to use the

knowledge of the local organizations to connect with the suppliers and the consumers with more

ease.
8.0. International Marketing Communications Models

There are three stages of buying which are Cognitive stage, Affective stage, and Behavior stage.

Based on these stages marketing communication models are classified. Here the models for The

International Marketing Communications is shown below-

International Marketing
Communication Model

Advertising Levidge and Heightened

Model of
DAGMAR AIDA Exposure Steiner Appreciation
JOYEE
Model Model Model

Figure: International Marketing Communications Models

8.1. The most relevant model for distribution strategy:

Among all the marketing models, AIDA is the most relevant model for the distribution strategy

of IKEA. This marketing model provides the framework for grabbing customers Attention,

induce Interest & Desire and inspire the consumers to purchase (Action).

• Occupy the customers' Attention

A(Attention)

• Raise their Interest

I(Interest)

• Trigge the Desire of the customers

D(Desire)

• Inspire purchase
A(Action)

Figure: AIDA model

8.1.1. Analysis of AIDA Model:

To run a successful marketing campaign, AIDA can be a very helpful marketing tool. AIDA

stands for four steps. Combining these four steps it is the process of communicating with the

consumers through advertisements to influence them to buy the products. IKEA can use their

popularity and goodwill to get the attention of the consumers and use the quality and unique

design to create interest among the customers. Along with quality and design, they can also focus
on the affordability of their product which will address the customers need. Furthermore, IKEA

also should meet the emotional necessity of the customers.

8.2. Integrated Marketing Communication Planning (IMC) Model

Review the
marketing plan

Promotional strategy
analysis
Communication
process analysis

Budget making

Determining the Integrated Marketing Communication process

Advertisement Sales PR Selling Direct Interactive

Promotion marketing

Objectives of Objectives of Objectives of Objectives of Objectives of Interactive

Advertisement Sales PR Selling Direct objectives
Promotion marketing

Advertisement Sales PR strategy Selling Direct Interactive

strategy Promotion strategy marketing strategy
strategy strategy

Implementation
Monitoring

Figure: IMC Planning Model

8.2.1. Analysis of Integrated Marketing and Communication Planning Model

The suggested integrated marketing and communication plan for IKEA has 7 steps. Initially the

marketing tactics will have to be reviewed before proceeding any further. Afterwards

promotional strategy and communication process will need to be explored. Finally comes the

implementation of those strategy and observing the whole process to make the sales volume

increases substantially. The communication objectives and the marketing mix should be coherent

to be able to effortlessly evaluate (Peltier et al., 2003).

8.3. Integrated Communication Model

8.3.1. Analysis of Integrated Communication Model

Marketing, Public Relation (PR) and Human Relation (HR) is the three components of the

proposed Integrated Communication model of IKEA. In this model marketing overlaps with PR

and PR overlaps with HR. Furthermore, this model requires to be complementary and coherent

(Sriramesh, et al., 2013). Moreover, the value proposition approach can be used for IKEA in

their furniture sector (Sriramesh, et al., 2013).

 Part2: Online market

9.0. SWOT Analysis

S(Strengths) W(Weaknesses) O(Opportunities) T(Threats)

• Variety of • Inedequate • E-commerce • Competition

products Online support (Namburi, from online
(Jurevicius, • Online 2016) retailers with
2013) payment policy • Improving lower costs
• Very user • Logistic cost delivering because they do
friendly system. not have a
website • Webinar physical
• Well managed training for presence
distribution customers for (Pratap, 2016)
centers their DIY (Do • Information
It Yourself) leakage
method.
10.0. Marketing Mix on the Online Activities

•Wide range of products

Product
• Price reduction
Price • More payment option

•IKEA Website
Place
•Promotion through social media
Promotion •Healthy relationship with the consumers, (Høgevold, 2011)

•Effective network to deliver the products

Process
•139,000 employees
People
•Reflecting the cultural aspects of the country
Physycal evidence
11.0. International Strategies & Entry Mode Strategies

11.1.1. Entry Mode Strategies

Country
• Competition
• Economy

Strategy
• Political
• Legal

Implementation
• Acquisition
• Franchising
• Wholly owned subsidiary
• Joint ventures
12.0. International Marketing Communications Models

Marketing Communication Model

Advertising Exposure Model

DAGMAR

AIDA

Heightened Appreciation Model

Model of JOYEE

Levidge and Steiner Model

12.1. Most relevant model for IKEA’s online strategy

12.1.1. Analysis of AIDA

In the online marketplace IKEA can follow AIDA, the same marketing strategy it followed in

their offline sector. The idea behind this model is to capture the attention of the consumers. Upon

grabbing their attention, the next task is to grow their interest by using big data technology to

process research data (Lamb, et al., 2009). Afterwards build consumers’ desires and finally

engage them to buy the product.

12.2. Integrated Marketing Communication Planning (IMC) Model

12.2.1. Analysis of Integrated Marketing and Communication Planning Model

Even though the IMC strategy for their online sector can follow the same model as their offline

method, more focus needs to be given on creating interactive and more user friendly website for

the consumers. Moreover, search engine optimization is an area that can bring about more traffic

on the website which will help in succeeding the marketing plan by increasing sales significantly
12.3. Integrated Communication Model

12.3.1. Analysis of Integrated Communication Model

An integrated communication model for the online market should be coherent, consistent, and

complementary and show continuity. To get all the benefits from online sector an effective

communication model is necessary. It can also be beneficiary for the online consumers

(Sriramesh, et al., 2013). The importance of search engine optimization also needs to be noted

because it can enhance website traffic. IKEA can also opt for a user friendly mobile application

for their customer (Pawar, 2014).

13.0. The justification of the online activities based on the culture of

Bangladesh

In online sector, by adapting the local culture and understanding the cultural need and the need s

of the consumers IKEA can establish their position in the heart of the customers. This will

encourage the customers to support IKEA more than before. With globalization and technology,

cultural similarities are increasing all over the world as well. Technology not only allows

advertising products using conventional method like television but also it allows organizations to

advertise their products using social media platform. Furthermore, the increased number of

internet user coupled with the cultural shift towards branded product in Bangladesh is yet another

reason for IKEA to start advertising their products on their website to get the attention of the

huge online based consumers. Moreover, together with their offline activities, the online

activities adopted by IKEA can make it more cost effective and more profitable (Pawar, 2014).

14.0. The advantage of globalization to enrich IKEA’s online

maneuvers in Bangladesh

Globalization has made possible it possible for companies to enter into the global market.

Organizations investment opportunities have increased. Globalization is an ongoing process. It

has made cultures, and economy integrated (UK Essays, 2017). Due to Globalization

transportation has become cheaper and faster which can aid IKEA. It also produced more

development opportunities. Furthermore, due to increase in in shared cultural values, IKEA’s

operation cost can significantly reduce and communication process gets much efficient.
15.0. Conclusion

In today’s market to remain competitive, organizations have to enter into foreign market and

establish their mark. Multinational company such as IKEA needs to expand more and more to

remain at the top of the furniture retail industry. Although there some barriers for foreign

organization to enter into Bangladesh, its economy has been improving and the retail industry

has gone through revolutionary changes, it is in IKEA’s best interest to enter into the market and

establish themselves as the leading furniture retailer in the country as well. IKEA’s best quality

in lowest price will differentiate them from their competitors. Further their use of technology

give the competitive edge they need to be the biggest furniture retailer in the country. The entry

mode strategy for IKEA’s entry mode strategy can be joint venture to accelerate their

establishment.

16.0. Recommendations
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Appendix:

Appendix A: IKEA’s VMO

Every organization have a vision, sets of mission and objectives which help them grow as an

organization. To be successful in any business, the business needs to have a vision and to turn

that vision into reality it needs goals and objectives. Mission is the process of achieving that

vision. In IKEA’s case though, their mission and vision statement are the same. The vision of

IKEA is to create a better everyday life for as many people as possible. Their business idea

resonate with their vision by offering a various kind of elegant and efficient home appliances at a

very low price so that most people can afford them. IKEA’s primary objectives are to reduce

transportation and functional cost so that it can offer products at a lower price, expanding their

network by establishing retail stores around the world.

Appendix B: IKEA’s History

Feodor Ingvar Kamprad was a Swedish business magnate best known for founding IKEA is

mainly a Swedish company which was founded by Feodor Ingvar Kamprad. It has now become

the biggest furniture retailer in the world (IKEA, n.d.).

Appendix C: SWOT Analysis

IKEA has established their name as the leading furniture retailer around the world and they wish

to expand their network even more into the foreign market to remain competitive. Before

entering into a foreign market it is important to know the strengths and weaknesses, as well as

the opportunities and the threats to make informed strategic plan for future.

Strengths

 Low price

 Variety of products

 Strong relation with the customers

 Eco friendly

 Brand value

 What makes IKEA different than all other furniture retailer is that their goal to make

consumers’ life better

 Cost –leadership reducing the assembling process cost which benefits the customers as

well.

Weaknesses
 Do It Yourself (DIY) policy

 Logistic cost

 Number of staff

 Maintaining quality with low cost

 Mass produced goods

 It’s large scale business policy makes it very hard to maintain the quality across various

locations
  Maintaining environmental issues

Opportunities
 Possible future expansion

 The ecofriendly business structure taking their brand value to a whole another level

which in turns creating future opportunities for them as more and more people are

becoming aware of the environmental issues

 Expanding into developing countries

Threats

 The low price strategy which has been a major factor in the success of IKEA’s business

model has been implemented by many companies, therefore to stay competitive and

ahead of other organizations IKEA needs to be innovative in their strategy

 Increasing competition

 Economic Crisis

Appendix D: Pestel Analysis

Political: Political stability is the first thing that needs to be considered if a business wants to

enter a foreign market. Political freedom and constraints very crucial for a successful transition

of a business into a foreign market. There are restriction, policies Government policies,

legislation, and lot of other facets that plays a significant role in the process of the introduction of

an organization into the market. The political situation in Bangladesh has not been very stable.

Furthermore, the regulatory policies makes life difficult for international organization to enter

and establish their businesses successfully.

Economical: Economic stability is one of the most if not the most important thing for an

organization that wants to establish their network in a foreign market. The profitability of an

organization hugely depends upon the economic condition of the country. IKEA wants to

establish themselves in the furniture retail section of Bangladesh and undoubtedly the

economical position of Bangladesh has a large role to play here.

 Corporate Tax Rates in Bangladesh:

A 25% corporate tax on the publicly listed organizations in Bangladesh. It is important to note

that, there are two types of major income taxation policy in Bangladesh. Personal and Corporate.

Also, there is 15% VAT on consumer goods. In other sectors the tax rate are shown below,

(KPMG, 2017).

 Tax rate on Publicly Listed Organizations 25%

 Tax rate on Publicly Non-listed Organizations 35%

 Tax rate on Bank Sector 40-42.5%

 Tax rate on Telecommunication Industry 45%

Social: In this era of global businesses, many companies are trying to expand their business

overseas. Various social aspects of that country plays vital roles in that transition. While

economy decides how much the people will likely to spend, the social aspects help decide in

which are people will spend more. The retail industry of Bangladesh has flourished in the recent

years which makes it ideal for IKEA to enter this market.

 Consumer expenditure
Technological: Technology is in the center of every businesses activities of an organization

especially in the marketing and supply chain section. Bangladesh is well up to date with the

latest technology and IKEA will no trouble to utilize the technological advancements to bring

more profit.

 Although, the dependency on foreign technology is very large, Bangladesh has

been trying to reduce the dependency by developing technologies on its own

Environmental: A sustainable environment and to maintain the sustainability is very important

for an organization that plans to enter the market.

 Obliviousness and lack of awareness towards environmental policies

Legal: It is of paramount importance for any business that wants establish their network in a

foreign land to be familiar with the legislations and policies of that country.

 The way of approaching foreign organizations

Appendix E: AN OVERVIEW OF BANGLADESH FURNITURE INDUSTRY

Historically Bangladesh’s furniture business started from cottage industry. Afterwards it

transformed into mass furniture production around early 90’s. From then on the furniture

industry has been gradually growing. In the recent years the retail furniture industry of

Bangladesh has gone through extraordinary changes and people are choosing local products over

the foreign products. Currently around 2 lakh employees are working in the furniture industry
and around 42000 enterprises are involved. In furniture industry, about 60% of raw ingredients

are traded in from foreign countries.

Appendix F: Bangladesh FDI (Foreign Direct Investment)