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Ikea In India Essay

2353 words - 9 pages

Ikea in India…finally!July 1, 2012 by Andreas De Rosi 5 CommentsIkea in India: 100% FDI in single brand retailLast week Anand Sharma, India's commerce and industry minister met with Swedish home-ware company Ikea's CEO M Ohlsson in St. Petersburg. They discussed investment prospects of Ikea in India following the relaxation of rules guiding FDI in single-brand retail.The government had increased the FDI cap for investing in single-brand retail from 51% to 100% earlier this year, subject to the clause that 30% of the sourcing has to be from domestic small and medium enterprises (and up to $ 1 million investment is made in plant and machinery).After putting its India plans on hold, because of the 30% local sourcing clause, Ikea will now finally come to India with an investment of € 1.5 billion. This makes it the largest foreign investment in India's retail sector and gives India a much needed booster in investor confidence, which is currently quite low due to the government failing to enact important reforms.Ikea in India: 25 stores across various citiesIkeas investment in India will be done in two phases: € 600 million in the first phase followed by a € 900 million investment in the second tranche. Ikea submitted a formal proposal to the Foreign Investment Promotion Board to set up a 100% subsidiary in India. This will make Ikea the second retailer to do so after the UK based footwear firm Pavers applied beginning of this year.Ikea however still sees the clause that requiers goods to be purchased from small and medium enterprises as a challenge. The management believes that in order to secure low prices and benefit the Indian economy and society, small industries need to grow and develop. Nonetheless, Ikea said it expected to function within the "spiriti of the policy" and hopes that the definition of small industries is reviewed and will provide some flexibility in the future.Ikea in India: Its values and its supply chainIkea was founded in Sweden by Ingvar Kamprad, a man known for never showing off his money and not spending on unnecessary products and lifestyle (he never stayed in expensive hotels, always travelled in economy class and encouraged his employees to write on both sites of the paper). Ingvar Kamprad shaped the value system of Ikea. He created a set of values, which are beyond simply returning enhanced value to shareholders, but has bigger objectives, such as helping to reduce poverty, create a better environment and promote more equality.Anderson Dahlvig, former CEO of IKEA, wrote in his book "The IKEA edge": "In all countries and social systems, eastern as well as western, a disproportionately large part of all resources are used to satisfy a small part of the population. In our line of business for instance, too many new and beautiful designed productscan be afforded by only a small group of better-off people. Ikea's aim is to change this situation . [...] The company tries to eliminate all status symbols...

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