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“To create a better everyday life for the many people”
PESTEL Analysis
The PESTEL framework is a useful tool to assess the external, non-corporate, non-industry variables that might affect IKEA’s performance in India. This framework would enable identify key influences and understand the risk attached.
Economic Factors
- Annual GDP growth rate of 6.9%
- Fluctuation of local currency
- Recorded inflation rate of 9.3% in Dec. 2012
- Strong export market
Political Factors
- Allowing 100% FDI in retail sector
- Complex political structure
- Slow economic reforms
Legal Factors
- Customer protection regulations
- Government preference towards home-grown companies (86% market share)
- Legal policies and trading regulations (SAFTA, APTA)
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Environmental factors
- Climate changes
- Strong Corporate Social Responsibility in IKEA’s culture
- Various Tax and Tariffs
Social Factors
- Large and young population – 54% below age 25
- Different social beliefs and traditional mind-set
- Cultural difference with IKEA’s home country - Sweden
Technological Factors
- Highly educated, skilled and dynamic human resources - Low labour cost
- Technology and IT hub
- Furniture industry has slow absorption of innovation & change
- Underdeveloped complimentary asset (e.g. delivery service)
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