The Indian furniture market has grown by 5 billion (US$) from 2009 to 2014, with the 2014 expectation being 15 billion. If Ikea can setup its franchise in India by the year 2022, the Indian furniture market will have grown to 21 billion under our assumptions. Phase 1: Our plan will require more consumer research in India, as Ikea has made it clear they will wait to enter India until it’s under optimal conditions. This process will take another year. Phase 2: Ikea will then have to select a franchisee that is capable of providing the resources and location necessary for profitability. A franchise agreement must be negotiated, accounting for another year. Ikea will look to retain 3% of the franchise revenue as that is its standard. Phase 3: The franchise will then look to setup its location, near the city, while maintaining Ikea’s required standards. Finding a supply chain strategy and sourcing strategy that satisfies the legal requirements will take a long time. The Ikea franchise in New Zealand took around 5 years to set up, and we expect the franchise in India to take around the same amount of time as well. The franchise will then have to adjust to the preferences of the Indian market, this process will be ongoing.
Payoff: Ikea will enter the market in 2022, with the Indian furniture market expected to have grown to 21 billion (US$). Ikea will have invested 2.5 billion dollars by this point. If Ikea’s market share grows by an average of 5% per year, starting out at 10%,