1. P.E.S.T.ANALYSISBy Kripa Pattabiraman 2. POLITICAL 3.

Analysis Transparency Internationals Corruption Perception

Index (CPI): 94thout of 176 nations, score of 36 out of 100 on a scale from 0 (highlycorrupt) to 100 (very clean) Political instability: factions, criminal cases against leaders, corruption Government stipulation for foreign single-brand retailers: source30% of what they sell from SMEs. Ikea requested for a 10-yearmoratorium on this, government agreed to 7 years 4. Frequent strikes, protests and bandhs (complete or partial

shutdownof cities), often instigated for political reasons Often in response to some change introduced or proposed by theruling party If its a union or organization strike / protest, opposition party willsupport it in order to bolster its vote banks Examples of reasons for strikes / protests / shutdowns: Increase in LPG or petrol prices, or even onion and potato prices Allowing foreign supermarket chains to enter Not raising public transport tariff (autos and taxis) Death of a political leader Release of a controversial movie 5. Regulation changed to allow 100% FDI for single-brand

retailers.However, states free to allow or bar retail FDI Key cities and states for Ikea: Mumbai (Maharashtra) New Delhi (Delhi - Designated National Capital Territory) Chennai (Tamil Nadu) Bangalore (Karnataka) Two strong parties in most states; one is more liberal andsupports progressive reforms, the other supports the massesand blue-collared workers. For e.g., Mumbai: Congress-NCP v/s BJP-Shiv Sena Chennai: AIADMK v/s DMK State policies keep changing according to whos ruling and whatalliances have been formed between which political parties 6. Hurdle & Solution- Ruling and opposition political parties have

different stands on FDI- If opposition comes to power, it might disallow FDI citing job lossfor local businesses, especially carpenters- Ruling and opposition political parties have different stands on FDI- If opposition

comes to power, it might disallow FDI citing job lossfor local businesses, especially carpentersSocial Impact Innovation: Hire-A-CarpenterCarpenters get full-time jobs and a steady source of income-Ikea gets employees with relevant skills sets-Ikea also eliminates local competition popular with consumersSocial Impact Innovation: Hire-A-CarpenterCarpenters get full-time jobs and a steady source of income-Ikea gets employees with relevant skills sets-Ikea also eliminates local competition popular with consumers 7. ECONOMIC 8. Analysis Inflation and slow economy: 40% increase in

expenses, less savingsevery year (Nielsen report) High personal income tax andVAT: Up to 30% and up to 14.5% Weak currency: 1 kronor = 8.5 rupees, 1 dollar = 54 rupees Ikea often imports its products from global suppliers Might have higher price points in India in order to make profits 9. Indian consumers price sensitive (Research in Asia Pacific

Journalof Marketing & Logistics) Consumer spending: set to go up from $977 billion to $3.6trillion by 2020 Average household disposable income: to hit $6977 by 2025 10. Hurdle & Solution- High taxes, inflation and slow economy

reduce disposable income- Indians consumers price sensitive and seek value for money- High taxes, inflation and slow economy reduce disposable income- Indians consumers price sensitive and seek value for moneyEmotion and Product Identity innovation: Ikea Live DesignCustomers provide dimensions of living space, furniture specificationsand budget, come to the store on the day of their appointment-Ikea builds a mock-up of their living space in front of their eyes-Consumers feel special, know for sure what theyre getting-Service can be offered with deep discounts and bundling to add toconsumers value for money perceptionEmotion and Product Identity innovation: Ikea Live DesignCustomers provide dimensions of living space, furniture specificationsand

budget, come to the store on the day of their appointment-Ikea builds a mock-up of their living space in front of their eyes-Consumers feel special, know for sure what theyre getting-Service can be offered with deep discounts and bundling to add toconsumers value for money perception 11. SOCIAL 12. Analysis Poor infrastructure 4, 320, 000 kms of road network,

4 kms of road for every 1000people National highways: 40% of traffic, 1.7% of network, 24% 4-lanes 29.8% living below national poverty line 5thlargest consumer economy by 2025 (McKinsey report) Middle class households: 31.4 million, 53.3 million by 2016, 113.8million by 2026 (NCAER report) Love foreign-label brands: e.g. Munich Polo, Da Milano, FrancoLeone 13. Small homes (National Sample Survey Organization) 32% of

urban homes 258 sq. ft. or less 39% of rural homes 312 sq. ft. or less Office space rental 2004: Mumbai 15thmost expensive city in the world, Delhi 32nd 2013: Slow real estate market, companies moving to biggerheadquarters Piracy and knockoffs Not just movies and music, but Ikea furniture as well 14. Hurdle & Solution- Sizes of homes make it difficult for people to

visualize and buy morethan one piece of furniture- Buying any type of furniture without knowing if it fits is acumbersome commitment- Sizes of homes make it difficult for people to visualize and buy morethan one piece of furniture- Buying any type of furniture without knowing if it fits is acumbersome commitmentAesthetics & Ergonomics innovation: Ikea Flat Displays-Tie-up with builders, furnish sample flats-Offer discounts if customers buy a flat on that propertyAesthetics & Ergonomics innovation: Ikea Flat Displays-Tie-up with builders, furnish sample flats-Offer discounts if customers buy a flat on that property 15. TECHNOLOGICAL

16. Analysis R&D investments: good current growth, but low

overall Only 14 Indian companies in top 1500 in terms of annual R&D However, Indian companies reported largest increase in R&Dinvestment (35.1%) 2013 investment: India $45 billion, China - $220 billion Energy issues Power supply meets only 90% demand Rolling power cuts across the nation bring cities to a standstilland affect businesses 25% of population with no electricity Electricity costs forever rising 17. Increasing connectivity 350 million internet users by 2015

More than half will access the net via cell phones Online shopping Consumers use the internet to research, then buy offline To counter, several businesses offer home delivery and cash ondelivery options Social media Number of users to hit 66 million by June 2013 74% of urban internet users use social media 18. Hurdle & Solution- Bad infrastructure makes traveling a

nightmare- Coupled with the fact that the number of internet users is on therise, it is safe to say that online shopping is only going to increase- Bad infrastructure makes traveling a nightmare- Coupled with the fact that the number of internet users is on therise, it is safe to say that online shopping is only going to increaseEmotion and Product Identity innovation: Ikea Live Design-Same process as before-Offer online 3-D modeling as an alternative to live mock-up-Once design is finalized, offer free delivery and installationEmotion and Product Identity innovation: Ikea Live Design-Same process as before-Offer online 3-D modeling as an alternative to live mockup-Once design is finalized, offer free delivery and installation

India PEST Analysis

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). Evaluation of *ountries +sing PEST *omparative Evaluation of 'ermany , India +sing PEST Scoring Template -ote See Appendi for the .etailed PEST Analyses /ased on Which the following *omparative Evaluation Was Prepared. The Scores are /ased on !ur Assessment. +0 India

*omments Score *omments Score Politics Political Structure . The largest democratic republic% a hybrid of the /ritish and +S political systems. 1 Political 2reedom 3igh degree of political freedom% high degree of press freedom. 1 Political Stability Problems within the coalition government% the growth of nationalism and the intermingling of religion and politics. 2oreign 4elations Increasing problems with Pakistan over cross&border terrorism. War on terrorism has left the region unstable. -ational Security Several incidences of religious conflicts and tensions in Pakistan occupied 0ashmir. ) *ontinuity of 'ovt. Policy 'ovt policy is not as stable in recent times. 'ovt. /ureaucracies Problems between central and state governments. 5egal Environment A competent legal framework in e istence% although sometimes% 6ustice is e$uated with money. 3uman 4ights 4ecord *entral government accused in recent times of stirring up religious violence. ) 5evel of *orruption 3igh levels of corruption in government offices. Political 4isk 3igh levels of risk% civil unrest% cross&border stand&offs with Pakistan.

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Economy& 'eneral Economic System A mi ed economy but largely state&owned or public&controlled. E ceedingly volatile% influenced by implementation of economic reforms. Si8e of Economy 4anked as the )th largest economy in the world. 'rowth Prospects 9ery high potential for growth. '.P growth registered an increase from :; in ##) to :.1; in ##. : Per *apita Income Per capita income is low considering :; of the population is below the poverty line. Economic Stability 2acing an upturn after a spate of recent year recessions. 1 Interest 4ate .eregulation of interest rates has eased financial repression. Inflation 4ate 4educed to below :; in ##. E change 4ate 4isk The rupee is not easily e changeable% although it has strengthened in comparison with the +S dollar. /alance of Payment *urrent account deficit narrowed from ).); in ##) to #.:; in ##. 2oreign !wnership Policy 4estrictions on foreign companies lifted sub6ect to specified investment obligations. 1 Si8e% .evelopment , Influence of the *apital <arkets = Stock E changes 3uge numbers of listed stocks with free entry and e it to domestic and foreign companies. Investment Incentives 4ecent reform policies have induced increased investment incentives to foreign investors. /anking Industry Improved regulatory framework% a $uest for lower leverage. Ta ation 4egime A favourable ta regime in place. 1 Availability of 4elevant 2actor Endowments An abundant $uantity of various reserves and minerals. 1 Economic 5iberalisation 'overnment influence on ma6or industries% although large& scale privatisation has taken place recently.

Economic Infrastructure -ot generally developed and is unreliable 5evel of Informal Sector 3igh levels of black&marketing at present. Economic !utlook A marked improvement in ##% ma6or steps undertaken for strengthening the economy in future. 1 S+/&T!TA5 7#

Economy& Energy <arkets <arket Si8e A significant potential for sales backed by an enormous population. : Price *ontrol 4egime Absence of independent regulation has lead to distortion of prices. Energy /alance A huge demand but an inade$uate supply. *ompetition Improved scope of competition with the abolition of the administered price mechanism. !pportunities 5arge&scale opportunities for domestic and foreign companies. 1 S+/ & T!TA5 )7

S Social Population 4anked nd in the world in terms of population si8e. Presents a strong market opportunities and potential : 5abour <obility The nd highest labour mobility in Asia. : Income 5evels +ne$ual distribution of income amongst various classes. Income .istribution A large proportion of population is below the poverty line. Social .isturbance Social unrest caused by religious conflicts in particular regions. Employment 5evels 9ery high level of unemployment. 1 Wages 5ow wages offered to labour class. 1 *onsumer Awareness Increased awareness amongst the literate population and gaining momentum amongst other classes as well.

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Technology 4esearch , .evelopment Significant opportunities for improvement in technology and 4,.. S+/&T!TA5

'4A-. T!TA5 )) I-.IA India?s Social 4ealities People of India India occupies only .1; of the worlds land area% but it supports over ):; of the worlds population. The total population of India is more than ).# billion in @uly ##). *urrently% .); of people are younger than ): years old and most of Indians live in rural areas% while the rest of people are in cities and towns. 5ife e pectancy is about 7 years% :; of people who are ): years old and over can read and write. Also there is a &year compulsory education% up to age )1 and about 1)7 million work force is involved in different industries. *ulture /ecause of the historic factor that Iranian plateau% *entral Asia% Arabia% Afghanistan and the West have invaded India thousands of years ago% Indian people and culture have been influenced e tremely and produced a remarkable racial and cultural synthesis. 1 languages are spoken in the country. English is the most vital language for national% politics and commercial communication. Although A).; of the people are 3indi% India is the home of <uslims B); of peopleC&&one of the worlds largest <uslim populations. The population also includes *hristians% Sikhs% /uddhists% Sikhs and Parsis. . Education The education system has been developed at the conceivable levels from pre&school to post doctoral level. There are more than >1#%### formal school sand more than .7 million full time teachers. !ver )>: +niversities are offering under graduate and post

graduate courses and about 7### colleges affiliated to these universities. 4eligious *onflicts Indias e traordinary diversity is often seen as its greatest strength% but religious% ethnic% and regional conflicts regularly pose significant challenges to the countrys democracy. Increasing conflicts between 3indu and <uslim have caused more than :### people dead since )A. *hallenges to secure democracy% 6ustice% and e$uality in a multicultural society become urgent and necessary in India. Political 2actors The political arena has a huge influence upon the regulation of businesses% and the spending power of consumers and other businesses. Dou must consider issues such as ).3ow stable is the political environmentE .Will government policy influence laws that regulate or ta your businessE .What is the governments position on marketing ethicsE 1. What is the governments policy on the economyE :. .oes the government have a view on culture and religionE 7. Is the government involved in trading agreements such as E+% -A2TA% ASEA-% or othersE Economic 2actors <arketers need to consider the state of a trading economy in the short and long& terms. This is especially true when planning for international marketing. Dou need to look at ). Interest rates . The level of inflation Employment level per capita . 5ong&term prospects for the economy 'ross .omestic Product B'.PC per capita% and so on Sociocultural 2actors The social and cultural influences on business vary from country to country. It is very important that such factors are considered. 2actors include ).What is the dominant religionE

.What are attitudes to foreign products and servicesE ..oes language impact upon the diffusion of products onto marketsE 1.3ow much time do consumers have for leisureE :.What are the roles of men and women within societyE 7.3ow long are the population livingE Are the older generations wealthyE >..o the population have a strong=weak opinion on green issuesE Technological 2actors Technology is vital for competitive advantage% and is a ma6or driver of globalisation. *onsider the following points ). .oes technology allow for products and services to be made more cheaply and to a better standard of $ualityE ..o the technologies offer consumers and businesses more innovative products and services such as Internet banking% new generation mobile telephones% etcE .3ow is distribution changed by new technologies e.g. books via the Internet% flight tickets% auctions% etcE 1..oes technology offer companies a new way to communicate with consumers e.g. banners% *ustomer 4elationship <anagement B*4<C% etcE