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IKEA to Open 25 Stores in India

Monday, December 24th, 2012

Swedish homeware company IKEA has announced plans to open 25 stores across various cities in India.The company is set to invest a whopping amount of Rupees 10,500 crore (US$2.25 billion) in India over the next few years. It will invest 4,200 crore in the first phase and 6,300 crore in the second phase of the project. IKEA will also set up a 100 percent sub sidiary in India and will have to follow the mandatory 30 percent domestic sourcing clause set by the Indian government. “Currently, we are working closely with 70 suppliers and 1,450 subsuppliers, in cluding many small industries. Based on our analysis, we will source at least 30 per cent of the purchase value of products sold in India from our direct and indirect supply chain comprising Indian small industries,” IKEA told the Economic times.

IKEA has agreed to source 30 percent of the value of goods sold in India from domes tic small industries, but the company has reservations about this agreement working in the long term. The Swedish furniture manufacturer claims it is able to offer products at a low price due to its sourcing strategy. The com pany purchases about one third of its raw products from China and the rest from European nations. Based in Älmhult, IKEA of Sweden AB (IoS) develops and makes the IKEA range for its global customers. Currently, the company delivers products through its 31 distribution centers in 16 countries.

Customers appreciate IKEA’s concept of doityourself (DIY) furniture. Once the pur chase is made, the customer takes the un assembled product home and typically en joys assembling the different pieces of the product at their leisure. The group’s decision to invest in India has made global news and India expects similar foreign investments in the future. This definitely brings cheer in a still recov ering global economy and showcases India as a lucrative place for business. The deal was signed in St Petersburg this June following a meeting between IKEA’s CEO Mikael Ohlsson and Indian commerce and industry minister Anand Sharma.

The Swedish company has high hopes of attracting India’s urban middle class buyers that are keen on decorating their homes with stylish international brands. IKEA is also committed to social causes in India. In May 2012, the IKEA Foundation and Save the Children expanded efforts to fight child labor in the cotton industry. Both organizations have announced rel evant programs in the Indian states of Pun jab, Haryana and Rajasthan.

This initiative will deliver several ben efits such as improving the quality of edu cation. It will also make sure that children complete school and do not leave their edu cation midway.Steps will be taken to enhance family in comes through access to government social security and rural work schemes. The initia tive also includes increasing awareness in cottongrowing communities of children’s rights. Children will be educated about the dangers of working in cotton fields and fac tories.

“This is a natural step in our long collabo ration with Save the Children to strengthen children’s rights in India,” said Per Heggenes, CEO of IKEA Foundation. “If we can create more opportunities for children in developing countries by improving edu cation and awareness of children’s rights, we can help these children break the cycle of poverty and build a brighter future for themselves, their families and society at large.”

 

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