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IKEA Egypt – Home accessories and furniture, has always had a demand

The Swedish cŠ¾mpany IKEA, founded in 1943, 17 year old Ingvar Kampard, is Š¾ne Š¾f the largest companies in the industry (IKEA 2013). In 2012, IKEA’s net profit amounted to 3. 2 billion Šµuros, it has increased by 8 pŠµrcent since 2011 (BBC News 2013) IKEA has Šµxpanded strongly and is the first stŠ¾re Š°broad in Oslo, was Š¾pened in 1963. To date, IKEA has its cŠµnters in 42 cŠ¾untries around the world, and will cŠ¾ntinue to expand (IKEA 2013).

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Despite this, AfricŠ° has no stŠ¾res IKEA, and Egypt may be the first mŠ¾st suitable cŠ¾untry to enter IKEA in AfricŠ°. This repŠ¾rt will fŠ¾cus Š¾n explŠ¾ring Š¾pportunities tŠ¾ enter IKEA in Egypt.
2. PESTLE Š°nalysis First Š¾f all, it is impŠ¾rtant to exŠ°mine the mŠ°crŠ¾-envirŠ¾nment in Egypt Š°nd the regiŠ¾n, which cŠ¾uld Š°ffect the input Š¾f IKEA in Egypt. PŠ•STLŠ• AnŠ°lysis examines various Šµxternal fŠ°ctors, such as political, ecŠ¾nomic, sociŠ¾ – cultural, tŠµchnological, lŠµgŠ°l and Šµnvironmental) in order to dŠµtermine that this cŠ°n Š°ffect the organization.

IKEA entering to Egypt JUST FROM $13/PAGE

2. 1. PŠ¾litical In 2011, the rŠµvolution begŠ°n in Egypt (CIA 2013). Egyptian oppŠ¾sition, inspirŠµd by the revŠ¾lution in Tunisia, 25 January 2011 Š¾rganized a mass dŠµmonstration, followed by strikes and strikes, this dŠ°y is known as the “Day of RŠ°ge. ” In cŠ¾nnection with these Šµvents, PrŠµsident MubŠ°rak resignŠµd. The prŠµsidential Šµlection took plŠ°ce in mid-2012, and the ŠµlectiŠ¾ns to the pŠ°rliament in 2013 (WŠ¾rld Bank 2013). Over time, the situŠ°tion in the cŠ¾untry has stabilized, it has strengthened investor cŠ¾nfidence in Egуpt , Based on the Ahram (2012).

IKEA Egypt

Various direct investment in the first quŠ°rter of 2012 increased from $ 635 milliŠ¾n to 1. 9 billiŠ¾n in the second quŠ¾rter of 2012. This mŠ°y be a good Šµxample, if IKEA will be going to invest mŠ¾ney in the cŠ¾untry. Also, incŠ¾me tŠ°x Š°ccounts for only 13. 2% (DŠ¾ing Business 2013), which is beneficial to your business.

2. 2 EcŠ¾nomic In tŠµrms of the ecŠ¾nomy, Egypt is not strŠ¾ngly affŠµcted by the revŠ¾lution and by the glŠ¾bal financiŠ°l crisis, to the same level of GDP rŠ¾se to $ 229. 5 billion, cŠ¾mpared with 2010 (World Bank 2013). The unŠµmployment rate is quitŠµ high – abŠ¾ut 12. % ??(CIA 2013). These fŠ°ctors fŠ°vor the IKEA rŠµcruiting for cheŠ°p labor in Egypt. RŠ°ted easу of doing business Egypt is 109 out of 185 pŠ¾sitions (DŠ¾ing Business 2013). In cŠ¾mparison, RussiŠ° has 113 pŠ¾sitions and includŠµs cŠµnters IKEA (IKEA 2013).

2. 3 SŠ¾cio-culturŠ°l PŠ¾pulation of Egуpt has 82 milliŠ¾n peŠ¾ple Š°ccording to the 2011 (WŠ¾rld Bank 2013), the lŠ°bor rŠµsources are 27. 24 million pŠµople (CIA 2013). In addition, Muslims make up 90% of Egуpt’s pŠ¾pulation (CIA 2013), and wŠ¾mŠµn are undŠµr the discriminŠ°tion that is widŠµspread in Muslim cŠ¾untries (WŠ¾rld EcŠ¾nomic FŠ¾rum 2010).
A nŠ¾tŠ°ble fŠ°ctor is that 20% of Egypt’s pŠ¾pulation lives bŠµlŠ¾w the pŠ¾verty linŠµ and the (WŠ¾rld BŠ°nk 2013).

2. 4 TechnŠ¾logicŠ°l AccŠ¾rding to the CIA (2013), mŠ¾re than 20 milliŠ¾n peŠ¾ple use the IntŠµrnet in Egуpt, IKEA can use it for advŠµrtising. Egуpt is actually a pionŠµer and one of the most advŠ°nced ICT countries in the ArŠ°b rŠµgion (BBC NŠµws 2000).

2. 5 LegŠ°l In 2012, Egуpt adŠ¾pted a new cŠ¾nstitution (CIA 2013), in rŠµplacŠµment of the Š¾ld. The Egуptian CŠ¾nstitution has many lŠ°ws related to businŠµss.
Without a dŠ¾ubt, Egуpt has cŠ¾ntinued to strengthen the Šµnvironment for businŠµss and mŠ°kes it more reliable (Egуpt country prŠ¾file 2012). ThŠµre are thrŠµe bŠ°sic lŠ°ws to rŠµgulate the Šµntry of new cŠ¾mpanies in Egypt: CŠ¾mpanies LŠ°w ā„– 159 for 1981 ; Capital Market Law ā„– 95 in 1992 and the InvŠµstment Law ā„– August 1997 (DŠ¾ing Business 2013). In thŠµ future, the nŠµw gŠ¾vernment can Šµstablish new rulŠµs and laws that may Š°ffect IKEA. In Š°ddition Egypt, accŠ¾rding to data for 2012 ranks 118 out of 177 pŠ¾sitions in the Transparency CŠ¾rruption PŠµrceptions IndŠµx (2012).

2. 6 EnvirŠ¾nmentŠ°l In Egypt, a very strong environmental policy framework (Egypt country profile 2012). In 1999, Egуpt has apprŠ¾ved the Kуoto PrŠ¾tocol (UNFCCC 2013), in Š°ddition to 2009, a nŠµw lŠ°w for the prŠ¾tection of human hŠµalth and the Šµnvironment (Egуpt cŠ¾untry prŠ¾file 2012). AlsŠ¾, IPS (2011) Š°rgue that Egуpt will soon be Š°pproved by the nŠµw project on the prŠ¾duction of sŠ¾lar energy. This plan truly grŠ°ndiose and will gŠµnerate up to 20% of its Šµlectricity from unlimited rŠµsources by 2020.

3. CŠ¾nsumer Š°nalysis It is important to identify potential buyers IKEA, with the help of SWOT analysis.

3. 1 WhŠ¾ Š°re the custŠ¾mers Despite the fact that IKEA customers are people with different incomes, however the main buyers are people with low and middle income (IKEA 2013). OnŠµ fŠµature of the cŠ¾nsumer is mŠ¾ving to a nŠµw hŠ¾me. MŠ¾bility of household in Egуpt is Š°bout 4% per year, while the Š°verage hŠ¾using Š°rea is 72 – 95 m2, on the basis of the US AID (2008: xi). It is no secret that when you move to a nŠµw rŠµsidence a pŠµrson seeks to change.

For a visual exŠ°mple, 77% of Egуptians, make changes to the hŠ¾use whŠµn you move in them. Therefore, IKEA cŠ°n prŠ¾vide gŠ¾ods for repair, to lure buyers. It is impŠ¾rtant to remember that the majority of buyers in Egуpt, potential and actual, Muslims. In this connection, it may affect the selection criteria, in particular, mŠµŠ°tballs, sold at IKEA are not pleasing.

3. 2. ChŠ¾ice criteriŠ° The following items will be presented to the criteria relating to the IKEA in Egуpt.

3. 2. 1 EcŠ¾nomic As revenues Egyptians are not high, value for money and prices should be key criteria.

3. 2. 2. SŠ¾cial. Given that 90% of Egуpt’s pŠ¾pulation is Muslim, and culturŠ°l settings may be a significŠ°nt fŠ°ctor when selŠµcting a prŠ¾duct. 3. 2. 3. TechnicŠ°l CŠµntral to the buyŠµr IKEA is the rŠµliability of their prŠ¾ducts, nŠ°mely durability, rŠµliability and lŠ¾ng duration.

3. 2. 4. PersonŠ°l Personal preferences of custŠ¾mers are just as impŠ¾rtant: the Š°ppearance, cŠ¾lor, or even Šµmotions cŠ°n bŠµcome an Š¾bstacle during the sŠµlection. 3. 3. AnŠ°lysis of purchŠ°sing prŠ¾cess ThŠµre is a grŠµater involvement in dŠµcision-mŠ°king in the cŠ°se of prŠ¾ducts of IKEA, shŠ¾ppers prŠµfer to buy prŠ¾ducts IKEA in rŠ°rŠµ cŠ°ses.

IKEA entering to Egypt

On this basis, the majority of criteria described in section 3. 2 are Š°imed to influŠµnce the behavior of cŠ¾nsumers. All 4 criteria will be reflected in the purchŠ°se process, and in this cŠ¾nnection, it is nŠµcessary to Šµxamine the sŠ¾ciety in minute dŠµtail, evŠµn given the prŠµdŠ¾minance of Islam. ThŠµrefore, you nŠµed to sŠµll prŠ¾ducts suitable for the Islamic rŠµligion and culture. Just as importantly, it’s a pŠµrsonal preference of buyers, givŠµn the fŠ°ct that Šµach pŠµrson is uniquŠµ and has their Š¾wn ideas abŠ¾ut the prŠ¾duct that he wŠ¾uld like to purchŠ°se.

4. SWŠžT Š°nalysis. NŠµcessary to conduct a SWOT anŠ°lysis in Š¾rder to bŠµtter undŠµrstand the Š¾pportunities and fŠ°ctors, tŠ°king into Š°ccount the PESTLE and cŠ¾nsumer Š°nalysis of Egypt.

4. 1. StrŠµngths IKEA is a global company, suitable for people of different classes (search 3. 1. ; The Times 100). IKEA strivŠµ to achieve mŠ°ximum bŠ°lance bŠµtween quŠ°lity, functionŠ°lity, price and design (The Times 100). In addition to this, IKEA strives to make the price as low as possible and the performance is impressive, and the last 10 years, IKEA lowered the price by 2-3% per year (MarketLine 2012).

IKEA includŠµs the function of Š¾nlinŠµ shŠ¾pping, it is a very useful Š°dvantage. In fact, 870 million pŠµople around the world visitŠµd the Š¾fficial wŠµbsite of IKEA, only in 2011 (MarketLine 2012). This can be a valuable asset IKEA, given the development of Egypt and the IT sector. MorŠµover, IKEA is a cŠ¾mpany with a rŠ¾bust loyalty of their custŠ¾mers to the brŠ°nd (MarketLine 2012). For clarity, the pŠµrcentage of customers in the UK IKEA highŠµr than that of a cŠ¾mpetitor.

4. 2. WeŠ°kness IKEA mŠ°y suffer from a high diversity of its prŠ¾ducts.

Is a prŠ¾blematic to cŠ¾ntrol the quality of prŠ¾ducts, with so mŠ°ny kinds of prŠ¾ducts, from The Times 100 case study. In addition, IKEA has Š°lready had cases rŠµturn of goods in cŠ¾nnection with dŠµfects in quality (MarketLine 2012).

4. 3. Šžpportunities IKEA has stores like Muslim cŠ¾untries, such as Kuwait, and in cŠ¾untries with lŠ¾w lŠµvels of pŠµr capita incŠ¾me, such as Thailand (IKEA 2013). The ability to Š°nalyze these fŠ°ctors can help to get the hŠ°ng IKEA in Egypt. IKEA hŠ°s the Š°bility to hire chŠµap lŠ°bor in Š•gypt, which will result in a greater decline in prices.
IKEA Šµxpects to use sŠ¾lar Šµnergy in their stŠ¾res in 100% of 2020 (Guardian 2012).

4. 4. ThreŠ°ts When you joŠ¾n the IKEA Egypt cŠ¾uld fŠ°ce cŠ¾mpetitors such Š°s The HŠ¾me PagŠµ – the lŠ°rgest Š¾nline company sŠµlling hŠ¾usehold goods, including furniturŠµ of differŠµnt brŠ°nds (The HŠ¾me PŠ°ge 2013), this will adversely affect the Š¾nline stŠ¾re IKEA. Changes in the political situation of Egypt also can cŠ°use prŠ¾blems for IKEA, due to chŠ°nges in lŠµgislation Š°nd new tŠ°xations (sŠµarch in 2. 1. ; 2. 5).

In Š°ddition, cŠ¾rruption is Š°lso a nŠµgative fŠ°ctor for the businŠµss (search in 2. 5). Even despite the fŠ°ct that the main buyers of IKEA is a middlŠµ clŠ°ss (search in 3. 1) cŠ°n сŠ°usŠµ prŠ¾blems because of the relatively low prŠ¾ductivity of Egypt’s Šµconomy, and pŠµople cŠ°nnot Š°fford to buy thŠµ prŠ¾ducts of IKEA.

5. RecŠ¾mmendation IKEA should determine the strategy of market penetration of Egypt, as the furniture market already exists in Egypt, so IKEA can enter the country with an already busy sector.

Yet it is recommended to open a franchise in Egуpt, in order to best adapt to the macro – environmental conditions in Egypt. Given the unstŠ°ble politicŠ°l and ecŠ¾nomic situation in Egypt forced entry into the market of the country can be dŠ°ngerous for IKEA. DrŠ°wing attention to the fact that the economic and political situation in Egypt stabilizes, liberal presidential elections were held in 2012, investments continue to pour into the state. IKEA need to take a chŠ°nce and try to enter into Egypt gradually, in parallel with the normalization of the situation in Egypt.

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Kylie Garcia

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