gmm assi(2)
TRANSCRIPT
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Master of Business Administration (MBA)
Lord Ashcroft International Business School
Global Marketing Management
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Marketing Plan 2015
Launch of the IKEA brand in
India
By MD TAUHIDUL ISLAM
ID-1331601
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Executive Summary:
The aim of this report is to present global strategic marketing plan of IKEA to enter
into a new market. To implement this plan IKEA has an opportunity presented in
emerging markets like India.The report begins with an introduction of IKEA and
macro, micro environment factor analysis, which supports to enter into new
market.Then it develops appropriate global marketing objectives with the supporting
corporate and business strategies, to assist the launch of the IKEA brand in India.
Further, it supports the selected entry mode of the new market. Finally, the discussion
is concluded by the develop and implementation of a planned marketing mix
activities for the new Indian market .
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Table of Contents
Table of Contents Page Number
Executive Summary 03
1 Introduction 06
1.1: Aim and Purpose
1.2 At a Glance IKEA
06
06
2 Current Market Environment 07
2.1 Overview of India
2.2 Micro Environment Situation
2.3 Macro Environment situation
07
08
10
3 Proposed Marketing Objectives & Strategy 13
3.1 Marketing Objectives
3.2 Marketing Strategy
3.2.1 Corporate Strategy
3.2.2 Business strategy
13
13
14
14
4 Market Entry method
4.1 Market Entry strategy
4.2 Market Entry method
15
15
15
5 Develop & Implementation of planned marketing mix activities 17
6 Recommendation 20
References 21
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List of Figures
Figure 1:Micro Environment factors of IKEA India 08
Figure 2 : IKEA India product offering matrix 17
Figure 3: Promotional strategy of IKEA India 18
Figure 4:Gantt chart for the IKEAmarketing mix activities 20
List of Table
Table 1 : IKEA at a glance 07
Table2: Competitors market position 09
Table 3 : Different type of Entry mode 17
Table 4: Implementation of marketing Activities 20
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1 Introduction :
The essential act of entrepreneurship is new entry. New entry can be accomplished by
entering into a new or established markets with new or existing goods or services.
New entry is the act of launching a new venture, either by a start-up firm, through an
existing firm, or via"internal corporate venturing"(Lumpkin,G.T.,Dess,Gregory G.,
1996).
1.1: Aim and Purpose
The Netherlands-based Swedish company IKEA, is the largest furniture retailer in the
world with its presence in 27 countries.
Nonetheless,it didn't enter into the Indian business till 2013.Following a lengthy
campaigning and persuading with the Indian politician and administrators,on May
2013,IKEA's $1.95 billion venture proposition to set up 25 stores was acknowledged
by the Indian government(Roy,R.,2013).
IKEA is now a new enter in the Indian market with their existing products.Now i will
look into the IKEA’s business which operated through retail and food division.
1.2 IKEA at a Glance:IKEA basically fabricates, conveys and retails furniture and
home adornment items. The organisation offers merchandise through organisation
claimed stores,catalogue and e-trade destinations crosswise over four geographic
segments,North America, Asia,Australia and Europe.(IKEA,2015)(Global data
report,2015).
IKEA was founded in Sweden in 1943 by 17-year-old Ingvar Kamprad. IKEA was an
acronym of Ingvar Kamprad, Elmtaryd (the farm where he grew up) and Agunnaryd
(his hometown in Småland, South Sweden).(Slideshare,2015)
IKEABusiness Number No of Country
IKEA Stores 315 27 countries
Trading Service Office 28 24 countries
Distribution centres 32 16 countries
Customer distribution centres 11 16 Countries
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Industry Production units 44 11 Countries
IKEA sourced its merchandise from
Suppliers
1046 52 Countries
E-trade site www.ikea.com which had 1.30 billion visits by the customers
The company also provides IKEA Catalogue printed in 29 languages and in 62
editions.
In FY2013, the Retail division accounted for 95.09% & Food division accounted for
4.91% of the total revenue.
In FY2013, Europe contributed 69.00% ,North America 16.00%, Asia and Australia
8.00% and Russia7.00% towards the total revenue.
Table1:IKEA at a glance Source :(IKEA ,2015) (Global data report,2015)
2 Current Market Environment
IKEA business was first started in Sweden which was at the national level, then to the
provincial level in Europe, and lastly it went to the global or universal market.To
implement the global marketing strategy its now planning to enter into the Indian
market.To achieve this goal,IKEA needs to consider techniques and factors which
would help them to realise the market and customers.
IKEA’s mission is to offer a wide range of quality and well designed home furnishing
product at low price that as many people as possible can afford (IKEA,2015).IKEA
needed to change its worldwide store model to fit in with the Indian Foreign Direct
Investment (FDI)regulations and sourcing necessities.This mission would be possible
if the factors like location, customer buying behaviour, market environment and
rivalry from existing Indian furniture retail can be considered appropriately.
2.1 Overview of India
The total population of India is approximately 1.2 billion. Among them 400 million
are middle class people,who will be 5th largest middle class consumer economy by
2025.Its GDP $2.048 trillion with +7% growth rate and fourth-largest economy in the
world(World Bank, 2015).
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2.2 Micro Environment Situation
Market environment can be described where a business can consider factors and
forces that affect its ability to grow up and keep a successful relationships with
customers.Micro environment factors are considered as variables for a business that
have a direct effect on its business operations and achievement.IKEA need to do a
full investigation of their micro environment before implementing their marketing
strategy in Indian market.
Now report will analyse the Micro environment factors in Indian market for
IKEA
Customers/Consumers:All business should be orientated around customers.IKEA
also have a marketing plan which aim to attract and hold customers through their
products.These products meet the customers’ needs and play a role to provide
excellent customer service.
Figure 1:Micro Environment factors of IKEA India
IKEA core business model includes Low cost -Low price-Large volume sales
(IKEA,2015).So firstly, in Indian market IKEA will get a competitive advantage with
the rivals to provide a quality product with low price,which is the basic need of the
Indian customers.
IKEAIndia
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Secondly, in the case of shopping experience in Do -it -yourself (DIY) store, Indian
customers are used to their large shopping bags being reached to their cars by helpful
shop assistants(Bansal ,S.,2012).
Thirdly, another alarming issues for IKEA is that Indian customer does not like the
concept of Do it yourself (DIY).There is a need for assistance to assemble the
furniture in their home (Prezi,2015).
Fourthly,The scale of the shopping area need to be considered because the lack of
self-regulation among Indian consumers, especially those who go to shops with little
children,where jumping over display furniture and running across
corridors(Bansal ,S.,2012).
Finally, IKEA makes clean, functional designs furniture but Indians are used to
heavy teakwood furniture with intricate design. So it needs to be re-worked to suit
Indian tastes.
Competitors
Competitor analysis and monitoring is crucial for IKEA as the Indian furniture
market is highly competitive.Competitors such as Godrej Interio, Damro, Nilkamal,
Style Spa and plethora of furniture retail stores are the competitors in the market
(Introspectmarketing,2015).
Competitors Market Share Pricing Stores
Style spa 24% Premium to mid range 109
Interio 20% Premium to mid range 95
Durian 12% Affordable range 50
Home centre 6%-8% Affordable range 15
Table2: Competitors market position (Prezi,2015)
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Suppliers
Suppliers provide materials for IKEA which they have to use in their business. IKEA
has already around 50 local suppliers in India (The Economic times,2015).Supplier's
behaviour will directly impact on the business.For example if IKEA’s Indian
suppliers provide a poor service and increase raw material price that could affect on
IKEAmarketing strategy and may forces price increases.
Employees
Relevant and experience employees are the essential part of the IKEA’s Indian new
market .Training and development play a vital role in achieving a competitive edge;
especially in customer convincing in the new market and presenting the new product
to customer. If IKEA employs staff without motivation, skills or experience it will
affect customer service and ultimately sales(Learn marketing,2015).
Media
Media can play a positive or negative role for IKEA marketing strategy.Media
promote the Brand image and products. IKEA can employ public relations officer to
help them managing a particular event. In India media has a vital role such as
television programmes with a wide and more direct audience(Learn
marketing,2015)which may have a very powerful impact on the success of IKEA.
Shareholders
Any company needs investment to grow their business and they always decide to
increase money by the shareholding process.So IKEA in India can not initially
introduce the public shareholder for their new business.After opening new stores they
could try to initialise the public share.It should manage the relationship with
shareholders carefully as it might bring a long term success in the Indian market.
2.3 Macro Environment situation
Macro Environment is the external forces that IKEA can't directly control, instead it
needs to manage their macro environment in a way that benefits them.Porter
Diamond is an effective macro environmental tools which analyse the international
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competitive advantage of countries. Each factors of Porter diamond are interrelated
and from these relations IKEA can realise their competitiveness of the Indian new
market.
Factor Conditions
Factor conditions are values of the firm’s skill to supply those factors of research
production that allow a unit to compete (Bakan,I., Doğan,I.F.,2012).
For the case of India, IKEA has created its own important factors such as skilled
resources and technological base infrastructure.The resources needs to be deployed
over time to meet the customer demand.Other factors are-new innovations and wide
range of quality and functional products that provide the comparative advantage of
IKEA.
Before entering into Indian market IKEA should consider a few factors,which
influence the entering the new Indian market .
From(World Bank,2015) ease of doing business index,India scores 143 which
indicate that the regulatory environment is moderate to business operation.( Ease of
doing business ranks economies from 1=Good to 189=Bad).
This depends on internal and external factors. For IKEA in India, external factors are
major issues to entry such as cultural differences, language barrier, organised (15%)
& unorganised (85%) furniture competitors,complex political rules and violation.
For example: There have been concerns about that the entrance of big name retailers
like IKEA,which may hurt the small retailers in India. As a result, some of the
opposition political parties in India have voiced their concerns against the movement
of foreign direct investment (BBC News 2013).
Demand Conditions
The characteristics of this element that drive industry success include the presence of
early home demand,market-size,its rate of growth and sophistication
(Hollensen,S.2014).For IKEA in India,the local market demand is around 54%
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among the young people;who are interested in flat pack furniture.And the local strong
trend of market settings gives the competitive national advantage.IKEA core model
may influence the economics of scale production and growth in the market share and
From (Pawar,P.A,Veer,N.B,2013) stated that urbanisation in India is right indicator of
development and growth engine of economy. purchasing ability of any country is
depending on disposable income of country. Disposable incomes of Indian consumers
have increased significantly in the recent years.
Related and Supporting Industries
Local competition has created innovations and cost effectiveness for the IKEA. It has
also put the pressure on local suppliers . IKEA home line competitors in the New
Delhi region are Godrej Interio,Durian, Zuari,Modfurn, StyleSpa,Gautier,Heritage,
Damro,Featherlite , Mobel Furniture,Irony, Neelkamal, Giani, Supreme, Swagath
Moulded,Steelco,Hettich,Featherlite,Estillo(Businesstoday,2013)(ukessays,2015).whi
ch display its products on the line of IKEA. Simultaneously it has a general and work
line competitor such as Inter wood.IKEA could get an opportunity from their wider
range of products in comparing with the related companies in the existing Indian
market with better quality and competitive prices.
Firm strategy ,structure and rivalry
IKEA strategies can be affected by the local conditions and local rivalry.Their
marketing strategy will need to look at consumer awareness regarding the products
that they offer, develop the customer base,and work towards building customer
steadfastness and referrals.
Government and Chance
Governments and chance can influence and is influenced by each of the four main
factors (Hollensen,S.2014).In IKEA case, government could make the paperwork
easier for foreign investment and help to create more skilled labours and provide
infrastructures to attract more industries(Pawar,P.A,Veer,N.B,2013).Sometimes in
India laws prepared by the political government affect the marketing strategy.
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Now depending on the micro and macro environment situation IKEA can consider
and verify their internal (Strengths & Weakness) and external (opportunity & threats)
factors using the SWOT analysis where IKEA strength in Indian market is demand of
modern furniture,renowned outsourcing centre and board geographic reach.This
strengths will take an opportunity to enter a new emerging market and reduce labour
cost.Other side IKEA weaknesses in Indian market for their too focused Scandinavian
brand and design which will be a threat of IKEA in related to existing furniture
market.
3 Proposed Marketing Objectives & Strategy
3.1 Marketing Objectives
IKEA marketing objectives in India will be established by setting up a business
which will promote its product to potential consumers that should be achieved within
a given time frame.It is very important to ensure that objectives are - specific,
measurable, achievable, realistic and time-specific(SMART). Following this process
IKEA objectives are -
Establish IKEA brand in the Indian market
Increase customer market share against rivals
Identify the target group customer and achieve them by strong strategic planning.
for example: young, low to middle income group
Gaining advantage over the established competitor
IKEA will achieve the objectives in two phases-10 store in first decade and 15
store in second decade(Bloomberg Business,2012).
3.2 Marketing Strategy:
Marketing strategies is the path that shows how to achieve marketing objectives of a
company.A business always has two levels of strategies - Business strategy and
Corporate strategy. IKEA has same strategies to enter into the Indian new market .
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3.2.1 Corporate strategy
Corporate strategies involve those objectives that determine the future of a company.
It includes the long term objectives of a company(Harvard Business School,2015).
IKEA’s main corporate strategy focuses on offering customers low priced
contemporary designed, functional products (Harapiak,C.2013).In India, it is not easy
to establish corporate strategy because of the competitor’s low prices and customer
are not used to Scandinavian plain design. The customer will also look at IKEA as an
aspirational brand as a Chinese customer(Business today,2013).So for long term
business plan IKEA should prepare proper strategy.
They could considered market development -new market with existing products for
new growth in targeting Indian market and diversification-new market with new
product, where it will require new pricing,new promotional and distribution strategy
to engage the new customers in Indian market.
3.2.2 Business strategy
Global competitive business strategy covers a comprehensive field like branding,
positioning, product, price, distribution channel, promotion etc (Temiz,S.,
Yaroshyk,T.,2008).
In case of IKEA business strategy in India it need to be tweak its basic strategic
model.It should be customise the basic strategy and turn into the (global+ local) =
glocal or adaptation strategy which based on the local needs. IKEA consider a
marketing mix strategy, which is a set of controllable strategic marketing
tools–product, price, place and promotion– that firm uses to produce the response it
wants in the target market(Armstrong, G., Kotler, P. 2006).With the mix strategy
they will consider cost leadership and differentiation for the board Indian market.
In low price cases they use the cost leadership strategy to attract the target customers
and differentiated their product from their rivals industry. Now analyse the strategy of
IKEA in case of customer segmentation and targeting :
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Customer segmentation is a major part of a new entry market.According
to(Slideshare,2015),in India there are three types of segmentation in customer which
are- 1.Affluent class ( consumption share 7%-20% )
2.Middle class and (consumption share 5%-51%)
3. Economically disadvantaged class (consumption share 61%)
According to (hetv,2015),more than 50% of India's current population is below the
age of 25 and over 65% below the age of 35. About 72.2% of the population lives in
rural areas and the rest 27.8% in towns and urban areas.
Therefore in the case of IKEA it is important to consider the customer segmentation
and targeting which include the lower class to upper middle class people age between
25 to 35 years old. It may be include single, young couple or mature family.More
over,they will consider geographic segment by choosing highly populated state and
whose are most live in centre city and urban areas like-New Delhi,
Maharastha,Andhra Pradesh (Appendix A). For example- Ikea has recently agreed to
purchase 50,000 square metres of land in Hyderabad of Andhra Prades (The
Economic times,2015)
4 Market Entry method
4.1 Market Entry strategy:As a foreign retailer IKEA can choose different type of
entry strategies for Indian new market. According to (Root,F.R.,1994) Companies are
choosing three different entry strategies for foreign investment .
1.Naive rule:Same entry mode all foreign market .
2.Pragmatic rule:Company uses a workable entry mode for each market.
3.Strategy rule: Compared and evaluated alternative entry mode before decision
making process.
4.2Market Entry method
Now based on the pragmatic market entry strategies IKEA can choose an appropriate
entry mode for Indian market .
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Table 3 : Different type of Entry mode (Suwaris,S.,2015)
From the business case justification, the investment policy in India is favour for the
IKEA and it has to enter by foreign direct investment (FDI ) entry mode as a new
wholly-owned subsidiary,which also called the green field entry
methods.From(A.T.kearney,2015) published report on FDI confidence index where
India is 11th position in the world which consider a reliable direct invest in India .
So there is another chance for IKEA to choose an alternative FDI entry mode like
-acquisition of the existing brand company which prefer to quick access to enter the
market, which called the brownfield entry method. Because at the initial stage IKEA
will face a problem to find out a right location in major cities, with easy access to
public transport and a good transport network(Roy,R.,2013).
In case of international market entry there are few key consideration can considered
by IKEA. Such as: Speed, Cost , Flexibility, risk factor etc.In speed case- acquisition
is the most suitable for entry mode for IKEA which can access quickly in the Indian
market.If they consider new wholly owned subsidiary initially, it is too complex,
costly, time consuming and high risk in competitive established furniture Indian
market. For acquisition mode justification IKEA marketing tactics will be use the
existing retailer brand image and their communication process to targeting the
customer.
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Moreover, there are some potentially quite challenging requirements to use 30%
from local suppliers.Unlikely as a foreign retailer it is difficult to find and meet the
requirement to source 30% of goods from small Indian suppliers without access to
good local knowledge and expertise(Khaitan & co,2012).
But It has already get flexibility for IKEA, because for more than 25 years, India has
been an important market for IKEA from a sourcing perspective,and they will now
continue to increase their sourcing from both existing and new
suppliers(IKEA,2015).So in this case justification FDI method as a joint venture
partner with will be the an another way to enter the Indian market as a single brand
retailer like IKEA.
5 Develop and implementation the of planned marketing mix activities :
From the adaptation business strategy IKEA can consider a favouring adaptation
marketing mix activities which will be helpful for their expansion in Indian emerging
market.
Suggested Product strategy:In Indian market IKEA will define its wide range of
products offering according to the need of customers. Products available different
section of the society . For example- According to the Indian chief of IKEA-we are
looking to provide to the real middle-class in India aiming to offer good quality
furnishing products and solutions at affordable price (Slide share,2015).
IKEA basic product and price matrix
Figure 2 : IKEA India product offering matrix (Slide share,2015)
From the matrix,IKEA can modify their basic strategy and concentrate more in the
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country(neo-traditional ) and modern style with medium and low price based on the
adapted market.
Suggested Price strategy: IKEA should keep its Good-value strategy pricing, which
entails medium to high product quality at a low price (Armstrong, G., Kotler, P. 2006).
In India scenario, they can offer competitive price against branded competitors .
Globally IKEA prices are 30%-40% lower than competitors, but in India given
intensive competition in price IKEA could maintain a 10%-15%(Slide share,2015).
IKEA could try to lower down the price by shifting its production locally every year
gradually (Wisesaputri ,H.2009).
Suggested Place strategy:IKEA had to customise its store location strategy as the
customers in Europe and USA use their own vehicle and stores are located in the
suburbs area . However, in India most of the customers use public transport.Now it is
the highest priority for IKEA to find out right places for its stores in the major cities
with easy entrance to public transport and good transport network(Slide
share,2015).IKEA’s FDI can be concentrated in five cities in India namely, Mumbai,
New Delhi, Bangalore, Ahmedabad, and Chennai (Soundararaj,J.J 2012).
Suggested Promotional strategy:IKEA promotional activities will be implemented
by traditional and non traditional marketing strategies .In India , IKEA is planning to
use traditional strategies such as magazine e.g. India’s Time magazine,Billboard at
most of the major cities ,TV advertisement e.g. use celebrity model.
Figure 3: Promotional strategy of IKEA India
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In the area of non-traditional marketing IKEA has to plan Digital marketing e.g
digital catalogue applications from app store, social media campaign
e.g.facebook ,twitter, google+ and outdoor campaign. All these activities will help to
build up a strong brand awareness,value proposition of IKEA , quality product with
low price and finally attract customer to the store.
Now an effective marketing mix activities of IKEA can bring competitive advantage
for Indian market.Now here is a model of implementation process in Indian Market
for first five years and a Gantt chart show the marketing activities are taken place
before the opening:
Time-line Marketing Activities
Year 1 Market Research e.g.meet Indian customer and visit their home
Research for prominent store location
Already IKEA has been sourcing from India for about 25 years
(Roy,R.,2013).So it should be identified -how can build up a strong relation
with supplier
Year 2 Make IKEA display store in renowned shopping centre
Create brand awareness among customer via medium advertising
Collect customer satisfaction data and ceaseless touch with customer
Start to build first store
Year 3 Opening first store in Noida or Gurgaon in the Delhi region
Start production in India from source of local supplier
Identified the marketing plan elements such as -product position against
competitor, price of product , Promotion , Mass media etc.
Use strong Mass media advertising for increasing brand awareness, if
possible, use e-marketing such as - Internet advertising, Social media etc.
Year 4 Review the previous year performance and customer satisfaction before
continue to year 4
Promotion should be continue on brand advertising and attract to the target
customer such as - young people , new married couple, modular designs
and frequently changed consumers(Slideshare ,2015).
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Table 4: Implementation of marketing activities with five time-line
2014 2015
Figure 4:Gantt chart for the IKEAmarketing mix activities
6 Recommendation
By using effective marketing strategies it could be possible for IKEA to enter into the
Indian market which was also successfully carried out in China. They can use
effective and appropriate product localisation strategy.
As an evaluation of the report it is recommended that, initially IKEA can consider the
foreign direct investment entry mode by acquisition method to enter into the Indian
market. if they consider wholly owning subsidiaries method it can be a long term
process to open stores because of high risk of cost,existing organised and non
Start research for Second store
Year 5 Evaluation of the year 4 performance on Indian market and continuing the
market search
Opening the second in a suitable place
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organised furniture competitors.On the other hand, if they acquired existing brand
retailer, it will be benefited from their free marketing advertising to the customer as a
foreign IKEA brand. In the mean time they can review on profitability and cost of the
existing store.If the result of the review seems positive then IKEA could consider
expanding its business to the other cities in India by wholly owned subsidiaries.
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Appendix A
Top Five State/ Union territory with highest population
State/Union territory Population Population percentage
Uttar Pradesh 19,95,81,477 16.49
Maharashtra 11,23,72,972 9.29
Bihar 10,38,04,637 8.58
West Bengal 9,13,47,736 7.55
Andhra Pradesh 8,46,65, 533 7.0
Source: Census of India,2011 & Family Welfare Statistics in India,2011
Five least populated State/ Union territory
State/Union territory Population Population percentage
Sikim 6,07,688 0.05
Mijoram 10,91,014 0.09
Arunachal pradesh 13,82,611 0.11
Goa 14,577,23 0.12
Nagaland 19,80,602 0.16
Rural & Urban Proportion of population
State/Union territory Distribution of population (%)
Urban Rural
New Delhi 97.50 2.50
Goa 62.33 37.37
Uttar Pradesh 22.28 77.72
Maharashtra 45.23 54.77
Chandigarh 97.25 2.75
Source: Census of India,2011 & Family Welfare Statistics in India,2011