Globalization and Ikea

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1. How has the globalisation of markets benefited IKEA?

The globalisastion of markets has allowed IKEA to increase its market to 33 countries, catering to the many tastes and trends of stylish furniture at cost effective prices. IKEA, the home furnishing super-store has grown into a global cult brand with 230 stores in 33 countries that host 410 million shoppers a year. IKEA targets the global middle class who are looking for low-priced buy attractively designed furniture and household items.

2. How has the globalisation of production benefited IKEA?

IKEA is able to keep its prices low, and seek to lower them, by finding different ways to cut costs. With a network of 1,300 suppliers in 53 countries, IKEA devotes considerable attention to finding the right manufacturer for each item. For example, IKEA used to manufacture its Klippan love seat in Sweden but soon transferred production to lower cost suppliers in Poland. As demand for the Klippan grew, IDEA then decided that is made more sense to work with suppliers in each of the company’s big markets to avoid the costs associated with shipping the product all over the world. Today there are five suppliers of the frames in Europe, plus three int he United States and two in China. To reduce the cost of the cotton slipcovers, IKEA has concentrated production in four core suppliers in China and Europe. The resulting efficienies from these gloabl sourcing decisions enabled IKEA to reduce the price of the Klippan by some 40% between 1999 and 2005.

3. What does the IKEA story teach you about the limits of treating the entire world as a single integrated global marketplace?

IKEAs story teaches us that there are still differences between the various national markets and that they key to success is to be able to adapt and compromise to cater to the local tastes and trends. Despite its standard formula, to achieve glabl succes IKEA had to adapt its offerings to the tastes and preferences of...
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