A case study on globalization of IKEA
Jean Oct. 15. 2010 IKEA which may be the world’s most successful global retail has grown into a global cult brand with 230 stores in 33 countries that host 410 million shoppers. To achieve global success, IKEA took some actions, for example, in order to avoid the costs associated with shipping the product all over the world. IKEA works with suppliers in each of the company’s big market and IKEA had to adapt it offerings to the tastes and preference of consumers in different countries. Besides, globalization of market and production are also an important factors of IKEA’s achievement.
1. The first question: how has the globalization of market benefited IKEA?
The globalization of market refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have more easier to sell internationally, so it is easier for IKEA to grow into a global cult brand with 230 stores in 33 countries and have 5 suppliers of the frames in Europe, plus 3 in the United States and two in China.
Because a fewer barriers to cross-border trade. IKEA can easily to open a store in other countries.
2. The second question: how has the globalization of production benefited IKEA?
The globalization of production refers to sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of productions, IKEA did a good job, in order to reduce the cost of cotton slipcovers, IKEA has concentrated production in four core suppliers in China. The resulting efficiencies from these global sourcing decisions enabled IKEA to reduce the price of the Klippen by some 40 present between 1995 and 2005, because in China we have cheaper labour and lower price of source, it will reduce the cost of production in IKEA, thereby allow IKEA to compete more effectively.
3. The third question: What does the IKEA story teach you about the limits of treating the entire world as a single integrated global marketplace?
In my opinion, the limits of treating the entire world as a single integrated global marketplace is national difference in tastes and preference. Because IKEA entered the United States in early 1990s ,the company soon found its European-style offerings didn’t always resonate with American consumers, glasses were too small, curtains too short, and the sales was low, it is obvious that tastes and preference play an important role in the globalization market. And we should take more attention on the taste and preference difference.