Ikea Globalisation
Introduction
Globalisation is the internationalisation of trade, labour and finance. There are various reasons why a business may decide to expand globally and several methods that a business would use to do this. Global businesses face several specific issues including financial, political and social/cultural issues and these shall all be discussed in detail below with reference made to the global business IKEA.
1 Outline the reasons for global expansion:
1.1 Increase sales and find new markets. In a simple economy there are only so many customers to whom a business can sell its products to. With more than 6 billion potential customers around the world compared to the millions IKEA could sell to in Sweden, expansion was crucial to continue their growth. With over 200 stores worldwide IKEA has truly become a global business.
1.2 Acquire resources and have access to technology. Expanding globally also means that businesses may be closer to the resources and this saves large amounts of money in transport costs. Since IKEA aims to sell the cheapest possible product saving money on transport is a good reason fro their international expansion. Having access to technology can reduce production costs and therefore increase profitability.
1.3 Diversification. Diversifying into several markets eliminates the risks involved in producing only one product. Whilst IKEA prefers to standardise its products to gain from economies of scale its diversification in countries such as the USA helps protect it from rules associated with making one product.
1.4 Minimise Competitive Risk. Moving into global markets and larger markets with more customers minimises competitive risk from local competition. IKEA now has very little competitive risk as it is represented in over 20 countries. Similarly Coca Cola has saturated the market with over 90% of the earth's population within a walking distance of a place to purchase the soft drink.
1.5 Economies of
Globalisation is the internationalisation of trade, labour and finance. There are various reasons why a business may decide to expand globally and several methods that a business would use to do this. Global businesses face several specific issues including financial, political and social/cultural issues and these shall all be discussed in detail below with reference made to the global business IKEA.
1 Outline the reasons for global expansion:
1.1 Increase sales and find new markets. In a simple economy there are only so many customers to whom a business can sell its products to. With more than 6 billion potential customers around the world compared to the millions IKEA could sell to in Sweden, expansion was crucial to continue their growth. With over 200 stores worldwide IKEA has truly become a global business.
1.2 Acquire resources and have access to technology. Expanding globally also means that businesses may be closer to the resources and this saves large amounts of money in transport costs. Since IKEA aims to sell the cheapest possible product saving money on transport is a good reason fro their international expansion. Having access to technology can reduce production costs and therefore increase profitability.
1.3 Diversification. Diversifying into several markets eliminates the risks involved in producing only one product. Whilst IKEA prefers to standardise its products to gain from economies of scale its diversification in countries such as the USA helps protect it from rules associated with making one product.
1.4 Minimise Competitive Risk. Moving into global markets and larger markets with more customers minimises competitive risk from local competition. IKEA now has very little competitive risk as it is represented in over 20 countries. Similarly Coca Cola has saturated the market with over 90% of the earth's population within a walking distance of a place to purchase the soft drink.
1.5 Economies of