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Economic of scale, by providing a fixed standard of product to customer worldwide, IKEA can producing their product in a large amount to earn the benefit that bring form economic of scale, it means the average cost of one product is reduced.
Cost reduction, most of the product, store, and advertisement of IKEA are similar or even the same when it is promoted so IKEA does not need to invest extra additional cost in developing new product, new advertisement. By using such method the cost of designing, advertising could be lower.
Process simplifying, because of the standardized of products, the procedures of producing product and promotion could be simplified, as IKEA does no need to design a new product for a different market and promote it, with such strategy the time of production could be shorter, then the efficiency of operation is increased, thus the competitive of IKEA would be increased.
Easier to build up company image, globalization of market make IKEA to build up their image easier, as they are using the same marketing strategy among the world, for example, they open large warehouse stores festooned in the blue and yellow color, to make the consumers to remember IKEA easily and enable IKEA to apply their image worldwide, and also other purpose, such as advertisement. Then increase their soundness.
Globalization of market enables IKEA to lower the sales price of their products, and increase the efficiency therefore to increase their competitive, therefore to attract more customers to purchase from them, as a result increase the income that earn IKEA and enable it to grow.
Globalization of production means a company source goods and services from place around the world to catch the differences in the cost and quality of factor of production like land, labor and capital in different country(International Business: An Asian Perspective, Charles W.L. Hill, Chow-Hou Wee, Krishna Udayuasankar, Page 7). For example, to reduce the cost of the cotton slipcovers, IKEA has concentrated production in four suppliers in Europe and China so the price of the Klippan, one of the product producing by IKEA, could be reduced by around 40% between 1999 and 2005.
Globalization of production is all concerning about to reducing the cost, increasing quality and how to make the production more effective, like IKEA was manufactured their product in their home country, Sweden, but soon they transferred their production to lower-cost supplier in Poland. It is because they using the concept of globalization of production, and seeking the lower and higher quality and efficiency in producing their product.
The benefit bring from globalization of production:
Cost reduction, it may be the most significant benefit brought by globalization of production, as the example we discuss above, through the globalization of production process IKEA can produce the product with a lower cost as the labor and martial in certain country maybe cheaper.
Increased efficiency, the other reason of globalization of production may be the better support in other country and technology or even the higher efficiency of transportation. In such situation IKEA can produce goods with higher quality and deliver the goods around the world as soon as possible.
Globalization of production makes the procedures of the product more effective, increases the quality and reduces the cost of production so that IKEA to make their sales price lower and lower and attract more customer with better qualities of goods. It would directly raise the competitive of IKEA and make them become one of the most successful global retailers in the world.
Even IKEA had established a well-developed globalization plan for the market, there are still some limit in the market, there is no way that IKEA can really treat the whole world as one market, there would always some problem would appear that make IKEA to take action to fix it, there is always differences among different countries.
The limit of globalization of market to IKEA:
Country may own their specified features, in such situation adjustment is required in order to make the product or goods fulfill the needs of customer in different country. This problem becomes one of the main limitations to the globalization of market. IKEA had first discovered in 1990s when they are expanding their business in the USA. They found that the size of their product is not suitable for the customer in United State, so they need to redesign their offerings in USA which limited the plan of globalization of IKEA. After the adjustment, the sales revenue of IKEA in USA stronger.
It means no matter how your plan of globalization plan is planned, it would always something other than your expectation, and it is very difficult that to try to treat the entire world as a single integrated global marketplace. Even globalization of market is practicable in certain situation, however we should always consider other factors that are possible and design alternative to ready for such situation. For example, whether the weather the martial that IKEA is using to produce their product suit the weather in all their market countries? Should they adjust the price of their product to fit the living standard in different countries?