Globalisation of Ikea

Using one specific company with which you are familiar, examine the actual and potential impacts of globalisation on that company. Explain the reasoning behind the points you make. Evaluate possible strategies going forward which the company might use to respond to the impacts of globalisation you have identified.

Globalisation

"Process enabling financial and investment markets to operate internationally, largely as a result of deregulation and improved communications" (Collins)

Globalisation in laymen's terms is the expansion of worldwide trade and markets, mainly developed through importing, exporting, Foreign Direct Investment (FDI) and the breakthrough in technological advancements.

"Globalisation is the process of transformation of local phenomena into global ones. It can be described as a process by which the people of the world are unified into a single society and function together. This process is a combination of economic, technological, socio-cultural and political factors" (Croucher 2003:10)

Throughout this essay I will look at why IKEA have traded internationally and the potential risks and rewards they have or will have in the future.

IKEA is a privately owned business controlled by the INGKA HOLDING B.V a Dutch corporation. IKEA is an international business that manufactures and sells ready to assemble appliances and home accessories. In August 2010 IKEA employed 127,000 employees with 280 stores in 26 countries worldwide. www.Ikea.com (01/12/2010). In the year ending August 2009 their sales figures reached €21.8bn with nett profits of €2.5bn. Sales figures rose by 7.7% to €23.1bn in year ending August 2010, with profits yet to be released. IKEA perceive themselves as the market leaders within the global market of home furniture. The group's operations encompass developing, purchasing, distributing and selling IKEA products

Figure 1: IKEA's worldwide distribution of stores:

Adapted from www.ikea.com (28/11/2010)

In order for organisations to grow and become more successful they have to take risks in order to reap rewards. There are a number of different techniques businesses can use when moving into international markets which can be seen below:

Figure 2: Risks and Rewards

Adapted from (Wall et al 2010)

Since Ingvar Kamprad started the IKEA business in 1961 its rapid growth and success clearly illustrates that the company has taken risks in order to attain its expansion and diversification. IKEA is part of the Stichting IKEA foundation (set