Group 11: Hengstmann, Horváth, Jandík, Meixner, Tillger
1. How might de-globalization influence IKEA’s international expansion strategy and its ability to operate across global markets?
De-globalization might result in clustering of production chains. The currently global trading scheme could become obsolete with higher tariffs (although they are have been relaxed in the last days) as local sourcing becomes cheaper with the addition of tariffs.
On the other hand changing a production chain is not an easy task and such decisions are not to be rushed. With a clustered approach goods would stay within the respective clusters - say Europe, North America, Australia & Oceania, Asia.
The expansion to new emerging markets largely in South America should not be affected too much by de-globalization since the labor and raw resources cost in this region is low and should provide for a sufficient margin on sales.
An important factor to keep in mind is e-commerce. IKEA might not be able to support such a high online sales number in emerging countries with less sophisticated digital capabilities as well as well digitally versed residents.
2. What was IKEA’s strategy in terms of emerging operational locations? Based on what you heard in class, would you recommend IKEA to delve further into the potentials of emerging operational locations? What are potentially interesting emerging operational locations for IKEA?
IKEA should further develop emerging markets, not only for profit generation but also for securing it’s market leader status in those regions as well. Brazil can be a very lucrative country with a huge customer base, the catch is that Brazil has a lower income bracket than most developed countries and a good trade off has to be made between profit seeking and building market dominance. Although the competitive edge to most other furniture producers with it’s lower prices could already result in reaching a much greater customer base than IKEA’s competitors.
Another benefit with most emerging countries is that they still have very strong industry, while countries like the USA have slowly been reducing the industry within the countries borders via outsourcing. More industry also results in more forestry and therefore a greater supply of wood. Especially in South America this surplus of lumber might be attractive for the furniture market, especially IKEA.