Judging from past experience/internationalization- Should IKEA continue to internationalize?

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Table of Contents

Introduction
Conclusion
References

Introduction

Global marketing is defined as the process where business companies focus and strategize on ways of investing their resources within the world market. This is often faced by certain challenges and threats which either drives or restrains the processes involved. The challenges are experienced since marketing practices vary from country to country and require marketers to think globally (Keegan and Green, 2002).

Pros of Internationalization

Internationalization brought about rise in innovative designs and improved function of goods and services at affordable prices. This assisted in ensuring that consumers benefit from improved lifestyles due to new concepts of goods and services provided by competitors seeking market superiority. Businesses companies attain big profit margins from internationalization process. According to Moon 2004, “Wal-Mart was America’s number one furniture retailer because of large foot print in the world”.

The high margins attained were as a result of product and service diversification which ensured that each product within international market ploughed back extra revenue to the business away from home. Lower priced products and services offered due to internationalization brought about sensible cost cutting, this enhanced the level of consumer satisfaction through unique combination of form, function and affordability.

Cons of Internationalization

Several disadvantages arose from internationalization, one of them being products of low quality value which find their way into international markets. This was as a result of unhealthy competition within the market which makes most companies try dubious means of enticing customers, one of the ways being selling poor quality products at lower prices. This is mostly seen to capture price sensitive consumers and creates negative impact on consumer’s standard of living.

Market fragmentation is another major problem encountered within international business, large economic discrepancy between populations within the global markets tends to affect overall margins within international business companies. As a result extensive market research has to be done to effectively locate potential markets that may look profitable for specific products.

Also within the disadvantages is the abuse of certain business ethics and loss of business culture within the international markets. This could be as a result of different tastes amongst consumers of the same business products within different market locations. This leads to increase in the cost of production due to intense market research involved for the purposes of satisfying consumer tastes from diversified backgrounds within the global market (Knight, 2005).

Successful Country in Internationalization

Sweden which is the home country of IKEA was the most successful in internationalization of IKEA’s products. IKEA moved from Sweden and penetrated other external markets starting with America. Early 2000 the company was able to double revenues in the United States. United States initially was not receptive to IKEA but through market research they penetrated the market such that by 2002 the company had fourteen stores in America servicing over twenty five million customers on an annual basis (Moon, 2004).

Unsuccessful Country in Internationalization

France was the country least successful in internationalization of IKEA’s products. Statistics shows that the country accounted for only less than 10% of total sales of the products. This probably meant that France had low reception to Ikea products due to factors such as strong cultural ties within the country that resisted penetration of foreign products (Moon, 2004).

Continuation of Internationalization

Based on statistical analysis on leading purchasing countries, China accounted for over 17% of total purchases from IKEA group. This means that China is more receptive to the international business concepts and practices offered by IKEA Company. China is more diverse in their products and also bases their marketing concept on providing cheap products for international markets. IKEA should continue the sale of its products to Chinese markets (Moon, 2004).

Conclusion

The low prices attract most customers especially during difficult financial times. In order to improve its performance, IKEA has established a good brand name that is recognized globally, this has helped in maintaining the strong growth it requires in order to have a strong market identity amongst the clients. IKEA despite being a home furnishing retailer supplements its income through its constituent stores which are the restaurants, cafes and food shops.

References

Keegan, M. & Green, K. 2002. Global Marketing Management. NY: Prentice hall

Knight, J. 2005. Internationalization Brings Important Benefits as well as Risks. NY: University of Toronto Press.

Moon, Y. 2004. IKEA Invades America. Harvard Business School, (9), pp. 1-13.

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