Global Economic Environment and Marketing Essay

Global Economic Environment and Marketing - Essay Example This has lowered the cost of production for the company which in turn has provided them cost leadership. This also allows the company to maintain its environmental standards (The Times Newspaper, 2009). The key economic factors are: Firstly, the use of renewable raw materials and smarter use of them along with a dedicated relationship with suppliers have contributed to the company’s performance. Secondly, the economies of scale enjoyed by the company in terms of huge production scales. This has further lowered production costs. Thirdly, it has strategically placed its sourcing materials close to the supply chain to reduce costs. This factor further reduces the cost of handling by the company and contributes to its profit. Lastly, the use of innovative technologies has increased the profits of the company over the years. This paper aims to understand the impact on the marketing strategies of IKEA on account of globalization and the impact on the changing customer behaviour. Pot ential economic impact on marketing strategies IKEA initially operated with ten stores at the time it had opened. The increasing integration of the world economies on account of globalization has made IKEA operate a large number of stores to present day. The number of stores has raised to 345 in 42 countries in 2013 (IKEA Group, 2013b). IKEA has expanded its business across the continents of US, Asia along with the countries of Europe. The business environment it had to face in the different countries was different. For example, when it entered China, it faced a unique problem at hand by following its low pricing strategy. The Chinese customers were confused with the low prices of products, while the local companies began to copy the design. In China, the company chose to enter in a joint venture and customize its products to meet the aspirations of the clients (Chu, Girdhar and Sood, 2013). Porter’s five forces can be applied to understand the marketing strategy of the firm. Firstly, the competition from other firms becomes an important factor. IKEA has created a highly competitive market for its business. Secondly, the threat of new entrants can pose a problem to a firm. This threat is relatively less for IKEA because of high levels of market saturation and high capital investments. Thirdly, the bargaining power of suppliers is one of the forces. In case IKEA, all the suppliers strive to maintain a good relationship with the firm. IKEA has maintained strategic relationship with the suppliers, but reduced their bargaining power. The threat from substitute products is another component in Porter’s five forces. This threat is again weak in relation to IKEA because of its large scale. The bargaining power of the buyers is also less due to the large scale of operation of IKEA. This section concentrates on some of these forces in shaping IKEA’s choice (Luxinnovation G.I.E., 2008). Competitive advantage The factor which has contributed signific antly to become the greatest competitive advantage for the company is cost leadership. This has mainly owes to the self-sufficiency of the company. The company strives to provide for the home furnishings that are contemporary in sense of style, robust in quality and offers it at reasonably fair prices. IKEA does not depend on the third party manufacturers instead the employees of the company design the low cost furniture which can be readily assembled by the customers