ATHENA LEILA S.

BORDAN BSBA MM-3A

TASK PERFORMANCE ON GLOBAL PRODUCTION AND SUPPLY CHAIN MANAGEMENT

1. What are the benefits to IKEA of shifting so much of its global production to China?

-The Swedish furniture company IKEA is growing internationally. They have relocated their supplies and
production to Asian nations, most notably China, like many other businesses. The two largest IKEA
warehouses are currently in Shanghai. The advantage of moving global production to China is that
country's low manufacturing/production costs are attributable to cheap labor and raw material costs.
IKEA is able to maintain prices in China that are 60% cheaper than those it gives in other nations thanks
to the low cost; this enables them to appeal to a wider market there. The advantage of moving global
production to China is that country's low manufacturing/production costs are attributable to cheap
labor and raw material costs. IKEA is able to maintain prices in China that are 60% cheaper than those it
gives in other nations thanks to the low cost; this enables them to appeal to a wider market there.

2. What are the risks associated with a heavy concentration of manufacturing assets in China?

-As with many countries, there is a fear in sending all production to China. It's something that many
nationalists speak against. One of the risks associated with heavy concentration of manufacturing assets
in China is having to deal with political changes and non favourable policies. If the new rules do not
support the reason why they initially invested in that foreign country, it may be challenging for foreign
businesses and even lead them to withdraw from the nation. Nationalism is still another danger
associated with intense focus, as was already indicated. Sometimes campaigners will try to spread the
message that people should only support local firms, and this may hurt foreign companies. Unionization
might also occur. Local employees within the company may organize unions to protest imported
products, which could harm IKEA's supply chain operation. If suppliers know that IKEA is heavily reliant
on local suppliers, they might raise the price of supplies, which would in turn raise the price of items.
The owners, who are located outside of the foreign country, will have little to no time to figure out how
to correct anything that occurs there before it may go extremely bad and the business could see a
precipitous decline.

3. What strategies might IKEA adopt to maximize the benefits and mitigate the risks associated with
moving so much product?

-It would be wise to diversify production and disperse the production local point - China. Thus, IKEA
should consider new facility locations, such as most countries in the Southeast Asia region, which offer
similar labor benefits. If IKEA chooses to continue concentrated production in China, they could invest
into logistics and transport, in order to create a robust supply chain.