Answer:
The question is incomplete. Here is the full question:
a) What are the benefits to IKEA of shifting so much of its global production to China?
b) What are the risks associated with a heavy concentration of manufacturing assets in China?
c) What strategies might IKEA adopt to maximize the benefits and mitigate the risks associated with moving so much product?
a) As in many industries and among numerous companies, production in China has been a lucrative production model. The labor cost is extremely low, making labor a critical factor. Also, raw materials are widely accessible in China, thus high import taxes are eschewed.
Meanwhile, the labor has adequate education and the country is technologically progressive.
b) Risks are mainly associated with occasionally unstable political and economic factors, such as political turmoil and the rise of economic barriers.
Also, highly concentrated production location-wise is never the optimal option, as the mentioned factors can become critical for the whole supply chain in that case.
c) It would be wise to diversify production and disperse the production focal 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.
