According to an article  on EMSnow.com,  labor costs in China are rising fast due to pressure from human right organizations but also from government regulations to avoid social unrest and rising middle class expectations. CBA forecasts that the costs might keep increasing in the next two or three years. According to the article, electronics manufacturing data shows that there is not an unlimited supply of cheap labor in China, despite the huge population.

Moreover, according to the Economist, the increase of the costs has started in the coastal provinces where factories have clustered. In 2012, an investment bank has released a survey which stated that wages had already risen by 10% that year. According to Dale Weathington from Kolcraft (an American firm that uses China contract manufactures to make baby stollers in southern California), China’s coastal provinces are losing their power to  draw workers out of the hinterland. In previous years 95% of Mr Weathington’s  contract staff returned to work after the Chinese new year, compared to only 85% in 2012.

According to the FDi report 2013, here are the five destinations which were preferred to invest in Asia-Pacific in 2012.

As you can see, China is the favorite country for FDI, quickly followed by India with a number of projects reaching 704.  In total, the region of Asia-Pacific has attracted 3,740 projects with a 31.7% global market share.

Let’s now take a closer look at the top 5 source countries from Asia-Pacific in 2012.

As you can read, outward FDI from Asia-Pacific decreased in 2012. In total, project numbers fell by 18.52% and the highest decrease happened in India with a percentage of 30.20. Japan is still the dominant investor from the region with 873 projects although it represents a change of -11.91%.

According to the FDi report 2013, three of the BRICS countries namely India, China and Brazil, ended up in the top 5 destination countries for Foreign Direct Investment (FDI) globally in 2012.

Collectively, they attracted 18% of  all global FDI projects. Regarding India, is has attracted 30.02% of all the FDI projects from the BRICS countries. The city which attracted the biggest amount of FDI in India, is Bangalore with 15% of total projects between 2003 and 2012.

Moreover, India is expected to attract even more FDI project in the medium to longer term, thanks to reforms such as, passing a new law about land acquisition, allowing  more FDI in retailing, airlines and broadcasting.

According to Reuters India, IKEA Chief Executive Mikael Ohlsson devoted much time to acquiring local knowledge of what consumers desire in their furniture, in order to give the company an edge.  Through their accumulation of knowledge, they will accommodate to the needs of the cultural majority.

“Most people don’t really know and can hardly imagine that we visit thousands of homes round every store in the world every year,” he told Reuters at a store in Malmo in southern Sweden.

“We sit down in the kitchen and talk to them … That’s the way we try to learn and understand. ‘What are you annoyed with? What are your frustrations? What would you like to have? How much can you afford? What are your alternatives?’” he said.

In regions where there are smaller rooms, showrooms exhibit smaller.  Beds are bigger in the U.S., but mattresses are firmer in China.  “As we become more and more global and we expand more in China and we grow into India, we will need, probably, to have a wider range,” Gillian Drakeford, IKEA’s China retail chief said. “Then each country will be able to secure relevance by taking the part they really need. But of course we will still secure IKEA’s identity.”

“DIY (do it yourself) works very well in Europe and the United States; they are used to it. If you look at markets like China and India, people are not used to DIY. That is a reason why Home Depot has failed in China,” said Kantar Retail analyst Himanshu Pal.  “Indians have been used to local furniture shop owners making entire furniture units and delivering it to your house.”