IKEA Case Study

International

International

International

International

Business

Business

Business

Business

Wh

Wh_{at business is IKEA in?at business is IKEA in?} Wh

Wh_{at business is IKEA in?at business is IKEA in?}

Who is being Who is being Who is being Who is being satisfied? satisfied? satisfied? satisfied? Customer Customer Customer Customer Groups Groups Groups Groups What is being What is being What is being What is being satisfied? satisfied? satisfied? satisfied? Customer Customer Customer Customer Needs Needs Needs Needs How are How are How are How are customer needs customer needs customer needs customer needs satisfied? satisfied? satisfied? satisfied? Distinctive Distinctive Distinctive Distinctive Competencies Competencies Competencies Competencies Definition DefinitionDefinition Definition of Business of Business of Business of Business

Wh

Wh_{o are IKEA¶s customers?o are IKEA¶s customers?} Wh

Wh_{o are IKEA¶s customers?o are IKEA¶s customers?}

Individuals and families for whom price is more important than cultural values

Starting a new home and have no or very little furniture

Transient  makes functional, easy to

assemble and disassemble furniture a must Can you come up with an ideal cultural

profile to use when selecting potential markets?

Wh

Wh

_{at needs are being satisfied?}

_{at needs are being satisfied?}

Wh

_{at needs are being satisfied?}

_{at needs are being satisfied?}

N

eed to buy a whole array of furniture at an affordable price

Wh

Wh_{at is a distinctive or core competencyat is a distinctive or core competency} Wh

Wh_{at is a distinctive or core competencyat is a distinctive or core competency}

A _{bundle of skills and technologies (rather}

than a single discrete skill or technology) that enables a company to provide a particular

benefit to customers

Example: Pepsicos unique distribution, franchising, and branding skills bundled together allowed for quick penetration of

What distinctive competencies

What distinctive competencies

does IKEA possess?

does IKEA possess?

L

ogistics

Outsourcing

Customer service Any more?

IKEA¶s Strategy IKEA¶s Strategy IKEA¶s Strategy IKEA¶s Strategy

Ty

Types of Businesspes of Business Ty

Types of Business-pes of Business--Level Strategies-Level StrategiesLevel StrategiesLevel Strategies O

O_{ffers Products toffers Products to} O

O_nlynlyOO_{ne Groupne Group}

of Customers of Customers

O

O_{ffers Products toffers Products to}

Many Kinds of Many Kinds of

Customers Customers

O

O_{ffers Low-ffers}

Low-Priced Products Priced Products to Customers to Customers

O

O_{ffers Uniqueffers Unique}

or Distinctive or Distinctive Products to Products to Customers Customers Focused Focused Cost-Leadership Leadership Strategy Strategy Focused Focused Differentiation Differentiation Strategy Strategy Differentiation Differentiation Strategy Strategy Cost-Leadership Leadership Strategy Strategy

Generic Business

Generic Business

Generic Business-

H _{ow would you cow would you c}hh_{aracterize t aracterize t} hh_ee H _{ow would you cow would you c}hh_{aracterize t aracterize t} hh_ee

industry? industry?industry? industry? Potential Potential competitors competitors Rivalry Rivalry Substitutes Substitutes Supplier Supplier power power Buyer Buyer power power

Wh

Wh_{at about t at about t} hh_{e macroe macro} Wh

Wh_{at about t at about t} hh_{e macro-e macro--environment?-environment?environment?environment?}

Political and Legal Political and Legal Environment Environment Technological Technological Environment Environment Demographic Demographic Environment Environment Social Environment Social Environment Macro-Economic Macro-Economic_{EnvironmentEnvironment} Potential Potential competitors competitors Rivalry Rivalry Substitutes Substitutes Supplier Supplier power power Buyer Buyer power power

C

_{ompetitive advantage}

_{ompetitive advantage}

_{ompetitive advantage}

_{ompetitive advantage}

A relatively unique characteristic of_{an organization that provides} greater opportunities over rival

organizations

Example: American Airlines Sabre system

Wh

Wh_{at at competitive competitive advantages advantages doesdoes} Wh

Wh_{at at competitive competitive advantages advantages doesdoes}

IKEA possess?

IKEA possess? WhWh_{at does it do better at does it do better}

IKEA possess?

IKEA possess? WhWh_{at does it do better at does it do better}

t

t hh_{an t an t} hh_{e competition?e competition?}

t

t hh_{an t an t} hh_{e competition?e competition?}

Are t

Are t hh_{ese competitive advantagesese competitive advantages}

Are t

Are t hh_{ese competitive advantagesese competitive advantages}

sustainable? sustainable? sustainable? sustainable?

Wh

WhWh_{at are competitive advantages built on?at are competitive advantages built on?} Wh_{at are competitive advantages built on?at are competitive advantages built on?}

Superior Superior Quality Quality Competitive Competitive Advantage: Advantage: Low Cost Differentiation Superior Superior Innovation Innovation Superior Superior Efficiency Efficiency Superior Superior Customer Customer Responsiveness Responsiveness

Summary of t

Summary of t hh_{e Impact of e Impact of EfficiencEfficiency, Quality, Innovation, and y, Quality, Innovation, and} C _{ustomer ustomer}

Responsiveness on Unit

Responsiveness on Unit C _{osts and Pricesosts and Prices}

Innovation Innovation

Lower Unit Costs Lower Unit Costs

Higher Unit Prices Higher Unit Prices

Customer Customer Responsiveness Responsiveness Quality Quality Efficiency Efficiency

T hh_{e Roots of e Roots of} C _{ompetitive Advantageompetitive Advantage} T hh_{e Roots of e Roots of} C _{ompetitive Advantageompetitive Advantage}

D

istinctive Competencies,

istinctive Competencies,

D

istinctive Competencies,

istinctive Competencies,

Resources, and Capabilities

Resources, and Capabilities

Resources, and Capabilities

Resources, and Capabilities

Resources Resources Higher Higher Profits Profits Distinctive Distinctive Competencies Competencies Capabilities Capabilities Differentia-tion tion Low Cost Low Cost Value Value Creation Creation Superior Superior _{EfficiencyEfficiency} _{QualityQuality} _{InnovationInnovation} _{Customer Customer} Respon-siveness siveness

D

escribe IKEA¶s growt

escribe IKEA¶s growt

h

h

D

escribe IKEA¶s growt

escribe IKEA¶s growt

h

h

since its inception

since its inception

since its inception

since its inception

B

B _BCG G _{rowt rowt} hh

BCG G _{rowt rowt} hh_{---S -S S S} hhhh_{are Matrix are Matrix are Matrix are Matrix}

Relative Market S Relative Market S hh_areare

S

Sttaarr QQuueessttiioon n MMaarrk k

D_{og og} C _asashh C _owow H H_ighigh Market Market G _{rowt rowt} hh Low Low Weak Weak Strong Strong

BCG Growth-Share Matrix: BCG Growth-Share Matrix: Quadrant Characteristics Quadrant Characteristics

Relative Market S Relative Market S hh_areare

Star Star

Earnings: high stable, growing Cash flow: neutral

Strategy: hold or invest for growth

Question Mark Question Mark

Earnings: low, unstable, growing Cash flow: negative

Strategy: increase market share or harvest/divest

D_{og og}

Earnings: low, unstable

Cash flow: neutral or negative Strategy: harvest/divest

C _asashh C _owow

Earnings: high stable Cash flow: high stable

Strategy: hold or add market share 30% 30% Market Market G _{rowt rowt} hh -1 -10%0% ..₁₁ 1 100 ₁₁.0.0

Using t

Using t hh_{e Model: Symbolse Model: Symbols}

Using t

Using t hh_{e Model: Symbolse Model: Symbols}

Product A Product A Previous Previous Market Size Market Size and Position and Position B B Market Market Share Share Product A Product A Total Total Market Market Product B Market Product B Market Smaller but firm Smaller but firm has greater share has greater share

Plotting Your SBU¶s Plotting Your SBU¶s Plotting Your SBU¶s Plotting Your SBU¶s

Relative Market S Relative Market S hh_areare

S

Sttaarr QQuueessttiioon n MaMarrk k

D_{og og} C _asashh C _owow 30% 30% Market Market G _{rowt rowt} hh -1 -10%0% ..₁₁ 1 100 ₁₁.0.0 A A B B C C A A C C B B

Wh

Wh

_{at Strategic Alternatives did}

_{at Strategic Alternatives did}

Wh

_{at Strategic Alternatives did}

_{at Strategic Alternatives did}

your group come up wit

your group come up wit

_?

_?

your group come up wit

your group come up wit

_?

_?

Wh

WhWh_{at at} hh_{as allowed IKEA to be so successful as allowed IKEA to be so successful} Wh_{at at} hh_{as allowed IKEA to be so successful as allowed IKEA to be so successful}

wit

wit _wit hh _{a relatively standardized product and a relatively standardized product and}

wit hh _{a relatively standardized product and a relatively standardized product and}

product line in a business wit

product line in a business wit hh _{strong strong}

product line in a business wit

product line in a business wit hh _{strong strong}

cultural influence? cultural influence?cultural influence? cultural influence?

Consumers with low status concern, low conservatism, high education, white-collar workers, and also high income groups have fewer cross-cultural differences than other consumer groupsmore open to adapt values to new views

D_{id adaptations to t id adaptations to t} hh_{is strategy in t is strategy in t} hh_ee D_{id adaptations to t id adaptations to t} hh_{is strategy in t is strategy in t} hh_ee

Nort

Nort _Nort hh _{American market constitute aAmerican market constitute a}

Nort hh _{American market constitute aAmerican market constitute a}

defeat to t

defeat to t hh_{eir approaceir approac}hh_??

defeat to t

defeat to t hh_{eir approaceir approac}hh_??

North A _{merican adaptations changes IKE} A

from a standardizer to a global marketer Some adaptation might be transferable to other markets (i.e., sofa beds in Europe)

What international trade

What international trade

and investment policies

and investment policies

have hurt or might hurt

have hurt or might hurt

IKEA?

IKEA?

Which have helped or

Which have helped or

might help IKEA?

What were some of the

What were some of the

concepts from the text

concepts from the text

that

that

y

y

ou applied to the

ou applied to the

case?