International Business

Jeff Shay University of Montana

What business is IKEA in?
Who is being satisfied? Customer Groups What is being satisfied? Customer Needs

Definition of Business

How are customer needs satisfied? Distinctive Competencies

Who 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? .

What needs are being satisfied? Need to buy a whole array of furniture at an affordable price .

and branding skills bundled together allowed for quick penetration of Asian market with KFC . franchising.What 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.

What distinctive competencies does IKEA possess? Logistics Outsourcing Customer service Any more? .

IKEA¶s Strategy What is IKEA s strategy? .

Generic Business-Level Strategy BusinessTypes of Business-Level Strategies BusinessOffers Products to Only One Group of Customers Offers Products to Many Kinds of Customers Offers LowPriced Products to Customers Focused CostLeadership Strategy CostLeadership Strategy Offers Unique or Distinctive Products to Customers Focused Differentiation Strategy Differentiation Strategy .

How would you characterize the industry? Potential competitors Supplier power Rivalry Buyer power Substitutes .

What about the macro-environment? macroPolitical and Legal Environment Potential competitors Technological Environment Supplier power Rivalry Buyer power Demographic Environment Substitutes Macro-Economic Environment Social Environment .

Competitive advantage A relatively unique characteristic of an organization that provides greater opportunities over rival organizations Example: American Airlines Sabre system .

What competitive advantages does IKEA possess? What does it do better than the competition? Are these competitive advantages sustainable? .

What are competitive advantages built on? Superior Quality Superior Efficiency Competitive Advantage: ‡Low Cost ‡Differentiation Superior Customer Responsiveness Superior Innovation .

Quality.Summary of the Impact of Efficiency. and Customer Responsiveness on Unit Costs and Prices Efficiency Lower Unit Costs Innovation Higher Unit Prices Quality Customer Responsiveness . Innovation.

and Capabilities The Roots of Competitive Advantage Resources Superior Distinctive Competencies ‡Efficiency ‡Quality ‡Innovation ‡Customer Responsiveness Differentiation Value Creation Low Cost Higher Profits Capabilities .Distinctive Competencies. Resources.

Describe IKEA¶s growth since its inception .

BCG Growth-Share Matrix GrowthHigh Star Question Mark Market Growth Cash Cow Dog Low Strong Relative Market Share Weak .

unstable.BCG Growth-Share Matrix: Quadrant Characteristics 30% Star Earnings: high stable. growing Cash flow: negative Strategy: increase market share or harvest/divest Market Growth Cash Cow Earnings: high stable Cash flow: high stable Strategy: hold or add market share Dog Earnings: low.0 Relative Market Share . unstable Cash flow: neutral or negative Strategy: harvest/divest -10% 10 1. growing Cash flow: neutral Strategy: hold or invest for growth Question Mark Earnings: low.1 .

Using the Model: Symbols Product A Total Market Market Share Product A Previous Market Size and Position B Product B Market Smaller but firm has greater share .

0 Relative Market Share B .1 .Plotting Your SBU¶s 30% Star Question Mark C Market Growth Cash Cow A Dog C B A -10% 10 1.

What Strategic Alternatives did your group come up with? .

What has allowed IKEA to be so successful with a relatively standardized product and product line in a business with strong 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 .

.Did adaptations to this strategy in the North American market constitute a defeat to their approach? North American adaptations changes IKEA from a standardizer to a global marketer Some adaptation might be transferable to other markets (i. sofa beds in Europe) .e.

What international trade and investment policies have hurt or might hurt IKEA? Which have helped or might help IKEA? .

What were some of the concepts from the text that you applied to the case? .

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