International BusinessJeff ShayUniversity of Montana

What business is IKEA in?

Who are IKEAs customers?Individuals and families for whom price is more important than cultural valuesStarting a new home and have no or very little furnitureTransient 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

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: Pepsicos unique distribution, franchising, and branding skills bundled together allowed for quick penetration of Asian market with KFC

What distinctive competencies does IKEA possess?LogisticsOutsourcingCustomer serviceAny more?

IKEAs StrategyWhat is IKEAs strategy?

Types of Business-Level StrategiesOffers Products toOnly One Group of Customers Offers Products toMany Kinds ofCustomersOffers Low-Priced Productsto CustomersOffers Uniqueor Distinctive Products toCustomersFocused Cost- LeadershipStrategyFocused DifferentiationStrategyDifferentiationStrategyCost- LeadershipStrategyGeneric Business-Level Strategy

How would you characterize the industry?

What about the macro-environment?

Competitive advantageA relatively unique characteristic of an organization that provides greater opportunities over rival organizationsExample: 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?

Summary of the Impact of Efficiency, Quality, Innovation, and Customer Responsiveness on Unit Costs and PricesCustomerResponsiveness

The Roots of Competitive AdvantageDistinctive Competencies, Resources, and Capabilities

Describe IKEAs growth since its inception

BCG Growth-Share MatrixRelative Market ShareStarQuestion MarkDogCash CowHigh

MarketGrowth

LowWeakStrong

BCG Growth-Share Matrix: Quadrant CharacteristicsRelative Market ShareStarEarnings: high stable, growingCash flow: neutralStrategy: hold or invest for growthQuestion MarkEarnings: low, unstable, growingCash flow: negativeStrategy: increase market shareor harvest/divestDogEarnings: low, unstableCash flow: neutral or negativeStrategy: harvest/divestCash CowEarnings: high stableCash flow: high stableStrategy: hold or add marketshare30%

MarketGrowth

-10%.1101.0

Using the Model: SymbolsProduct APreviousMarket Sizeand PositionMarketShareProduct ATotalMarketProduct B MarketSmaller but firmhas greater share

Plotting Your SBUsRelative Market ShareStarQuestion MarkDogCash Cow30%

MarketGrowth

-10%.1101.0

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 groupsmore 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 marketerSome adaptation might be transferable to other markets (i.e., sofa beds in Europe)

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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