International

Business

Jeff Shay
University of Montana
What business is IKEA in?
Who is being What is being
satisfied? satisfied?

Customer Customer
Groups Definition Needs
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
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,
franchising, and branding skills bundled
together allowed for quick penetration of
Asian market with KFC
What distinctive competencies
does IKEA possess?
Logistics
Outsourcing
Customer service
Any more?
IKEA’s Strategy

What is IKEA’s strategy?

Generic Business-Level Strategy
Types of Business-Level Strategies
Offers Products to Offers Products to
Only One Group Many Kinds of
of Customers Customers

Offers Low- Focused Cost- Cost-

Priced Products Leadership Leadership
to Customers Strategy Strategy

Offers Unique Focused

or Distinctive
Differentiation
Differentiation
Products to Strategy
Strategy
Customers
How would you characterize the
industry?
Potential
Potential
competitors
competitors

Supplier
Supplier Buyer
Buyer
Rivalry
Rivalry
power
power power
power

Substitutes
Substitutes
What about the macro-environment?
Political and Legal Technological
Environment Potential Environment
Potential
competitors
competitors

Supplier
Supplier Buyer
Buyer
Rivalry
Rivalry
power
power power
power

Demographic Substitutes
Substitutes
Macro-Economic
Environment 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
Superior
Quality
Quality

Competitive
Competitive Superior
Superior
Superior
Superior Advantage:
Advantage: Customer
Customer
Efficiency
Efficiency ••Low
Low Cost
Cost Responsiveness
Responsiveness
••Differentiation
Differentiation

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

Efficiency

Lower Unit Costs

Innovation Quality

Higher Unit Prices

Customer
Responsiveness
 Distinctive Competencies,
Resources, and Capabilities
The Roots of Competitive Advantage

Resources
Resources
Superior Differentia-
tion
•Efficiency
Distinctive
•Quality Value Higher
Competencies
•Innovation Creation Profits
•Customer
Respon-
siveness Low Cost

Capabilities
Describe IKEA’s growth
since its inception
BCG Growth-Share Matrix
High Star Question Mark

Market
Growth
Cash Cow Dog

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

10 1.0 .1
Relative Market Share
Using the Model: Symbols

Product A Product A
Total Market Previous
Market Share Market Size
and Position

Product B Market
B Smaller but firm
has greater share
Plotting Your SBU’s
30% Star Question Mark
C C
B
Market A
Growth
Cash Cow Dog

A B

-10%
10 1.0 .1
Relative Market Share
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.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?