International

Business
Jeff Shay
University of Montana

What business is IKEA in?

Who is being
satisfied?

What is being
satisfied?

Customer
Groups

Customer
Needs

Definition
of Business

How are
customer needs
satisfied?
Distinctive
Competencies

Who are IKEAs 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: Pepsicos 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?

IKEAs Strategy
What is IKEAs
strategy?

Generic Business-Level Strategy

Types of Business-Level Strategies
Offers 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
Potential
competitors
competitors

Supplier
Supplier
power
power

Rivalry
Rivalry

Substitutes
Substitutes

Buyer
Buyer
power
power

What about the macro-environment?

Political and Legal
Environment

Supplier
Supplier
power
power

Demographic
Environment
Social Environment

Technological
Environment

Potential
Potential
competitors
competitors

Rivalry
Rivalry

Substitutes
Substitutes

Buyer
Buyer
power
power

Macro-Economic
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

Superior
Superior
Efficiency
Efficiency

Competitive
Competitive
Advantage:
Advantage:
Low
LowCost
Cost
Differentiation
Differentiation

Superior
Superior
Innovation
Innovation

Superior
Superior
Customer
Customer
Responsiveness
Responsiveness

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
Distinctive
Competencies

Capabilities

Efficiency
Quality
Innovation
Customer
Responsiveness

Differentiation
Value
Creation
Low Cost

Higher
Profits

Describe IKEAs growth

since its inception

BCG Growth-Share Matrix

High

Market
Growth

Star

Question Mark

Cash Cow

Dog

Low
Strong

Relative Market Share

Weak

BCG Growth-Share Matrix:

Quadrant Characteristics
30% Star

Market
Growth

-10%

Question Mark

Earnings: high stable, growing

Cash flow: neutral
Strategy: hold or invest for
growth

Earnings: low, unstable, growing

Cash flow: negative
Strategy: increase market share
or harvest/divest

Cash Cow

Dog

Earnings: high stable

Cash flow: high stable
Strategy: hold or add market
share

Earnings: low, unstable

Cash flow: neutral or negative
Strategy: harvest/divest

10

1.0
Relative Market Share

.1

Using the Model: Symbols

Product A
Previous
Market Size
and Position

Product A
Total
Market
Market
Share

Product B Market
Smaller but firm
has greater share

Plotting Your SBUs

30% Star

Question Mark

C
Market
Growth

A
Cash Cow

Dog

-10%
10

1.0
Relative Market Share

.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 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
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?

What were some of the

concepts from the text
that you applied to the
case?