I nternational

Business
Jeff Shay
University of Montana
What business is I KEA in?
Who is being
satisfied?

Customer
Groups
What is being
satisfied?

Customer
Needs
How are
customer needs
satisfied?
Distinctive
Competencies
Definition
of Business
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?
Types of Business-Level Strategies
Offers Products to
Only One Group
of Customers
Offers Products to
Many Kinds of
Customers
Offers Low-
Priced Products
to Customers
Offers Unique
or Distinctive
Products to
Customers
Focused Cost-
Leadership
Strategy
Focused
Differentiation
Strategy
Differentiation
Strategy
Cost-
Leadership
Strategy
Generic Business-Level Strategy
How would you characterize the
industry?
Potential
competitors
Rivalry

Substitutes

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

Substitutes

Supplier
power
Buyer
power
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
I KEA possess? What does it do better
than the competition?

Are these competitive advantages
sustainable?
What are competitive advantages built on?
Superior
Quality
Competitive
Advantage:
Low Cost
Differentiation
Superior
Innovation
Superior
Efficiency
Superior
Customer
Responsiveness
Summary of the I mpact of Efficiency, Quality, I nnovation, and Customer
Responsiveness on Unit Costs and Prices
Innovation
Lower Unit Costs
Higher Unit Prices
Customer
Responsiveness
Quality
Efficiency
The Roots of Competitive Advantage
Distinctive Competencies,
Resources, and Capabilities
Resources
Higher
Profits
Distinctive
Competencies
Capabilities
Differentia-
tion
Low Cost
Value
Creation
Superior

Efficiency
Quality
Innovation
Customer
Respon-
siveness
Describe IKEAs growth
since its inception
BCG Growth-Share Matrix
Relative Market Share
Star Question Mark
Dog Cash Cow
High



Market
Growth




Low
Weak Strong
BCG Growth-Share Matrix:
Quadrant Characteristics
Relative Market Share
Star
Earnings: high stable, growing
Cash flow: neutral
Strategy: hold or invest for
growth
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
Cash Cow
Earnings: high stable
Cash flow: high stable
Strategy: hold or add market
share
30%



Market
Growth



-10%
.1 10 1.0
Using the Model: Symbols
Product A
Previous
Market Size
and Position
B
Market
Share
Product A
Total
Market
Product B Market
Smaller but firm
has greater share
Plotting Your SBUs
Relative Market Share
Star Question Mark
Dog Cash Cow
30%



Market
Growth




-10%
.1 10 1.0
A
B
C
A
C
B
What Strategic Alternatives did
your group come up with?
What has allowed I KEA 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?

Which have helped or
might help IKEA?
What were some of the
concepts from the text
that you applied to the
case?