Download - IKEA Case Study
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International International BusinessBusiness
Jeff ShayUniversity of Montana
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What business is IKEA in?What business is IKEA in?
Who is beingWho is being satisfied?satisfied?
Customer Customer Groups Groups
What is beingWhat is being satisfied?satisfied?
Customer Customer Needs Needs
How areHow arecustomer needscustomer needs
satisfied?satisfied?Distinctive Distinctive
CompetenciesCompetencies
DefinitionDefinitionof Businessof Business
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Who are IKEA’s customers?Who are IKEA’s 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?
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What needs are being satisfied?What needs are being satisfied?
Need to buy a whole array of furniture at an affordable price
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What is a distinctive or core competencyWhat 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
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What distinctive competencies does IKEA possess?
LogisticsOutsourcingCustomer serviceAny more?
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IKEA’s StrategyIKEA’s Strategy
What is IKEA’s strategy?
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Types of Business-Level StrategiesTypes of Business-Level Strategies
Offers Products toOnly One Group
of Customers
Offers Products toMany Kinds of
Customers
Offers Low-Priced Products
to Customers
Offers Uniqueor Distinctive Products toCustomers
Focused Cost-Leadership
Strategy
Focused Differentiation
Strategy
DifferentiationStrategy
Cost-Leadership
Strategy
Generic Business-Level StrategyGeneric Business-Level Strategy
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How would you characterize the How would you characterize the industry?industry?
Potential competitors
Potential competitors
RivalryRivalry
Substitutes
Substitutes
Supplier power
Supplier power
Buyer power
Buyer power
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What about the macro-environment?What about the macro-environment?
Political and LegalEnvironment
TechnologicalEnvironment
DemographicEnvironment
Social Environment
Macro-EconomicEnvironment
Potential competitors
Potential competitors
RivalryRivalry
Substitutes
Substitutes
Supplier power
Supplier power
Buyer power
Buyer power
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Competitive advantageCompetitive advantage
A relatively unique characteristic of an organization that provides greater opportunities over rival organizationsExample: American Airlines Sabre system
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What competitive advantages does What competitive advantages does IKEA possess? What does it do better IKEA possess? What does it do better than the competition?than the competition?
Are these competitive advantages Are these competitive advantages sustainable?sustainable?
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What are competitive advantages built on?What are competitive advantages built on?
SuperiorQuality
SuperiorQuality
Competitive Advantage:•Low Cost•Differentiation
Competitive Advantage:•Low Cost•Differentiation
SuperiorInnovation
SuperiorInnovation
SuperiorEfficiency
SuperiorEfficiency
SuperiorCustomer
Responsiveness
SuperiorCustomer
Responsiveness
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Summary of the Impact of Efficiency, Quality, Innovation, and Customer Responsiveness on Unit Costs and Prices
Innovation
Lower Unit Costs
Higher Unit Prices
CustomerResponsiveness
Quality
Efficiency
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The Roots of Competitive AdvantageThe Roots of Competitive Advantage
Distinctive Competencies, Distinctive Competencies, Resources, and CapabilitiesResources, and Capabilities
ResourcesResources
HigherProfits
DistinctiveCompetencies
Capabilities
Differentia-tion
Low Cost
ValueCreation
Superior
•Efficiency•Quality•Innovation•Customer Respon- siveness
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Describe IKEA’s growth Describe IKEA’s growth since its inceptionsince its inception
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BCG Growth-Share MatrixBCG Growth-Share Matrix
Relative Market Share
Star Question Mark
DogCash Cow
High
MarketGrowth
LowWeakStrong
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BCG Growth-Share Matrix:Quadrant Characteristics
Relative Market Share
StarEarnings: high stable, growingCash flow: neutralStrategy: hold or invest for growth
Question MarkEarnings: low, unstable, growingCash flow: negativeStrategy: increase market shareor harvest/divest
DogEarnings: low, unstableCash flow: neutral or negativeStrategy: harvest/divest
Cash CowEarnings: high stableCash flow: high stableStrategy: hold or add marketshare
30%
MarketGrowth
-10%
.110 1.0
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Using the Model: SymbolsUsing the Model: Symbols
Product APrevious
Market Sizeand Position
B
MarketShare
Product ATotalMarket
Product B MarketSmaller but firmhas greater share
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Plotting Your SBU’sPlotting Your SBU’s
Relative Market Share
Star Question Mark
DogCash Cow
30%
MarketGrowth
-10%.110 1.0
A
BC
A
C
B
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What Strategic Alternatives did What Strategic Alternatives did your group come up with?your group come up with?
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What has allowed IKEA to be so successful What has allowed IKEA to be so successful with a relatively standardized product and with a relatively standardized product and product line in a business with strong product line in a business with strong cultural influence?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
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Did adaptations to this strategy in the Did adaptations to this strategy in the North American market constitute a North American market constitute a defeat to their approach?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)
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What international trade and investment policies have hurt or might hurt IKEA?
Which have helped or might help IKEA?
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What were some of the concepts from the text that you applied to the case?