IKEA Case Study

International Business Jeff Shay University of Montana

What

business is IKEA in? Who is being

What is being

satisfied?

satisfied?

Customer Groups

Customer Needs

Definition 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 N

needs are being satisfied?

eed to a whole array of buy furniture at an affordable price

What

is a distinctive or core competency

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 A

Asian

market with KFC

What distinctive competencies does IKEA possess? L

ogistics Outsourcing Customer service Any more?

IKEA¶s Strategy What

is IKEAs strategy?

Generic BusinessBusiness-Level Level Strategy Types of BusinessBusiness-Level Level Strategies Offers

Products to Only One Group of Customers

Offers LowPriced Products to Customers

Offers

Unique or Distinctive Products to Customers

Focused CostLeadership Strategy

Focused Differentiation Strategy

Offers

Products to Many Kinds of Customers

CostLeadership Strategy

Differentiation Strategy

How

would you characterize the industry? Potential competitors

Supplier power

Rivalry

Substitutes

Buyer power

What

about the macromacro-environment? environment?

Political and Legal Environment

Supplier power

Demographic Environment

Social Environment

Technological Environment

Potential competitors

Rivalry

Buyer power

Substitutes Macro-Economic Environment

Competitive

advantage

A unique characteristic of anrelatively 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 Quality

Superior Efficiency

Competitive Advantage: Low Cost Differentiation

Superior Innovation

Superior Customer Responsiveness

Summary of t he 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 T he

Roots of Competitive Advantage

Resources Superior Distinctive Competencies

Differentiation

Efficiency

Value Creation

Quality Innovation Customer

Responsiveness Capabilities

Low Cost

Higher Profits

D

escribe IKEA¶s growt since its inception

h

BCG Growth--S Share Matrix Star

High

Market Growth

QuestionMark

Cash Cow

Dog

Low Strong

Weak

Relative Market S hare

BCG Growth-Share Matrix: Quadrant Characteristics 30% Star

Market Growth

Question Mark

Earnings: high stable, growing

Earnings: low, unstable, growing

Cash flow: neutral Strategy: hold or invest for growth

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 -10% share

10

Earnings: low, unstable Cash flow: neutral or negative Strategy: harvest/divest

1.0 Relative Market S hare

.1

Using the Model: Symbols

Product A Total Market

Product A Previous Market Size and Position

Market Share

B

Product B Market Smaller but firm has greater share

Plotting Your SBU¶s 30%Star

QuestionMark

C

C Market Growth

B

A Cash Cow

Dog

A

B

-10% 10

1.0 Relative Market S hare

.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 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?