global strategy & organization - mit opencourseware in sweden (~1955-70). i. ikea’s...

Global Strategy & Organization Joe Santos Class ��4��

1

For the Sloan Fellows - © Jose Santos, 2012

“Home, Sweet Home”

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��courtesy of��)left*+ 6�� 6�� )right)��7� �!��

http://www.flickr.com/photos/elmada/1229419072/

http://www.flickr.com/photos/mattimattila/3958102905/


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Arrive at IKEA warehouse Drop off kids Shop for furniture Consult store personnel

Get food with family Shop for small goods Pick up at warehouse

Checkout Transport to home Build furniture

I K E AI K E A

Image by MIT OpenCourseWare.


IKEA ��

(Source: Ikea) 4


TURNOVER (million EURO)Of all IKEA stores

(Sales tax excluded)

STORESAll operate under

franchise Inter IKEA Systems B.V

CATALOGUES (millions)Printed in 56 editions

and 27 languages

VISITS (millions)To all IKEA stores

world-wide

1

0.5 2 6,8 35

72

145 16

0 174 19

1 199

199

0.05 1.6 8.252.1

125.6 400.

8

453.

8

504.

2

583.

1

1 2 9 52 114 20

1 220 23

7 260 28

5 301

631.

8

660.

1

19541964

197419

8419

9420

0420

0520

0620

0720

08

2009

25 169 1,216

4,396

13,5

70

15,2

12

17,6

58

20,6

85

22,4

98

22,7

13

19541964

1974

1984

1994

2004

2005

2006

2007

2008

2009

19541964

197419

8419

9420

0420

0520

0620

0720

08

2009

19541964

197419

8419

9420

0420

0520

0620

0720

08

2009


IKEA�s business model (�radical�) innovation: Large scale �build-to-stock� + instant satisfaction (and more) at a low price

Furniture Design

Production Delivery Assembly Store for Display and Order

The traditional furniture business: Low scale �build-to-order� + slow full-service at a high price

Outsourcing partnerships

in LCCs

…… by customer ……

Sweden (~1955 ~1970)

5

Furniture Design

Production Self-service, warehouse+ retail store

Catalogue, Advertising Assembly Delivery

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“Home, Sweet Home”

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http://www.flickr.com/photos/mattimattila/3958102905/

http://www.flickr.com/photos/edgar/255073186/

http://www.flickr.com/photos/22057747@N07/2207848570/

http://www.flickr.com/photos/elmada/1229419072/


��is Swedish because…

1.  The non-mobile resources required to produce its breakthrough innovation were available in Sweden

2.  It found the optimal combination of resources through an emergent process of interaction with local customers, competitors, and shareholders in Sweden (~1955-70).

i.  IKEA’s performance worldwide was superior because the local

optimum in Sweden was a global optimum (Porter, 1990) …

ii.  … and it found such local optimum with superior efficiency than other Swedish companies to whom the same resources and combinatorial context were available …

iii.  … and it increased its geographic scope in such a way that its original national advantage was at least maintained.

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National companies … turned “global”

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The primacy of “Home, Sweet Home”

�  The home-base of the “national” company turned global success provided the company with a set of key success factors:

�  The ideal cultural context and institutional environment �  Local access to superior technologies and organizational capabilities

�  The origin of critical resources, key suppliers and complements �  Intense competition

�  The most demanding customer base

�  Lead (advanced/knowledgeable) users

(Sources: M. Porter; Kogut, Redding, … ( Marshall, Vernon, Krugman, Lorenzoni, von Hippel…)

)

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(Source: Porter)

The “competitive advantage of nations”

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Factor (Input) Conditions

Context for Firm Strategy and Rivalry

Demand Conditions

Related and Supporting Industries

A local context and rules thatencourage investment and sustained upgrading (e.g.,Intellectual property protection)

Meritocratic incentive systems across institutionsOpen and vigorous competitionamong locally based rivals

Sophisticated and demandinglocal customer(s)

Local customer needs thatanticipate those elsewhereUnusual local demand in specialized segments that can be served nationally and globally

Access to capable, locallybased suppliers and firms in related fields

Presence of clusters insteadof isolated industries

Human resources

Physical infrastructureAdministrative infrastructureInformation infrastructure

Natural resources

Scientific and technologicalinfrastructure

Capital resources

Presence of high quality, specializedinputs available to firms



The Cluster as Home

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The primacy of “Home, Sweet Home”

�  The home-base of the “national” company turned global success provided the company with a set of key success factors:

�  The ideal cultural context and institutional environment �  Local access to superior technologies and organisational capabilities

�  The origin of critical resources, key suppliers and complements �  Intense competition

�  The most demanding customer base

�  Lead (advanced/knowledgeable) users

Sources: M. Porter; Kogut, Redding, … ( Marshall, Vernon, Krugman, Lorenzoni, von Hippel…)

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Shimano’s Timeline


1920s

1930s

1940s

1950s

1960s

1970s

1980s

1990s

2000s

2010s

Major external events

Major company events

Com

pany

foun

ded

Com

pany

exp

ands

in A

sia

Com

pany

ree

stab

lishe

d af

ter

war

3 sp

eed

hub,

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pany

be

gin

expo

rts

to U

S,

acce

sses

tec

hnol

ogy

in

US

Japa

n ex

pand

s in

Asi

a

WW

II

PRC

Oil

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rgo/

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on s

hock

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erge

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ndia

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horin

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o S.

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Internationalization 1.: Exploiting Capabilities

•  What capability(ies) do we have that we seeking to exploit internationally?

•  Do they pass the RATs test in a particular target country: –  Are they Relevant? –  Are they Appropriable? –  Are they Transferable?

Source: Lessard et al, 2012 (forthcoming)

Home-based capabilities

Target country Market Position/ Customer Value

Exploit

RAT

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Internationalization 2.: Enhancing Capabilities

•  What capability(ies) might we tap in a particular target country?

•  Apply the CATs test: •  Are they Complementary? •  Are they Appropriable? •  Are they Transferable?


Enhance

Augmented capabilities

at home

Target country- derived

capabilities

CAT

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Internationalization: The Full Cycle


Home-based resources/ capabilities

Target country Market Position/ Customer Value

Exploit

RAT

Enhance

Augmented capabilities

at home

Target country- derived

capabilities

CAT

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(Source: Renault-Nissan Corp. docs.) For the Sloan Fellows - © Jose Santos, 2012

Renault-Nissan

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1999

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Japanese? French?

(Source: Corp. presentations)

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In a Global World :

•  The �cost of distance� is so low that it … •  Eliminates the profitability of arbitraging things that are easy to move •  Increases the intensity of global competition and transnational production •  Traditional sources of superior performance (such as scale or low labor cost)

become requirements for normal performance (that is, for competitive parity, not competitive advantage)

•  Competitive advantage is primarily based on knowledge (skills, technologies, user experience, …) and other * intangibles (reputation, culture, institutions) that are very hard to move or copy.

•  Knowledge (of the “hard to move” kind) is increasingly dispersed around the world (Source: Doz, Santos, & Williamson,“From Global to Metanational”)

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Global Advantage: National or Metanational?

National Metanational

Superior performance Superior performance depends on the attributes depends on the capabilities of the (“pitch”) of national origin organisation and management team

Projecting to the World Learning from the World

(Porter, 1990) (Doz, Santos, & Williamson, 2001)

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Technical Knowledge (own)

Technical Knowledge (supplier)

User Knowledge

Business / Market Knowledge

The Roots of Competitive Advantage and Global Market Leadership

Innovating by melding home-base knowledge or globally dispersed knowledge?

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The Roots of Global Superior Performance

Augmenting home base advantage by exploiting

capabilities and market insights from different countries

Projecting home base advantage into different countries

National National Plus

Sensing and melding multiple capabilities and market insights

across countries

Metanational

National exploration provides the sufficient factors for competitive advantage

at the World level

National exploration provides necessary factors that are complemented globally for

competitive advantage at the World level

International exploration provides the sufficient factors for competitive advantage

at the National or World level

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Why Internationalize

“National” Advantage Internationalizing to exploit home-based competitive advantage. The World as a source of efficiency and continuous improvement.

“National Plus” Advantage Internationalize to exploit and enhance home advantage.

The World as a source of efficiency and discontinuous improvement.

“Metanational” Advantage Internationalize to create competitive advantage.

The World as a source of breakthrough innovation.

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IKEA

Shimano

Renault Nissan

MIT OpenCourseWarehttp://ocw.mit.edu

15.220 Global Strategy and OrganizationSpring 2012

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