Global Strategy & Organization Joe Santos Class 4
1
“Home, Sweet Home”
,
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For the Sloan Fellows - © Jose Santos, 2012 2
IKEA
Arrive at IKEA warehouse
Pick up at warehouse
Checkout
Drop off kids
Shop for furniture
Consult store personnel
Shop for small goods
Get food with family
Transport to home
Build furniture
Image by MIT OpenCourseWare.
For the Sloan Fellows - © Jose Santos, 2012 3
IKEA )DFWVDQG)LJXUHV
220
201
114
301
285
260
VISITS (millions) To all IKEA stores world-wide
09
660.1
20
631.8
583.1
504.2
453.8
8 4 4 5 7 6 4 54 964 974 98 99 00 00 00 00 00 9 1 2 2 2 2 1 2 1 1 1
20
09
20
125.6 52.1
400.8
199
199
191
174
160
145
72 35
0.05 1.6 8.2
8 4 4 5 7 6 4 54 964 974 98 99 00 00 00 00 00 9 1 2 2 2 2 1 2 1 1 1
09
CATALOGUES (millions) Printed in 56 editions and 27 languages
09
54 64 74 84 94 04 05 06 07 08 19 19 19 19 19 20 20 20 20 20
6,8
2
2
52
1
8 4 4 5 7 6 4 54 964 974 98 99 00 00 00 00 00 9 1 2 2 2 2 1 2 1 1 1
0.5
22,713
22,498
20,685
17,658
15,212
1,216
9
25 169
20
1
13,570
4,396
237
STORES All operate under franchise Inter IKEA Systems B.V
TURNOVER (million EURO) Of all IKEA stores (Sales tax excluded)
Image by MIT OpenCourseWare.
(Source: Ikea)
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For the Sloan Fellows - © Jose Santos, 2012
The traditional furniture business:
Low scale build-to-order + slow full-service at a high price Furniture Design
Store for Display and Order
Production
Delivery
Assembly
Sweden (~1955 ~1970) IKEAs business model (radical) innovation: Large scale build-to-stock + instant satisfaction (and more) at a low price Furniture Design
Production
Catalogue, Advertising
Outsourcing partnerships in LCCs
Self-service, warehouse+ retail store
Delivery
Assembly
…… by customer ……
For the Sloan Fellows - © Jose Santos, 2012 5
“Home, Sweet Home”
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For the Sloan Fellows - © Jose Santos, 2012 6
,.($is Swedish because…
1.
The non-mobile resources required to produce its breakthrough innovation were available in Sweden
2.
It found the optimal combination of resources through an emergent process of interaction with local customers, competitors, and shareholders in Sweden (~1955-70).
i.
IKEA’s performance worldwide was superior because the local optimum in Sweden was a global optimum (Porter, 1990) …
ii.
… and it found such local optimum with superior efficiency than other Swedish companies to whom the same resources and combinatorial context were available …
iii. … and it increased its geographic scope in such a way that its original national advantage was at least maintained.
For the Sloan Fellows - © Jose Santos, 2012 7
National companies … turned “global” ([DPSOHV 6LHPHQV *HQHUDO(OHFWULF /RXLV9XLWWRQ 0F'RQDOG V ,.($ ,%0 &DPU\ )RUG $PRULP %RHLQJ
For the Sloan Fellows - © Jose Santos, 2012 8
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 RUJDQL]DWLRQDO 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…) For the Sloan Fellows - © Jose Santos, 2012
) 9
The “competitive advantage of nations” Context for Firm Strategy and Rivalry A local context and rules that encourage investment and sustained upgrading (e.g., Intellectual property protection) Meritocratic incentive systems across institutions Open and vigorous competition among locally based rivals
Demand Conditions
Factor (Input) Conditions Presence of high quality, specialized inputs available to firms
Sophisticated and demanding local customer(s)
Human resources
Local customer needs that anticipate those elsewhere Unusual local demand in specialized segments that can be served nationally and globally
Capital resources Physical infrastructure Administrative infrastructure Information infrastructure Scientific and technological infrastructure Natural resources
Related and Supporting Industries Access to capable, locally based suppliers and firms in related fields Presence of clusters instead of isolated industries
(Source: Porter)
Image by MIT OpenCourseWare.
For the Sloan Fellows - © Jose Santos, 2012 10
The Cluster as Home ([DPSOHV 6LOLFRQ9DOOH\ *0 &KU\VOHU )RUG
For the Sloan Fellows - © Jose Santos, 2012 11
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…)
For the Sloan Fellows - © Jose Santos, 2012 12
13
1980s
Recall
1970s
Keizo S. dies
SPD
1960s
Euro racing
1950s
Offshoring
1940s
3 speed hub, Company begin exports to US, accesses technology in US
1930s
Founders death
1920s
Company reestablished after war
Rise of China, India
SRAM suit
Europeans “reinvent” bicycling Downhill emerges in US
Oil embargo/ Nixon shock
PRC
WWII
Japan expands in Asia
Major external events
Company expands in Asia
Company founded
Shimano’s Timeline
2000s
1990s 2010s
Major company events
For the Sloan Fellows - © Jose Santos, 2012
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? RAT Exploit Home-based capabilities
Target country Market Position/ Customer Value
Source: Lessard et al, 2012 (forthcoming) For the Sloan Fellows - © Jose Santos, 2012 14
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? Augmented capabilities at home
Target countryderived capabilities
Enhance
CAT
Source: Lessard et al, 2012 (forthcoming) For the Sloan Fellows - © Jose Santos, 2012 15
Internationalization: The Full Cycle RAT Exploit Home-based resources/ capabilities
Target country Market Position/ Customer Value
Augmented capabilities at home
Target countryderived capabilities
Enhance
CAT
Source: Lessard et al, 2012 (forthcoming) For the Sloan Fellows - © Jose Santos, 2012 16
Renault-Nissan
