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
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09
20
125.6
52.1
400.8
199
199
191
174
160
145
72
35
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8
4
4
5
7
6
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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
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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)
4
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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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”
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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
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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
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1999
2004
For the Sloan Fellows - © Jose Santos, 2012
(Source: Renault-Nissan Corp. docs.)
17
Japanese? French?
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(Source: Corp. presentations)
For the Sloan Fellows - © Jose Santos, 2012
18
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 ZRrld
(Source: Doz, Santos, & Williamson,“From Global to Metanational”)
For the Sloan Fellows - © Jose Santos, 2012
19
Global Advantage: National or Metanational?
National
Metanational
Superior performance
depends on the attributes
(“pitch”) of national origin
Superior performance
depends on the capabilities of the
organisation and management team
Projecting to the World
Learning from the World
(Porter, 1990)
(Doz, Santos, & Williamson, 2001)
For the Sloan Fellows - © Jose Santos, 2012
20
The Roots of Competitive Advantage and Global Market Leadership
Innovating by melding home-base knowledge or globally dispersed knowledge?
Technical Knowledge (own)
Technical Knowledge (supplier)
User Knowledge
Business / Market Knowledge
For the Sloan Fellows - © Jose Santos, 2012
21
The Roots of Global Superior Performance
Projecting home base advantage
into different countries
Augmenting home base
advantage by exploiting
capabilities and market insights
from different countries
National
National Plus
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
Sensing and melding multiple
capabilities and market insights
across countries
Metanational
International exploration provides
the sufficient factors for
competitive advantage
at the National or World level
For the Sloan Fellows - © Jose Santos, 2012
22
Why Internationalize
IKEA
Shimano
Renault Nissan
“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.
For the Sloan Fellows - © Jose Santos, 2012
23
MIT OpenCourseWare
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15.220 Global Strategy and Organization
Spring 2012
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