Global Strategy & Organization

Joe Santos


Class 4


1
For the Sloan Fellows - Jose Santos, 2012
Home, Sweet Home
2
I
Photos courtesy of Adam Lederer (left), Matti Mattila (right) on Flickr.
For the Sloan Fellows - Jose Santos, 2012
3
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 A I K E A
Image by MIT OpenCourseWare.
For the Sloan Fellows - Jose Santos, 2012
IKEA Facts and Figures (2009)
(Source: Ikea)
4
Image by MIT OpenCourseWare.
TURNOVER (million EURO)
Of all IKEA stores
(Sales tax excluded)
STORES
All 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
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For the Sloan Fellows - Jose Santos, 2012
IKEAs 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
For the Sloan Fellows - Jose Santos, 2012
Home, Sweet Home
Image of Swedish dolls removed due to
copyright restrictions.
Photos courtesy of Adam Lederer (top), Richard Bott (left),
John Edgar Park (middle), Matti Mattila (bottom) on Flickr.
6
For the Sloan Fellows - Jose Santos, 2012
KEA 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. IKEAs 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.





7
For the Sloan Fellows - Jose Santos, 2012
National companies turned global
Examples:

- Siemens

- General Electric

- Louis Vuitton

- McDonald's

- IKEA

- IBM

- Camry

- Ford

- Amorim

- Boeing
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For the Sloan Fellows - Jose Santos, 2012
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 organzatona 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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For the Sloan Fellows - Jose Santos, 2012
(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 that
encourage investment
and sustained upgrading (e.g.,
Intellectual property protection)
Meritocratic incentive systems
across institutions
Open and vigorous competition
among locally based rivals
Sophisticated and demanding
local customer(s)
Local customer needs that
anticipate those elsewhere
Unusual local demand in
specialized segments that
can be served nationally
and globally
Access to capable, locally
based suppliers and firms in
related fields
Presence of clusters instead
of isolated industries
Human resources
Physical infrastructure
Administrative infrastructure
Information infrastructure
Natural resources
Scientific and technological
infrastructure
Capital resources
Presence of high quality, specialized
inputs available to firms
Image by MIT OpenCourseWare.
For the Sloan Fellows - Jose Santos, 2012
The Cluster as Home
Examples:

- Silicon Valley

- GM

- Chrysler

- Ford
11
For the Sloan Fellows - Jose Santos, 2012
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)
12
Shimanos Timeline
For the Sloan Fellows - Jose Santos, 2012
1920s
1930s
1940s
1950s
1960s
1970s
1980s
1990s
2000s
2010s
Major external events
Major company events
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13
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?
Source: Lessard et al, 2012 (forthcoming)
Home-based
capabilities
Target country
Market Position/
Customer Value
Exploit
RAT
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For the Sloan Fellows - Jose Santos, 2012
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?
Source: Lessard et al, 2012 (forthcoming)
Enhance
Augmented
capabilities
at home
Target country-
derived
capabilities
CAT
15
For the Sloan Fellows - Jose Santos, 2012
Internationalization: The Full Cycle
Source: Lessard et al, 2012 (forthcoming)
Home-based
resources/
capabilities
Target country
Market Position/
Customer Value
Exploit
RAT
Enhance
Augmented
capabilities
at home
Target country-
derived
capabilities
CAT
16
(Source: Renault-Nissan Corp. docs.)
For the Sloan Fellows - Jose Santos, 2012
Renault-Nissan
Yoshikazu Hanawa and Louis Scheitzer
sign the agreement between Renault and
Nissan in Tokyo on March 27, 1999.
1999
ALLIANCE VISION - DESTINATION

The Renault-Nissan Alliance is a unique group of two global
companies linked by cross-shareholding.
- They are united for performance through a coherent stretegy,
common goals and principles, results-driven synergies, shared

best practices.
- They respect and reinforce their respective identities and brands.
2004
17
For the Sloan Fellows - Jose Santos, 2012
Japanese? French?
(Source: Corp. presentations)
Photographs of Nissan and Renault car models removed due to copyright restrictions.
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For the Sloan Fellows - Jose Santos, 2012
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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For the Sloan Fellows - Jose Santos, 2012
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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For the Sloan Fellows - Jose Santos, 2012
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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For the Sloan Fellows - Jose Santos, 2012
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
22
For the Sloan Fellows - Jose Santos, 2012


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.
23
IKEA


Shimano


Renault Nissan

MIT OpenCourseWare
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15.220 Global Strategy and Organization
Spring 2012
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