Diana Kassas Dan Gheorghe Anastasiya Kovalevska

IKEA: Culture as Competitive Advantage

Q1. Suggest some new organizational development that will enable IKEA to adapt to the double challenge of the departure of Ingvar Kamprand and the continuous challenge in the global environment. Ingvar Kamprand, the entrepreneur behind IKEA, holds the key to IKEAs great success around the world and all of the different aspects that we experience in IKEA stores anywhere are the result of his visions and inspired leadership. Because of his long involvement with the company in all aspects it is easy to identify traits of his own character reflected in the IKEA- way of (doing business). Another part of Kamprands contribution is the IKEA philosophy which includes its unique ways of doing business in an informal and experimental, yet very efficient and successfully way of managing the business. While Kamprand played a very important role in the development of every aspect for the IKEA and marketing mix, today the company is very well established all over the world and this ensures that the IKEA philosophy prevails. One issue is the free management style and lack of strategic planning which might not be an option for Kamprands successor. It will be hard for someone else to accept these business methods and might change parts of IKEAs business culture. It is important for IKEA to be able to adapt its philosophy in order to accommodate new management styles, but it is very important to keep the fundamental values of the IKEA way intact. Kamprands successor should be open and ready to be part of the IKEA culture, and should not make major changes which might affect IKEAs success. It is important to carry on with Kamprands plans and take his visions to the future. Another Issue which IKEA should consider it the continuous change in the global environment, at the moment, IKEA is able to have a competitive advantage in all markets it enters, by using its standardized marketing mix. But IKEA should not rely on its previous success as a measurement for the future. As the global environment changes, IKEA should consider issues such as the economical, cultural and social changes in different cultures. IKEA, who at the moment, dont dedicate much resources towards market research, should consider using more research when entering new markets or when expanding already tapped markets. This way IKEA can make sure they will catter to their international customers and adapt their strategies accordingly.

Q2. Demonstrate understanding of how IKEAs national culture has contributed to their success, as well as the inter-cultural changes they are still facing. IKEA has managed to become a global scale furniture distributor by keeping their Swedish culture everywhere they expanded. IKEA uses a centralized decision making approach which leaves big decision to the head offices in Sweden. As the IKEA-Way managed to work well in Europe and ASIA, in the United States the company found itself in a struggle due to the mass competition they were facing. IKEA ended up adapting the inside layout of the store to American customers needs who at first felt trapped in a maze while visiting IKEA stores. IKEA redesigned the layout of the stores by creating shortcuts for people who knew what they wanted and found no use in wandering through the store. In France the main issue was the workforce, because due to IKEAs informal nature and indecision at times, the people who worked for them saw them as weak, which was not the case. The situation here was two different cultures not understanding one another. In France people were generally used to firm rules and a strong hierarchy. In the French managers eyes it was just like being able to do whatever they wanted. IKEAs way is to teach one another, make mistakes, and to take risks which were not well digested by the French. What the French workers did not manage to understand was the fact that the Swedes did not want to create an environment where responsibility is limited and they felt that by using this informal approach they would get more out of people. The French believed that in this working environment you are not able to stand out and therefore get lost in the crowd. In order to make it clear to the French workforce IKEA developed a formal communication platform which spelled out in facts and numbers IKEAs advantage over their competitor. Another action they took was to develop formal training programs to grow IKEAs personnel skills of the workers, which was something that was not necessary in other countries. IKEA then started getting complaints from customers about the amount of non-French people working in the stores, therefore they had to reduce their number and make sure to hire a majority of French workers. IKEA was faced with strikes and discontent of workers, thus a more affirmative approach was put in place which seems to work much better. In Germany even though the way of thinking and doing business is different from the Swedish way, it seemed to work with not much adaptation from IKEAS part. Even though Germans seem to be more afraid of risk and enjoy bureaucracy much more they managed to still work well in the Swedish environment, and proof of this fact is that Germany is the largest national organization of the IKEA group accounting for 30% of total group sales. Even though issues of discontent may vary and way of doing business is different IKEA still manages to implement the Swedish way with little or no changes. Below are some facts of how Swedish style is kept throughout all IKEA stores internationally; Product o unique product design capabilities due to the simple design of Swedish furniture (for America some products had to be adjusted to suit American needs, while still maintaining Swedish style) o IKEA introduced the world to the Swedish style

o Experience Swedish culture through the use Swedish food in its restaurants and sale of Swedish grocery products

Swedish business culture o Facilitates international explanation o Competitive advantage (struggled at the beginning in the US because they had a lot of competitors who though and approached the market in similar ways as IKEA)

Marketing advantage o Use of foreign culture as a marketing point o People attracted to a foreign brand o Using Swedish flag and colors in its communication o Use foreign looking, Swedish names for its products

Differentiation o Well known international brand o Competitors who are always local

Q3. Propose a course of action that will help IKEA integrate its culturally different members and develop better understanding of concepts and values? One of the IKEAs competitive advantages is its ability to promote the IKEA-way strategy, which reflects the way of how IKEA as whole works so successfully. This particular way of doing things, invented and developed by Ingvar Kamprand reflects the idea of learning-by-doing, which is at the same time, corresponds with IKEAs intuitive way of doing business. Ingvars general scheme is evolved from not following the usual and orthodox strategic planning , it comes from creative responses to difficult problems, and eventually turning them into solutions; however, the risk is considerably high. Due to its distinguished ways of operating IKEA is able to create a needed focused balance and deliver the attractive Swedish products in warm atmosphere with low prices. However, the bases of IKEAs success come from the ability of its employees to deliver this value of IKEA way to the customers as well as among employees. Due to the fact that most of the IKEA workforce is ethnically different it is difficult to fully transfer the IKEA way among the co-workers, without any prior education about it. Most of the nonSwedish members see IKEA management style as informal, open and caring, where

hierarchy is not emphasized. There are only three levels of responsibility between the store managers and co-workers. The employees at all levels are encouraged to take initiatives and managers are expected to be close to their co-workers. Overall, every employee is advised to do mistakes which are considered to be an important part of learning by doing philosophy. IKEA employs people of any race and nationality, and proposes them a potential growth in career, which is dependent on the co-workers ability to understand and fully integrate with the IKEAs business strategy. Nevertheless, most of the IKEAs nonSwedish employees find it difficult to get promoted in such international company like IKEA. Moreover, in order to go up in career ladder co-workers are expected to learn by heart the IKEA way as well as know the range intimately. According to Ingvars philosophy people are expected to be patient and gain enough experience to meet the requirements, through following the learning by doing way, nobody should be in the hurry to become promoted. It is very difficult for foreigners to work their way up, especially in the product line development. Most of IKEAs educational programs as well as product management are located in remote areas of Sweden where only Swedish is spoken. Generally, due to the mentioned facts it becomes even more impossible for non-Swedish nationals to have a stable future with IKEA. This problem, not only affects the ability of workers to understand this highly sophisticated way that IKEA decided to follow, but also creates inability of the way to be fully delivered around the company. In order to decrease the misunderstanding and to increase the workers possibility of professional growing and education, IKEA needs to take a course of action based on the idea of full interaction as well as adaptation of its programs to foreign employees. For international company it is extremely necessary to take into account every foreign employee and to make sure this employee delivers the right information to the potential customer. Therefore, IKEA should develop a range of educational programs focused especially on the foreign employees, which at the end will result in better understanding of companys values and more attractive future with IKEA for potential employees. Even though, IKEAs trait is to have as less costs as possible, it still needs to become serious about this problem which is required to be addressed. Furthermore, the authoritative way supervision in IKEA is not always able to have the message delivered correctly, due to its informal base, therefore application of some kind of respect and regulation can bring a better understanding for employees as well as better outcome for IKEA.

Q4. Analyze IKEAs marketing mix and describe the degree of adaptation for each element of the mix. Product: The product is modern, Swedish designed furniture that stays the same in all countries they operate in. Apart from its core product IKEA uses different methods to augment its product in order to provide its customers with a better value. IKEA will create a very family oriented atmosphere and include facilities such as playrooms, restaurants and Swedish product grocery. While these remain similar in most countries there are some adaptations made to better satisfy local tastes. Additionally IKEA will adapt its customer services and will provide transportation and installation for furniture in countries where DIY is less a accepted.

When looking at IKEA s product range, we can notice that its products are basically the same all over the world, with the only exception being the bedroom furniture, which, according to IKEA needs to be slightly adjusted from culture to culture. Also it is quite common to see that some products are available in some stores and some are not, this happens most of the time, not because IKEA is adapting its product range to local culture but its done to reduce costs. IKEA chooses its local product range by considering the cost of producing it and delivering it to certain stores and will chose to take out products which would weight down the supply chain. Place: When IKEA enters a new market they locate their stores and warehouses on the outskirts of major cities, even though this might seem an inconvenience for the consumer it fits perfectly with IKEAs target consumers, people who are willing to transport and assemble the products themselves in order to reduce costs. Not much adaptation is done in this regard. When choosing store locations IKEA will try to group stores in a close geographical area in order to reduce their transportation costs and maximize their exposure to customers. When it comes to store layout and design, there is a quite standardized approach which IKEA uses, but in some situations like certain Asian countries, IKEA can adapt its stores to adapt local culture by reducing large open spaces, as well as the order in which the products are displayed. Price: IKEA has a competitive advantage when it comes to pricing, and remains cost leaders in all countries they have expanded in. Almost all their products are at low cost, the only time there is price variation it is due to fluctuations in exchange rates. The other benefit over their competition they have is the fact that they enjoy economies of scale due to amount they purchase and long-term contracts that lead to good relations with their suppliers. By using numerous cot cutting methods, IKEA is able to use loss leaders strategy in order to better penetrate the market and attract customers to its stores. Promotion: IKEA has a magazine style catalogue that the customer can use to obtain not only prices but also to get inspired in how to arrange their products. The layout of the catalogue is adapted by using the local language, but stays the same in layout and style. IKEA frequently has sales and promotions, which are constantly changing, it also has a points card system, with which the more you buy the more points you accumulate as well as benefit for preferential prices for certain products. As for advertising IKEA uses different channels such as print, billboards or TV, the main message for their communication strategies will remain similar allover the world, but the execution will be done locally, and the use of different channels will differ from country to country.