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Ikea case study

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SWINBURNE UNIVERSITY OF TECHNOLOGY Faculty of Business and Enterprise "IKEA : Managing Cultural Diversity" By Cihat SAYACI - 5392462 Kiyomi SHINZATO - 5392772 Katja MENTI - 5396395 Nisachol PURICOMPEE (NAM) - 5395461 Lecturer: Dr. Soma PILLAY Subject : HBH522 - Managing People Across Cultures EXECUTIVE SUMMARY As a strong furniture leader in Sweden, IKEA has also become a successful global furniture distributor over the last 25 years. IKEA has considerably enlarged with hundreds of stores in different countries in Europe, North America and the Asia- Pacific and is now a $12.2-billion-a-year company employing over 76.000 people, and receiving annually more than 410 million Customer visits. IKEA has unique design capabilities, unique outsourcing and tightly controlled logistics, and have succeeded by producing quality products at affordable prices, seeking new ways to lower their prices, and with cheap logistics. The company has further developed globally by finding cheap land for stores, checking sourcing possibilities and proximity to central warehouses, or lowering marketing cost." IKEA have their own unique management style, "the IKEA way", and they used this in every country that they entered when opening a new IKEA. IKEA faced miner difficulties in France and Germany, but they found ways to overcome these obstacles. When entering the U.S market IKEA faced many difficulties. Firstly, because the cultural specific requirements, for home furnishing were considered different than the European markets. Secondly the American market had come to be known as the "graveyard" of European retailers. But the most important challenge for IKEA was the issues of management, culture and Human Resource Development. ...read more.


Also, more formal training programs are being developed because in France "learning by doing" is not perceived as a credible way of developing competency (Hodgetts & Luthans, 2003). 2.5.2. Germany One other problem for IKEA was the fact that the Swedish notion of "taking on responsibilities for yourself", the core stone of their work policy, was not perceived in the same way by Germans, who have a tendency to adhere very closely to precisely defined rules and instructions (Hodgetts & Luthans, 2003). 2.5.3. USA IKEA's expansion in to the U.S market was a bold developmental decision. Firstly, because the cultural specific requirements for home furnishing were considered different than the European markets, secondly the American market had come to be known as the "graveyard" of European retailers. From an historical perspective the venue seemed unlikely to succeed. But somehow, IKEA seemed confident that going about it the IKEA way would prove their exception. IKEA faced many challenges when braking in to the U.S market, and developed strategies to overcome these obstacles. But the most important challenge for IKEA was the issues of management, culture and Human Resource Development. Although American employees perceive IKEA as being more employee-orientated than average American employers, some of the cultural issues were the fact that the manager roles in IKEA are subtle and that IKEA managers tend to have a long term approach to management. There were few written procedures for the workers, so the golden rule for managers was to help people understand why things were done in a particular way. ...read more.


Hence, their egalitarian and employee friendly policies are broadly admired by mass media (Ridder, 2004 Center for Management Research, 2005 Society for Human Resource Management, 2003). And they were even nominated 'Best employer' by Fortune (cited in Kokoska, 2005 Coombes, 2006). American employees seem to have recognised the value of IKEA's policies, and agreed to import Swedish values. Of course, they still have some things to improve, which must be their ethnocentrism, they have valuable policies which they should not change. It is doubtful they should change American management style totally. 5. CONCLUSIONS As discussed above, there are some differences between American propensity of management style and IKEA's management style. Nevertheless, IKEA has sticked to its own "the IKEA Way" concept. Consequently, they had some conflicts within the organisation. The core reason of that must be their Ethnocentrism. On the other hand, what actually they have focused on, in order to solve the problems, seems to be their original policies, which are their employee friendly policies. Dramatically their policies appeared to be successful and they are accepted in the US market. 6. RECOMMENDATIONS Briscoe and Schuler's model (Awareness- Respect - Reconciliation) Source: Briscoe and Schuler, International Management: Policy and Practice for the global enterprise, p.119. Although this report supports "IKEA Way", they have still room to get some suggestions according to Briscoe and Shuler's model. With the help of these suggestions, Ikea might become more successful in their American stores. Firstly, Ikea should "understand" its own cultural values (Briscoe and Shuler's cultural layer is useful.) as well as American cultural values. Secondly, they should "respect" and "appreciate" both culture and differences. Thirdly, they should "reconcile" and "integrate" them. Considerations are as follows; * Clear procedure (although they have improve slightly, it is not enough. ...read more.

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