SWINBURNE UNIVERSITY OF TECHNOLOGY

“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. Similarly to the problems that arose in Germany and France, Americans could not relate to IKEAs management style.

IKEA strongly believed in the “IKEA way” in America, but they did not adjust or balance their management style to the American cultural style. Being a Multi national corporation IKEA Should have emphasised less on managing differences outside the firm and more on managing cultural diversity within the company. The fact that they did not do this created problems with American workers.

IKEA’s policies made it difficult to recruit and retain talents in the United States. Their ethnocentrism valued IKEA’s traditional and original way, and resisted accepting the Americans preferences in the workplace. Also, they focus on employees’ managing abilities rather than depending on formal procedure or structure, many talented American workers left the company because they could not understand their value. This eventually led to additional and unnecessary recruiting costs for IKEA.

Although there was significance in accepting and bringing in American style management for IKEA’s to succeed in America, it seems as though they became successful because they introduced different management strategies rather than inducting an American style. Their sales have increasing in America, and efforts are being made to accept the American management style. However, their best focused seemed to be their original characteristics. IKEA has introduced radical changes in the company’s approach to benefits, corporate culture, chain of command and work/life balance since 1998. Thanks to their policies, their turnover rate became much lower than before.

American employees seem to have recognised the value of IKEA’s policies, and reconciled the importing of external American values and importing Swedish values.

TABLE OF CONTENTS

  1. INTRODUCTION

This report aims to examine the case study about IKEA published by Hodgetts & Luthans, (2003) which reveals IKEA’s Human Resources Management problems faced in overseas markets particularly in the US. It starts by giving a brief background information about IKEA, its business success and management strategies, then follows by some theoretical analysis applying some HR models to the IKEA’s HR-Management style. Using the analyses of these aspects, conclusions are written, some suggestions for IKEA, and some critiques of author, are made.

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  1. BACKGROUND

2.1. Facts

As a strong furniture leader in Sweden, IKEA has also become a successful global furniture distributor over the last 25 years in an industry which was formerly considered by nature to be local (Hodgetts & Luthans, 2003). From the time when its first store opened at Almhult, Sweden, in 1958, IKEA has enlarged considerably with hundreds of stores in different countries in Europe, North America and the Asia- Pacific (Effective organizational learning, 1997).

 

IKEA is a $12.2-billion-a-year company employing over 76.000 ...

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