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 people (Merisler, 2004) and receiving annually more than 410 million customer visits. “The company is known in some circles as the McDonald's of furnishings.” (Effective organizational learning, 1997)
2.2 Key Elements to Business Success
IKEA has some key elements to its business success.
- quality products at affordable prices
- seeking new ways to lower prices
- cheap logistics
- considerable profit from small margins
- staying close to customers
- design reflecting the Swedish Culture
- selling lifestyle: being far more than a furniture merchant, IKEA sells a lifestyle which customers around the world embrace and they have a good taste and distinguish value (Capell et al, 2005)
- “unique design capabilities, unique outsourcing and tightly controlled logistics” (Hodgetts & Luthans, 2003).
- Involving in some environment projects and activities (Celebrating with IKEA, 2006). See Appendix A
2.3. Human Resource Management Strategy
In IKEA, it is believed that “their way of managing people has universal appeal” (Hodgetts & Luthans, 2003). IKEA managers overseas clearly explain to employees and middle-level local managers the reasons why things are done in that way. (Hodgetts & Luthans, 2003).
Briefly, IKEA’s management style is described as informal, open, and caring (Hodgetts & Luthans, 2003).
- lack of hierarchy
- no title on the business cards
- managers to be close to their co-workers
- HR executives responsible for answering "How should we treat people who are part of us?" (Merisler, 2004)
2.4. International Expansion
IKEA’s international expansion has occurred gradually over years especially in countries which have a growth potential such as Germany and France.
IKEA is Sweden's best-known export, and has 226 stores in 33 countries, successfully hosting 410 million shoppers a year (Capell et al, 2005).
The founder of IKEA, Ingvar Kamprad, says that when they opened their first store in Switzerland people questioned why there, because it was a difficult market but he responded to that “if they could succeed there, they should succeed anywhere” (Hodgetts & Luthans, 2003). When they expanded to Germany, they were called “those crazy Swedes” but they didn’t mind and have kept going.
“IKEA has developed globally by finding cheap land for stores, checking sourcing possibilities and proximity to central warehouses, or lowering marketing cost.” (Hodgetts & Luthans, 2003)
2.5. Problems Arising from International Development
2.5.1. France
The main challenge for IKEA management in France was the French tendency to judge informality as a sign of weakness, or indecisiveness. French people are accustomed to formal rules and strong hierarchy.
To make things clear to employees, formal communication platform was developed in France to spell things out in facts and figures by comparing IKEA’s benefits with those of competitors. 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. This was viewed as indecisiveness by American employees new to IKEA, that were more used to rules and procedures spelled out clearly and managers who take responsibility for quick decision making (Hodgetts & Luthans, 2003).
THEORETICAL ANALYSIS OF IKEA’S HRM PROBLEMS
3.1 Application to Models
Applying some models by Hodgetts, Luthans and Doh (2006), and Briscoe Schuler (2004) , IKEA’s characteristics and core problems emerged.
3.1.1 Culture as Layers
Source: Briscoe and Schuler (2004), International Management: Policy and Practice for the global enterprise, p.118
Applying Briscoe and Schuler’s model (2004), IKEA has layers as organisational culture thus;
- Surface culture: their unique products or service (which is Ikea Way)
- Hidden Cultures: Ikea’s management style
- Invisible cultures: Interaction between employees in Ikea
3.1.2 Organisational Culture Types
Source: Hodgetts et al, p160, 2006,’International management’
Hodggetts et al (2006) state organisation’s culture is divided four categories. Applying this model to IKEA’s culture, they seem to be categorised “Incubator” which strongly emphasise on equity and orientation to the person. The evidences are thus;
- Description by non-Swedish members of informal, open and caring culture;
- encouragement co-workers at all levels such as taking initiatives;
- considering that making mistakes is a necessary part of “learning by doing”;
- encouragement to express their ideas; and
- managers’ responsibility why things are done.
On the other hand, Hodgetts et al (2003) state that America is generally categorised Guided Missile culture (see appendix). The evidence of Guided Missile culture in American firm is their job dissatisfaction of informal and unclear procedure and policies They would like to get idea of their roles or future in organization.
3.1.3 Culture Dimensions
Hodgetts et al (2006) also show that there are different culture dimensions dependent on countries. Accordingly, the big difference between Sweden and USA in culture dimensions is Masculinity/Femininity. Sweden is Femininity while USA is Masculinity. The rest of dimensions are only slight differences.
3.1.4 Managing Multıculturalısm and diversity
Source: Hodgetts, Luthans and Doh, International Management Culture, Strategy and Behavior, p. 167
According to Hodgetts et al (2006), MNC should be at the phase 3 (Multinational firms). At this stage, they should put less emphasis on managing differences outside the firm and more on managing cultural diversity within the company. So IKEA should do it. However, they did not accept the difference of management style well in terms of management style. This created core problems with IKEA because of this. They lost the some talents, and found difficulty to find other employees who understand IKEA way, especially in senior manager positions with bigger roles in the company. They are lack of balancing between American management and the IKEA way to keep their co-workers. The core reason seems to be “Ethnocentric MNC” (Hoddget, 2003). Since “Ikea Way” in terms of their visible culture and invisible culture which discussed before, used to be successful in other countries, they must persist their own way.
3.2 Impacts on HR practices
The “IKEA way” had a strong impact on the practices of human resource management in the United States. There are three big impacts on HRM practices by their policies.
Firstly, 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. Original recruitment policies emphasised that candidates should have;
- “Caring attitudes”
- “Long term employment”
- “Cooperative informal relations”
- “High degree of independence and tolerant approach to others”
Also, they focus on employees’ managing abilities rather than depending on formal procedure or structure, many talented American workers left them because of not understanding their value. Eventually this led to additional and unnecessary recruiting costs for IKEA.
Secondly, the development of human resources did not function properly. Ethnocentrism possibly set the location of IKEA’s product managers and furniture schools in the remote and only Swedish spoken area despite the necessity of learning for all emoloyees. Especially development of managing staffs was hindered.
Thirdly, they must have difficulty in managing performance. Undervalued individualistic such as showing emotion, individuals’ achievement, and cheerleading hinders motivating employees. IKEA’s policies looked unmatched with preference of the United States, and caused employees’ job satisfaction. It must be noted that the strong link among motivation, recognition and achievement, are broadly acknowledged (Nankervis, Compton, And Baird, 2004 Stone, 2005, De Cieri and Krammer 2003). Additionally, key person’s left, unclear and nearly impossible promotions discourage employees to tackle their work. It must be quite demanding to keep morale among the workplace.
CRITIQUES OF AUTHOR
Although the author insists on the significance of accepting and bringing in American management style for IKEA’s success there, it seems that they have become successful because they have introduced different management strategies rather than inducting an American style by wider readings.
Actually there are some efforts being made to accept American management style and they have initiated formal procedure. According to Gleba and Cavanagh (2005), they have introduced a new intranet system in order to make employees’ task clearer.
However, their best focus seemed to be their original characteristics, which were their egalitarian and employee oriented policies. Meisler (2004) states that IKEA has introduced a radical change of the company’s approaches 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 (Meiler, 2004). It became 36% which is much better than the average of the same industry, which is 60% (Ridder, 2004). At the same time, Meisler (2004) highlights that due to this policy, their profits in the United States raised in spite of their financial intensive care.
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.
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.
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.)
- Providing better opportunities for promotion (Location of school)
- Creating individual performance and reward management
BIBLIOGRAPHY
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‘A Major Retailer’s Approach’, 2003, Society for Human Resource Management, November, vol.48, No.11, viewed 19th April 2006
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Briscoe, D and Schuler, R, 2004 ‘International Management: Policy and Practice for the global enterprise’, 2nd ed, Newyork, Routledge New York
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Capell, K, Sains, A, Lindblad, C, Palmer, A T, Bush, J, Roberts, D & Hall, K 2005, , “IKEA”, How the Swedish Retailer Become a Global Cult Brand, Business Week 11/14/2005 Issue 3959, p96, EBSCO, ISSN 0007-7135, IDNumber: 453 – 452, viewed 21 April 2006.
- “Celebrating with IKEA” 2006, American Forests Winter2006, Vol. 111 Issue 4, p23, EBSCO, ISSN: 0002-8541, viewed 20 April 2006.
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Coombes, A 2006, These ‘Best Companies’ Work at Being Top Employers, Marketwatch, viewed 19th April 2006,
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“Effective organizational learning” 1997, Industrial and Commercial Training. Vol.29, Issue: 4; pg. 109, 11 pgs, ProQuest, ID: 201822321, viewed 20 April 2006
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Gleba, B and Cavanagh, L 2005, Applying the IKEA values to improving the intranet, Strategic Communication Mnagement, Oct/Nov, p9, 6 ABI/INFROM Global, pg 30, viewed 19th April 2006
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Hodgetts, R M, Luthans, F 2003, ‘International Management: Culture, Strategy and behavior, 5th ed, McGraw-hill, New York
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Hodgetts, R M, Luthans, F, & Doh, J P 2006 ‘International Management: Culture, Strategy and behavior, 6th ed, McGraw-hill, New York
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‘Ikea’s Innovative Human Resource Management Practices and Work Culture’, 2005, Center for Management Research, viewed 19th April 2006
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IKEA United States, ‘IKEA NAMED ONE OF FORTUNE’S 2005 “100 BEST COMPANIES TO WORK FOR”, press release, viewed 19th April 2006,
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Meisler, A 2004, “Success, Scandinavian Style”, Workforce Management, Costa Mesa: Aug 2004.Vol.83, Iss. 8; pg. 26, 5 pgs, ProQuest, ID: 768183711, viewed 21 April 2006.
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“Nike, IKEA and IBM's outsourcing and business strategies: Profits and perils” 2005, Human Resource Management International Digest, Volume: 13 Issue: 3, Page: 15 - 17, Emerald Group Publishing Limited, viewed 20 April 2006
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Ridder, K 2004, ‘Ikea’s Unusual Benefits, Attitudes Scores Hit With Workers, Tribune Business News, July 14, viewed 19th April 2006
APPENDICES
Appendix A
ENVIRONMENTAL PROJECTS
IKEA has involved in some environment projects and activities. For instance it has partnered with American Forests - non-profit organization to plant more than 210,000 trees in Global Releaf and urban community planting projects These include an elementary school near Baltimore, Maryland; a city park in Chicago, and a portion of national forestland burned by a wildfire near Los Angeles. IKEA has also sponsored Living Classrooms -- gifts of trees, lesson plans, and high-tech computer software that teach students to integrate math, science, and geography by studying the beneficial effects of trees on communities.
(Source: Celebrating with IKEA, 2006, American Forests Winter2006, Vol. 111 Issue 4, p23)
Appendix B
Sales for the IKEA Group for the financial year 2003 totaled 11.3 billion euros.
Source: Meisler, A 2004, “Success, Scandinavian Style”
Appendix C
Source: Meisler, A 2004, “Success, Scandinavian Style”
Appendix D
Organisation Cultures in MNCs
Organization Culture has been defined as the shared values and beliefs that enable member to understand their roles and the norms of the organization
Organisation Cultures in MNCs
Organisation cultures of MNCs are shaped by a number of factors, including the cultural preferences of the leaders and employees, there are 3 aspects of organization functioning that seem to be especially important in determining MNC organizational culture
- the general relationship between the employees and their organization
- the hierarchy system of authority that defines the roles of managers and subodinates
- the general view that employees hold about the MNC’s purpose, destiny, goals and their place in them (Hodgetts and Luthans, 2005)
Source: Hodgetts et al, p160, 2006,’International management’
Family (Power-oriented culture): A culture that is characterized by a strong emphasis on hierarchy and orientation to the person.
Eiffel Tower (Role-oriented): A culture that is characterized by strong emphasis on hierarchy and oriented to the task
Guided Missile (Project-oriented): A culture that is characterized by strong on equality in the workplace and orientation to the task.
Incubator Culture (Fulfillment-oriented): A culture that is characterized by strong emphasis on equality and orientation to the person.
Appendix E
Hofstede’s Cultural Dimensions
Hofstede’s Cultural Dimensions
Power Distance is the extent to which less powerful members of institution and organization accept that power is distributed un equally.
Uncertain avoidance is the extent to which people feel threatened by ambiguous situation and have created beliefs and institution that try to avoid these.
Individualism/ Collectivism
Individualism is the tendency of people to look aster themselves and their immediate family only
Collectivism is the tendency of people to belong o groups or collectivism and to look after each other in exchange for loyalty.
Masculinity/ Feminity
Masculinity is a culture in which the dominant values in society are success, money, and things
Feminity is a culture in which the dominant values in society are caring for others and the quality of life