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Inside IKEA’s Digital Transformation

• Thomas Stackpole

A Q&A with Barbara Martin Coppola, IKEA Retail’s chief digital officer.

How does going digital change a legacy retail brand? According to Barbara Martin Coppola, CDO at IKEA Retail, it’s a challenge of remaining fundamentally the same company while doing almost everything differently. In this Q&A, Martin Coppola talks about how working in tech for 20 years prepared her for this challenge, why giving customers control over their data is good business, and how to stay focused on the core mission when you’re changing everything else.

What does it mean for one of the world’s most recognizable retail brands to go digital? For almost 80 years, IKEA has been in the very analogue business of selling its distinct brand of home goods to people. Three years ago, IKEA Retail (Ingka Group) hired Barbara Martin Coppola — a veteran of Google, Samsung, and Texas Instruments — to guide the company through a digital transformation and help it enter the next era of its history. HBR spoke with Martin Coppola about the particular challenge of transformation at a legacy company, how to sustain your culture when you’re changing almost everything, and how her 20 years in the tech industry prepared her for this task.

• Thomas Stackpole is a senior editor at Harvard Business Review.

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Ikea target audience, ikea marketing channels, ikea marketing strategy, ikea marketing strategy 2024: a case study.

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Ikea serves the unique functional needs of each target audience, with special attention to 16-34-year-old adults. It has solutions for:

• Single people not living at home
• Newly married couples
• Families with the youngest child under six
• Older married couples with dependent children
• No children families
• Labor force
• Professionals 

Thus, it uses the following types of product positioning :

• Mono-segment positioning. It appeals to the needs and wants of a single customer segment that is cost-conscious and prefers value for money.
• Adaptive positioning. It believes in periodically repositioning products and services to adapt to changes in customer preferences. Its Swedish furniture chain considers the dynamic nature of customer preferences. For instance, its latest products reflect increasing minimalism on the global scale. 

Ikea utilizes the power of the following marketing channels: 

• Mobile Application
• WebEngage: Email, SMS, and Whatsapp Marketing
• Social Media
• Telecalling
• Commercials

The Ikea marketing strategy contributes majorly to its success because it's original, imaginative, and distinctive while maintaining a transparent value proposition.

A Creative, Consistent Brand Theme

From the Swedish national colors on its buildings to rich meatballs in its store cafeterias, Ikea's marketing strategy reflects its cultural heritage proudly. It infuses all elements of their identity with a sense of self-assuredness that maintains their identity in the market of stiff competition. 

Emphasizing Affordability and Sustainability 

Understanding that a simple tiered strategy won't encourage repeat business, Ikea extends customization, flexibility, and mix-and-match furniture modules. It effectively combines the elements of affordability and sustainability in its marketing strategy to ensure success.

While the furniture options don't pledge a lifelong guarantee, the products are built to last. Even its reusable shopping bags reflect its commitment to sustainability.

Sponsorship and Influencers 

IKEA-sponsored comedic series Easy to Assemble. Its innovative content marketing was way different from a furniture product demo. Incorporating sponsored digital marketing campaigns and social media influencers have boosted the Ikea marketing strategy. 

Ikea’s Easy to Assemble Series

Exceptional In-store Experience

Ikea brilliantly displays products employing the best lighting systems to generate more sales. It strategically arranges best-matched items in mock rooms to encourage impulse purchases and inspire decor. The company also extends excellent customer service to provide a memorable experience and incite customers to come back for more.

Ikea’s Store Decor for Inspiration

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Website and Mobile Application Marketing

Ikea ensures an optimal mobile website's speed, button displays and gesture controls on its website and mobile app to retain and attract individuals to the site. It carefully invests in its UI/UX , enquiry-based chatbot, and regular updates on new offers, discounts, and promotions. 

One of the most successful marketing moves includes downloading its 3D modeling app to envision a dream home. It's one of its most successful marketing moves that allows IKEA to upsell its low-demand items by creating a desire in its customers to revamp the room.

Ikea’s Website With Engaging Content

Ikea's SEO (Search Engine Optimization)

Ikea's marketing strategy aims at enhancing the site's visibility for relevant searches to attract the attention of new and existing customers. It includes the right product-specific keywords and Google advertisements to further augment its organic ranking .  

Ikea Ranking for Bookcases on Google’s First Page

Ikea's SMM (Social Media Marketing)

Ikea's handles are very active on digital marketing platforms like Facebook, Instagram , Twitter, and Youtube . Their digital presence is impressive, with more than 30 Million likes on Facebook, 1 Million followers on Instagram, 5.3k followers on Twitter, and 41.2k subscribers on YouTube.

Ikea’s Instagram Profile

Its Instagram bio links to its website. The website also has links to its various social media posts. Its 'view shop' and 'call' options for product catalog and direct assistance, respectively, are a testament to a well-crafted Ikea marketing strategy.   

Ikea’s Youtube Advertisements 

IKEA also conducts free online workshops that lure lots of enthusiastic customers, resulting in gaining leads.

Ikea’s Online Workshop Ad

Content Marketing

Ikea relies on its content marketing strategy to create a distinguished presence amongst furniture brands. Its commercials, print ads, social media, and website stands out with attention-grabbing content. It combines innovation and humor to present the brand's core values and inspire people. 

Ikea’s Captivating Commercial 

Ikea Marketing Strategy bears testimony to a well-thought and structured marketing venture. Sign-up for our Digital Marketing Specialist and learn more about marketing case studies published by Harvard Business. You will be taught by experts from facebook and Purdue University. Sign-up for the course TODAY!

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IKEA Case Study: IKEA’s Genius Business Strategy

This article is an excerpt from the Shortform summary of "Understanding Michael Porter" by Joan Magretta. Shortform has the world's best summaries of books you should be reading.

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Are you looking for an IKEA case study according to Michael Porter’s Five Forces?

Porter’s IKEA case study shows one company’s success in fitting together business activities, business strategy, and operations. His analysis shows how the activities connect to create a uniquely competitive business.

IKEA’s Fit Between Activities

Good strategies depend on the connection among many things. Fit means the value or cost of one activity is affected by the way other activities are performed – in other words, “synergy.” If the activities fit together, they each meaningfully contribute to the company’s increased value or lower cost, and they work strongly together. The IKEA case analysis below is one example of fit between different activities.

This is a clear departure from the (mistaken) idea of the one core competence. If strategy truly is based on one core competence, then it becomes relatively easy to replicate. More often, industries compete fiercely to control the one key “resource” – distribution channels, product portfolios – thus driving up cost. In reality, strong strategies are built on many unique activities that fit together to deliver the unique value proposition. Later, you’ll see how fit works well in the IKEA case study, despite certain trade-offs.

Fit arises in 3 ways . Keep this in mind when you read the IKEA case analysis:

• Example: many of Southwest’s activities are directionally pointed toward lowering cost and increasing convenience.
• When activities are inconsistent, they cancel each other out.
• Netflix’s large catalogue gives more chances to collect data points to make better recommendations.
• IKEA’s room displays substitute for sales associates, thus lowering cost.
• Dell will preload software onto PCs, substituting for the customer’s IT department.

Fit discourages rivals in a few ways:

• With a large range of activities, it becomes unclear which of the company’s activities are most valuable to replicate.
• As a simplistic example, say there are 5 activities that give a company a competitive advantage. If the chance of replicating one activity is 90%, then the chance of replicating all of them is 0.9^5, or 62%.
• An activity that fits one value chain can punish a different value chain, if it lacks synergies with the other activities or contradicts them.
• Activities with fit make it easier to see where the weak link in the chain is (think about this in the IKEA case analysis later).

The IKEA Case Study

Let’s examine a masterpiece of strategy in IKEA using the IKEA case study analysis. Their mission is to deliver stylish furniture at low prices. Their activities show clear trade-offs and strong fit:

• Assembling furniture yourself also seems to increase your enjoyment of it, maybe because of endowment effect. 
• Compact boxes reduce freight shipping costs from the manufacturer.
• This means time from buying to having furniture in your house is much faster than shipped furniture.
• IKEA stores are huge warehouses in large suburban locations with highway access. With large parking lots and loading zones, they allow customers to self-service and deliver their own furniture.
• IKEA showrooms have minimal staff, with the entire inventory laid out for buyers to peruse.
• IKEA cafeterias are self-service and customers are encouraged to bus their own trays.
• IKEA designs its own products, allowing trade-offs in styling and cost.
• Furniture has few customization options, allowing production in bulk and bargaining at scale.
• A narrower catalogue also allows IKEA to keep its warehouses fully stocked, instead of requiring shipping.

Many of these activities fit together and reinforce each other to provide low-priced furniture. The furniture’s self-assembled design reduces manufacturing costs, storage costs, shipping costs from manufacturer, and shipping costs to customers. In turn, IKEA’s locations make the furniture’s self-assembled design even more effective. 

Note how each activity is distinctly a trade-off : you either have furniture disassembled or not. You either have salespeople on the showroom floor or not. This is one of the aspects covered in the IKEA case study analysis.

Many traditional furniture retailers practice the inverse of IKEA’s value chain. If they tried to adopt one of IKEA’s activities, they’d find it less compatible with their own value chain, and so they’d gain very little of IKEA’s competitive advantage.

Note too that, in making these tradeoffs, IKEA is deliberately alienating customer groups – those who want furniture ordered seamlessly to their homes, who want nice salespeople to guide them through options, who want unique and fancifully designed furniture. The IKEA case study analysis shows how trade-offs can sometimes have big strategic payoffs.

Activity System Map

To visualize the strength of fit between activities, place the activities on a map.

• Start by placing the key components of the value proposition.
• Make a list of the activities most responsible for competitive advantage
• Add each activity to the map. Draw lines wherever there is fit: when the activity contributes to value proposition, or when two activities affect each other

Here’s an example for IKEA:

A densely interconnected activity map is a good sign. A sparsely connected map shows weak strategy.

The activity map isn’t useful just for description of your current strategy. It can also be used for ideation for new strategies:

• Can you improve fit between activities? 
• Can you find ways for an activity to substitute for another?
• Can you find new activities or enhancements to what you already do?
• Are there new products or features you can offer because of your activity map, that rivals will find difficult to emulate?

Porter’s IKEA case study is an example of a competitive business in a particular area of an industry. Porter’s IKEA case study shows business activities and strategy intersecting successfully.

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• Likeability Lies: You’re Being Fooled by Charm and Charisma →

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Navigating the Digital Seas: A Case Study on IKEA’s Transformation

Introduction:.

In the fast-evolving landscape of digital transformation, legacy brands face a unique challenge — how to embrace the future without losing the essence of what makes them iconic. In this case study, we delve into the digital transformation journey of IKEA, a globally recognized retail brand, with insights from Barbara Martin Coppola, Chief Digital Officer at IKEA Retail.  

Source: Harvard Business Review  

Digital Transformation at a Glance:

IKEA, known for its distinct brand of home goods, embarked on a digital transformation journey under the leadership of Barbara Martin Coppola, a tech industry veteran. The company aimed to remain true to its DNA while adapting to the changing needs of customers in the digital era.  

Operational Changes and E-commerce Growth:

Over the past three years, IKEA tripled its e-commerce levels and transformed its stores into fulfillment centers , requiring adjustments in supply chains and store layouts. The COVID-19 pandemic accelerated these changes, pushing the company to innovate and adapt at an unprecedented pace.

The Multi-Faceted Approach to Transformation:

Digital transformation at IKEA is not just a technological shift; it’s a holistic reimagining of the business. From exploring new customer offers to reengineering the entire value chain, the transformation extends across various layers of the company. This includes revamping customer interactions both online and in-store, exemplified by features like the “Shop & Go” functionality in the IKEA app.  

Consistency Amidst Change:

A critical aspect of the transformation is ensuring that IKEA’s core vision and values remain consistent. The company’s culture, values, and vision of creating a better everyday life for many people form the unchanging DNA of IKEA. The challenge lies in expressing these values in the digital realm, leading to the concept of human-centric technology.  

Data and Analytics:

IKEA’s significant increase in the e-commerce levels over a period of three years was a result of data-driven insights and analytics to understand customer behaviours , preferences, and trends in the digital space.     Data played a pivotal role in reshaping the flow of goods, supply mechanisms, and even the floorplans of the stores, which s ubsequently transformed IKEA’s physical stores into fulfilment centres .     Therefore, IKEA’s digital transformation journey s howcases a strategic and pervasive use of data and analytics across various f acets of the business, from customer interactions to operational changes, u ltimately driving the company’s evolution in the digital era.  

Trust and Customer Data:

To maintain consumer trust, IKEA introduced a Customer Data Promise, emphasizing people’s control over their data. By putting ethical behaviour , diversity, and privacy at the core, IKEA aims to build the same level of trust in the digital world that it has earned over 78 years in consumers’ homes.  

Lessons from the Tech Industry:

Barbara Martin Coppola’s experience in the tech industry, particularly at Google, played a crucial role in shaping IKEA’s digital transformation. Key learnings include the importance of speed, agility, customer focus, prioritizing people, and having a clear sense of purpose.  

Culture as a Catalyst:

The success of digital transformations hinges on cultural shifts within organizations. At IKEA, integrating digital into the company’s fabric involves fostering a culture of acceptance, shared values, and a common vision. Leadership, openness, and acknowledging vulnerability are emphasized as crucial elements in navigating the transformative journey.  

Augmented Reality (AR) and Virtual Reality (VR):

IKEA recognizes the potential of AR and VR in enhancing customer experiences. Testing VR in-store and acquiring Geomagical Labs for AI technology reflect IKEA’s commitment to democratizing home design while ensuring accessibility for all.  

Supporting, Not Replacing, Workers:

Contrary to concerns about automation replacing human roles, IKEA sees technology as a means to empower its workforce. Automation is aimed at relieving employees of repetitive tasks, allowing them to explore new and diverse roles through ongoing reskilling initiatives.  

The Resilience Imperative:

The pandemic presented challenges and accelerated digital initiatives. Despite the hurdles, IKEA’s resilience and commitment to growth have positioned the company as a digital frontrunner.    

Conclusion and Call to Action:

As we delve into the dynamic world of digital transformation through the lens of IKEA, the possibilities that await in the realm of business transformation become clearer. The case study highlights the intricacy between tradition and innovation, offering a glimpse into the future of businesses navigating the digital seas.  

The Bachelor of Business Transformation course at the Analytics Institute of Australia (AIA) emerges as a beacon of opportunity. In a landscape where change is the only constant, AIA’s program stands as a gateway to mastering the skills and insights required for driving impactful transformations.  

By joining the Bachelor of Business Transformation at AIA, you’re enrolling in a course that values real-world application, critical thinking, and a deep understanding of the evolving business landscape. The lessons obtained from real cases, such as IKEA’s digital odyssey, become tools in preparing you to lead transformations with confidence and foresight.  

Join us at AIA, where education transcends textbooks. Your transformative journey awaits – embrace it with AIA’s Bachelor of Business Transformation , and become a navigator of change in the business landscape of tomorrow.  

#analyticsiaustralia #internationaleducation  #dataanalytics #march2024intake #analytics #businesstransformation #businessanalytics #christmasinmelbourne #newyearinmelbourne #studywithus  

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IKEA U.S. takes equity, diversity and inclusion to the next level

Furniture retailer builds ambitious new strategies into its business plan.

5-MINUTE READ

Call for change

A responsibility to build a better society.

For many years, the world’s largest furniture retailer, IKEA, has prioritized efforts to promote equity, diversity and inclusion (ED&I). For example, the company has partnered with social entrepreneurs, creating thousands of jobs for under-represented groups around the world, including a project with Syrian refugees to develop textile products for sale in IKEA stores. Additionally, through employee development and human resources programs across the globe, IKEA has successfully increased the percentage of women in leadership positions,  reaching 50% in 2020 .

Even with its existing achievements in ED&I, IKEA wanted to do more.

IKEA U.S. asked Accenture to help assess its current state of ED&I, define an ED&I vision, and develop a comprehensive plan to accelerate gains in this area. The aim was to implement an effective approach that the company could replicate in other countries. IKEA U.S. was particularly interested in setting and pursuing race and ethnicity goals as well as increasing the diversity of its leadership.

With increasing inequality due to climate change and other global challenges, we recognized that we have a responsibility to help build a society that provides equal opportunities for all.

STEPHANI “STEVIE” LEWIS / Chief Diversity Officer, IKEA U.S.

When tech meets human ingenuity

Improving maturity in ed&i.

We used our maturity model to characterize the current state of ED&I at IKEA U.S. This model measures the extent to which ED&I is embedded in a company in specific areas and identifies opportunities for improvement.

The team inputted the results of several activities into the model:

• Interviews with IKEA U.S. departments:  For instance, interviews with communications staff focused on understanding how ED&I values are embedded into the communication strategy.
• A survey of executives at IKEA U.S.  gathering insights into the current state of ED&I and their aspirations for the company.
• Focus groups with IKEA U.S. co-workers  to explore their experiences working at IKEA and gather their perspectives on the company’s ED&I maturity.

Using the model’s results and additional research on ED&I at eight other retailers, Accenture compared the ED&I maturity of IKEA U.S. with that group. We also compared human resources data for IKEA U.S. employees with U.S. Census data in various geographic areas, revealing the diversity gap between IKEA and local Census populations.

A valuable difference

A roadmap for greater equality.

We presented the results from our maturity assessment in a facilitated workshop with the IKEA U.S. ED&I staff and leadership team. The participants translated the results into a vision to guide action and several ED&I strategies, such as increasing underrepresented groups at all levels of the organization. They also developed 30 recommendations to be integrated into the 2023 business plan for IKEA U.S., such as determining ED&I performance indicators.

Since Accenture completed the project, the ED&I team has asked leaders at each U.S. store to implement ED&I initiatives that support the new vision and strategies while serving specific store needs. These include an Equity Council, an accountability group led by CEO Javier Quiñones, and a pilot program to support diverse talent with leadership training and mentorship. IKEA U.S. has also built a dashboard that tracks ED&I indicators at stores, allowing for progress reports to be shared with executives.

“We now have the data and the tools to take ED&I to the next level,” said Lewis.

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Edexcel AS Business Studies - IKEA case Study

8th April 2008

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Our Edexcel AS Business Studies revision notes for the IKEA case study are now complete. As part of the exercise, Mark Tottman has produced an excellent series of guided revision questions that help lead students through the key issues raised by the case study. Here are the questions:

Note: or model answers and advice on approaching these case study areas, please refer to Mark’s detailed study notes for the Edexcel case study.

Unit 1 – Business Structures, Objectives and External Influences

What business sectors are considered in the IKEA case study? Evaluate the merits of IKEA’s complex ownership structure. “Most of these stores are owned by IKEA and the other stores are owned and run by franchisees outside IKEA” (lines 2-3). Evaluate the benefits to IKEA of operating a franchising model. Analyse the advantages and disadvantages to IKEA of being a multi national company (MNC) “Competition is expected to increase from MFI, up-market rivals like the Danish company Ilva, and from other unexpected sources” (lines 86-87). Who are the main competitors to IKEA? “To create a better everyday life for the many people… You do your part. We do our part. Together we save money” (extract from lines 12-16). To what extent does Ingvar Kamprad’s vision for IKEA remain true in his retirement? Explain why profits are important to Barnsley Beds Ltd Analyse the implications of social and environmental objectives on the culture and operations of IKEA. Assess the main macro-economic factors and other influences that affect the demand for IKEA products. With reference to key demographic, lifestyle, political and social trends, evaluate the likely success of IKEA worldwide in the next few years. Analyse the organisational structure of IKEA with reference to its functions, product and geography. What are the issues of communicating with IKEA’s large workforce of 118,000 co-workers. With reference to motivational theorists, evaluate the ways in which IKEA motivates its co-workers. “… his alleged obsessive personality and zealous frugality have seeped into every corner of IKEA; senior executives travel around Europe on budget airlines and Kamprad himself has been known to replace fizzy drinks from hotel minibars with cheaper supermarket products” (lines 20-22). Analyse how Ingvar Kamprad’s leadership style has influenced the culture of IKEA. Examine how jobs are designed at IKEA.

Unit 2 – Marketing and Production

Does IKEA operate in a mass market or a niche market? “IKEA does much less market research than many companies because it so often decides what the customer is going to need in advance” (lines 32-33). Analyse whether IKEA is a product-oriented or a market-oriented company. Evaluate which component of the marketing mix is most important to IKEA. Analyse how IKEA uses market segmentation to target its customers. How does the IKEA product range meet the needs of its customers? Analyse the ways in which the IKEA Concept uses product design to secure very low product prices. How does IKEA use branding to sell its products? Each IKEA store is laid out so customers will not only find what they came for but will also be tempted to ‘impulse buy’ (lines 41-42). Evaluate the role of ‘place’ in IKEA’s marketing mix. Analyse IKEA’s pricing strategy. Analyse the methods of Promotion used by IKEA. To what extent does IKEA benefit from lean production techniques? “Buyers look all over the world for good suppliers with the most suitable raw materials. These materials are then bought in bulk on a global scale”. (lines 30-31). Analyse how does IKEA benefit from economies of scale? Analyse the importance to IKEA of having a world class stock control system.

Unit 3 – Financial Management

Why does IKEA not produce a full set of company accounts? With reference to the data presented in Appendix 2, calculate the Return on Capital Employed for Barnsley Beds Ltd and evaluate your findings. Assume that Barnsley Beds Ltd had a Turnover of £2,000,000 in 2006 and Overheads of £1,000,000. Calculate the Profit margins for the business and comment on your findings. With reference to the data presented in Appendix 2, calculate the Current ratio and the Quick ratio for Barnsley Beds Ltd and comment upon its short-term financial liquidity. What is a debenture and give an example for Barnsley Beds Ltd. With reference to Appendix 2, calculate the gearing ratio for Barnsley Beds Ltd and comment on your findings. Evaluate the usefulness of ratio analysis in understanding Barnsley Beds Ltd’s financial performance. Assess the extent to which the information shown in Barnsley Beds Ltd’s Balance Sheet and its Operating Profit figure enables the reader to evaluate the overall performance of the business. Barnsley Beds Ltd has a delivery vehicle which it bought new three years ago for £60,000. Assuming that it still has two years of useful life remaining and that it can be sold for £12,000, calculate the current book value of the vehicle using the straight line approach to depreciation. Assess the extent to which the use of budgeting might assist IKEA in managing its global operations. Discuss the role of contribution analysis in determining the viability of each of IKEA’s 9,500 product lines. Evaluate the usefulness of breakeven analysis to IKEA in deciding whether to set up a new store in New Zealand.

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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Ikea Branding Strategy and Marketing Case Study

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Brand Overview

• Home and Garden

Business Type

Physical Products

https://www.ikea.com

Target Customer

Budget Home Shoppers

Primary Need ( Job To Be Done )

Furnish my home with goods that are fashionable but affordable

Brand Visual Identity & Content

Primary brand colors, brand typefaces, hero content.

Hero Content Type

Content features people, brand messaging, key messages, benefit or feature focus, tone of voice, brand archetypes.

( Learn More About Brand Archetypes )

Everyperson

Brand Positioning Strategy ( Elements of Value )

( Learn More About The Elements of Value )

Aspirational

Self-Actualization

Design & Aesthetics

Reduces Cost

Brand Benefits

Ability to furnish everything I need in my home at one single shopping location 

Access to modern and trendy design aesthetics at extremely affordable pricepoints

Consistent, well thought out assembly instructions to get new furniture ready to use quickly

Competition

Key competitors.

Target, Wayfair, Amazon, Lowe’s, Home Depot, Ashley Furniture, Cost Plus World Market, Floyd

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IKEA Case Study| History of IKEA| IKEA Business Model

lapaasindia

August 31, 2019

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Ikea Case Study- (Business Model)

2 Minute Summary

IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943. Everybody knows that Ikea offers the products at a very lower price than any retail shop. Ikea has invested 800 crores in India, It has more than 9500 Products and has more than 350 stores in 35 countries. the new store is spread across 400,000 square feet in the southern city of Hyderabad & plans to invest 105 billion rupees in India. the company is a non-profit. IKEA employs about 135,000 people. Because of tax rules for non-profits, IKEA pays about 33 times fewer taxes than their for-profit competitors. The Ikea trademark and the concept is owned by another private company named Inter Ikea Systems. It acquired TaskRabbit on Sep 28, 2017. IKEA has many mobile apps. But the most popular app is IKEA STORE. The app is having almost 9,60,333 monthly downloads. IKEA is the lead investor in 4 companies. Full Detail in Blog.

Everybody knows that Ikea offers the products at a very lower price than any retail shop.

In this blog, we’ll talk about Ikea Case Study(Business Model) as the Swedish furniture company opened its first retail store in India.

Like Walmart acquired Flipkart and entered the Indian Market. Ikea can destroy the Whole Furniture Market in India.

Ikea has invested 800 crores in India, It has more than 9500 Products and has more than 350 stores in 35 countries.

According to CNN , the new store is spread across 400,000 square feet in the southern city of Hyderabad & plans to invest 105 billion rupees in India.

But have you ever wondered? How does Ikea work?

What is the meaning of IKEA?

How IKEA works?

How IKEA business model earns ?

You must have many questions regarding IKEA, like What is the meaning of IKEA?

What is IKEA?

How IKEA earns?

This will be the most detailed case study on IKEA.

I will be answering all of your questions.

Let’s START WITH

WHAT IS IKEA?

IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943.

IKEA is a globally renowned furniture retailer that sells ready-to-assemble furniture, kitchenware and home accessories.

 The company started with selling pens, wallets, jewellery with the concept of meeting consumers demands at the most affordable prices.

After five years into the business, IKEA brought in the furniture. Since then furniture has been the mainstream for the business.

IKEA furniture is now a well-known multinational brand.

IKEA MEANING

You must be wondering that what is the story behind the unique name the brand has.

The name IKEA isn’t just a fun.. it stands for – Ingvar Kamprad Elmtaryd Agunnaryd.

Short-form is cooler to pronounce right? But it actually has a deeper meaning.

The first two letters of IKEA i.e. I and K are the initials of the name of the founder Ingvar Kamprad.

While ‘E’ comes from the name of the farm he grew up on – Elmtaryd.

And the last letter ‘A’ comes from the Swedish village, Agunnaryd,

where the farm was located.

HOW IKEA EARNS? – IKEA BUSINESS MODEL

They follow Price-leadership model. Low prices are the main concern stone of the IKEA vision, business idea and concept.

In the world of IKEA furnishings, the products are named after Swedish towns like Aneboda, Akurum and Anordna.

But the costumers worry less about the names and care more about how much they cost.

Ikea furniture is a beacon for bargain hunters. Its whole business model evolves around selling their product at the lowest price possible.

IKEA business model revolves around their vision which is – offering a very wide range of well-designed, functional home furnishing products at so low prices that as many people as possible will be able to afford them.

Anybody can make a high-quality product for a high price, or a poor-quality product for a low price.

IKEA follows a different approach, they have developed methods that are both cost-efficient and innovative. Before designing the product… they decide the price tag.

Their designers begin with designing of the product after keeping the price in mind. The IKEA Group has 31 distribution centres in 16 different countries, supplying goods to IKEA stores. It has about 45 trading service offices in 31 countries.

They have very close relationships with their 1,350 suppliers in 50 countries.

IKEA’S SMART SECRET

Is IKEA – a Non- profit organization. ?

You must be having a lot of questions by now, like if IKEA is a non

profit organization then –

How do they manage their running cost?

Where all the money goes away?

Where does all this money earned is utilised?

You will get all your answer right away as you continue reading.

I would say a big YES,

IKEA has a little known secret: the company is a non-profit

They grew with a vision that states ‘to create a better everyday life for as many people as possible. And on a mission to offer a wide range of home furnishing products at a price so low that as many people will be able to afford them.’

Besides the vision and mission, the main motive of showing itself a non profit organization could seem as business-driven.

IKEA employs about 135,000 people. Because of tax rules for non- profits, IKEA pays about 33 times fewer taxes than their for-profit competitors.

There is one more big hole in this whole IKEA non-profit organization.

Money is not trapped inside Ikea’s foundation.

The Ikea trademark and the concept is owned by another private a company named Inter Ikea Systems.

So, to operate Ikea stores and use the brand name, the non-profit Ikea have to make payments each year to the private company – Inter Ikea Systems.

This clearly means money is paid directly from IKEA profits to the owners of this private company to license the trademark.

The beneficiaries or we can say owners of this private company are not publicly recorded, but it’s not hard to speculate that the Kamprad family is on the receiving end of this loophole.

HISTORY – STARTING AND GROWTH OF IKEA

Let’s talk about the exciting history timeline of IKEA.

From the of how it is started to the story of how it evolved exponentially.

It all started in 1926 when founder Ingvar Kamprad is born in Småland

in southern Sweden.

The 1940s-1950s

In the year 1948 – Furniture was introduced into the IKEA range.

Local manufacturers produced the furniture for IKEA in the forests close

to Ingvar Kamprad's home.

In the year 1956 – IKEA came up with the idea of designing furniture for

flat packs. It started focusing on self-assembling furniture models.

In the year 1980s – IKEA expands dramatically into new markets such

as the USA, Italy, France and the UK.

In the year 1984,

Ikea family was introduced a new club for the customers was launched.

Today, Ikea family is in 16 countries (over 167 stores) and has about 15

million members.

FINANCIAL FACTS AND FIGURES

Categories – Consumer Electronics, Furniture, Retail, Shopping, Smart Home.

Headquarters –   European Union (EU)

Founded Date –   1943

Founders – Ingvar Kamprad

No. of Employees – 10001 +

Legal Name –  IKEA BV

Digital links

Website –  www.ikea.com/

Facebook- www.facebook.com/IKEAIndia

LinkedIn – www.linkedin.com/company/ikea-group/

Twitter – https://twitter.com/IKEAUSA

Till now IKEA has only 1 acquisition.

It acquired  TaskRabbit  on Sep 28, 2017

Mobile app and its downloads

IKEA has many mobile apps. But the most popular app is IKEA STORE.

The app is having almost 9,60,333 monthly downloads.

Website and its monthly traffic IKEA is ranked 166 among websites globally.

And having almost 146,040,680 monthly visitors.

Investments

IKEA is the lead investor in 4 companies. Those are –

XL HYBRIDS – IKEA announced its investment in this company on

October 12, 2017

MAT SMART – IKEA announced its investment in Massmart on Jan

TRAEMAND – IKEA announced its investment in Traemand on Dec

LIVSPACE – IKEA announced its investment in Livspace on Dec 19,

MANAGEMENT AND THE CORE TEAM

CEO – Jesper Brodin

CFO – Alistair Davidson

FOUNDER – Ingvar Kamprad

HEAD OF CORPORATE FINANCE & TAX – Krister Mattsson

HEAD OF DIGITAL – Christian Moehring

HEAD OF E-COMMERCE, SOUTHEAST ASIA – Koen Besteman

HEAD OF UK MARKETING PROCUREMENT – Maria Malpartida

HEAD OF INNOVATION – Jens Heitland

8 IKEA Marketing Strategy

Many people confuse marketing with promotion. People believe that marketing is something you do to sell your product. But, this is not completely true. Marketing begins even before the production stage, as designing a product based on the demand and needs of the customers is also a part of marketing. This is what IKEA Believes in. Everything in IKEA is from a customer’s point of view. Let’s dive deep into learning different strategies of IKEA.

1. Amazing Customer Experience

Have you tried shopping from IKEA? If not, then I would strongly recommend you to try IKEA next time you need a piece of furniture.SHopping at an IKEA store is a different experience than shopping from any other furniture store. Whenever adults go out shopping with their kids, both the kids and parents face issues.

IKEA has got an amazing solution for this where none of them would feel any type of burden and in fact, both of them would like to spend more time at the IKEA store. Yes, I am talking about the free childcare facility provided by the IKEA stores. You can just leave your child safely with them and enjoy hustle free shopping and the child will also spend some quality time playing and making new friends.

Another amazing thing is that instead of standing and having a long discussion about which product to buy and calculating your cost, you can have a seat ad enjoy your paneer butter masala meal while discussing the furniture.

These little things not only add a value to the customers shopping experience but also give them a reason to visit again and even suggest others to visit the store.

2. Brand Identity

In such a competitive environment, is it very important to stand out or be unique and creative to survive? You have to build your brand in such a way that customers prefer you over other companies.IKEA is very strongly working with this. Its goal is to become the leader of every home.

IKEA focuses more on the product and the customers which a lot of companies fail to do. If you create what your customers want then you can build a good brand identity. Your every action should be a signal of your brand.IKEA uses this technique in its advertising. If you have been following IKEA for a while then you will not have to think a lot you can recognise directly that this is an IKEA ad.

3. Content Marketing

With the growing digital environment, the content has become an important element of the digital industry. Content is used by most of the companies to promote their product digitally. From a picture art to a long written blog anything can be used as content in digital marketing.

One of the best strategies you can use in this digital era is to interact with your customers directly.IKEA uses all types of contents to reach out to their customers. From images, videos to textual content IKEA has it all. To reach your customers digitally, it is very important to identify your potential audience, basically defining who your customers are. Then the most important step is defining how your potential customers can find you?IS is through your social media handles or is it through your website or a combination of all these. And then you need to target them both organically and by paid promotion techniques.

4. Social Media

Social media is something which cannot be avoided. Everyone nowadays uses social media, thanks to the internet revolution and jio revolution in India. Your presence on every social media platform is must, it doesn’t matter if you are an old company or a new one. Social media allows you to be in constant touch with your customers. You can use various strategies across your social media platforms that can help you create trust and a good brand image in front of your customers and also develop new customers.

There are a few strategies which you can follow.

• If you follow a consistent posting schedule, then you can have a good content interaction as regular posts can make your customers think about you.
• You can also use promotional strategies provided by social media companies to reach a new audience and attract them by telling them about your new products and offers.
• Another important feature of social media that you can use is to understand your audience. Understanding your audience is important because they are the ultimate consumers and having clarity about the consumers makes it possible for a brand to plan its products and marketing accordingly.

5. Innovation

IKEA is very famous for new designs and products. It keeps on constantly adding a new design or a new to product to its collection. This allows customers to visit the store even if they do not want to buy anything so that they can check the latest trends and products. If you check their social media handles, you will find a lot of different types of content that displays new and innovative products. This is a very good strategy as your customers stay updated with your products. Even if they do not add the products to their cark at the moment, they still add it to their wishlist. Which indirectly gets converted into sales. Thus, innovation in products and making innovation reach your customers is very important.

6. Creative Marketing Campaigns

IKEA is very creative when it comes to marketing. Their posts are so engaging that you want to click on it and see them that what is there. The example given below demonstrates how one will swipe right to see what they have for you. Isn’t it creative? If you observe, they have made good use of the present condition in a creative way. Similarly, a humorous and creative content strategy can help you get more engagements.

7. Amazing Use of Technology

Living in the 21st century, you can make amazing use of technology to provide a great experience to your customers. Augmented reality and virtual reality are some great examples of technology can you can use especially in such industries.IKEA makes use of both these augmented realities and the virtual reality

What is Augmented Reality?

This is the most amazing use of technology that IKEA could have done. With this, you can use your mobile phone to see how a piece of particular furniture would look at your home. You can also use this to decide at which corner of the house that particular furniture would look good. This is like a trial technology where you can try the products virtually at the comfort of your home without actually buying it. It is similar to something used by Lenskart.

What is Virtual Reality?

Yet another amazing use of technology. Where most of the people are busy using virtual reality for gaming purposes, IKEA has its smart use. Through virtual reality technology, IKEA allows its customers to feel the look of the furniture. For example, say you want to buy a modular kitchen, you can try the kitchen before actually buying it in a virtual reality headset. The most amazing part is that you can try cooking and get real experience.

8. Payments Methods

Consumers have become a lot more advanced than before. Customers need comfort. Since the evolution of the digital era, there are a lot of different methods of payment. Every consumer has different payment options. It becomes important to have all the options available so that the customers get a hustle free shopping experience. As already, IKEA is a price dominant company, best price with all modes of payments is like a cherry on the cake.

Unknown Facts About IKEA

• Ikea is the third-largest wood consumer on the planet. Being the leading furniture company it should not be shocking.
• IKEA is claimed to print more copies of its annual catalogue each year than the bible.
• IKEA has very good food sales. Being known for its furniture has a very good taste when it comes to their restaurant. This can be a great contribution to their revenue as they have an approximate sale of 2 billion annually.
• As in 2014, they have 716 million visitors to their store. This is a very huge number.
•  The first IKEA restaurant was launched in 1956 to feed its customers that would feel hungry after spending the whole day shopping.

SWOT Analysis of IKEA

* Its vision – ‘to create a better everyday life for many people’

* Economies of scale

* Lowest Price

* Countless designs

* Bad press

* Low quality

* Difficulty to control standards across locations.

OPPORTUNITY

* Solutions for a sustainable life at home

* Developing social responsibility

* The recession slows down consumer spending

* More competitors entering the low price household and furnishings

IKEA is one of the biggest furniture companies in the world founded by a carpenter named Ingvar Kamprad who was 17-year-old, in Sweden in 1943.

The company started with selling pens, wallets, jewellery with the concept of meeting consumers demands at the most affordable prices.

IKEA KEY VALUES

They are very strict about their values.

They firmly believe that every individual has something valuable to

Let’s look at some of there core values –

1. Cost – Consciousness

Their first priority is to make their product affordable to as many

people as possible. They challenge themselves constantly to make

the product more affordable without compromising on quality.

2. Renew and Improve

They always challenge themselves to try something new and to find a

a better way out.

3. Caring for People and Planet

They believe in caring for people as well as for the environment.

They act as a force for a positive change.

IKEA IN INDIA

In 2006, Ikea first displayed an interest in the Indian market but back then

the Indian laws allowed only 51 per cent foreign ownership.

With the government of India relaxing the norms for foreign direct

investment (FDI) in single-brand retail, IKEA announced in October

their intention to open stores in India.

IKEA opened its first store in India on Aug 9, 2018.

It took IKEA 12 long years to enter the Indian market.

The first store in India was opened in Hyderabad.

Hyderabad, the southern Indian city gave it a roaring welcome.

So far, more than 3 million customers have visited IKEA Hyderabad

store and about 8 million have visited IKEA’s India website

In the year 2016, Ikea purchased land in Mumbai and said that it planned

to open stores in Bengaluru and Delhi too.

After Hyderabad, in 2019 IKEA has launched its first online store in

Mumbai is offering more than 7,500 products.

It will provide delivery to most of the locations in Mumbai and will have

a delivery time of four to seven days, subject to availability and distance.

In India, IKEA currently has more than 55+ suppliers.

Also, have more than 45,000 direct employees and 400,000 people in the

extended supply chain.

Now, the company plans to have more than 25 stores in India by 2025.

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• Harvard Business School →
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• March 2016 (Revised January 2017)
• HBS Case Collection
• Format: Print
• | Language: English
• | Pages: 16

About The Author

Eric J. Van den Steen

Related work.

• Faculty Research
• IKEA  By: Eric Van den Steen and Alon Galor

Select Clients

Defining and executing the vision for the next-generation customer experience

What we did

• Vision for transformation
• First e-commerce app
• Global site redesign
• Redefined in-store digital
• Built a design system

Growth in e-commerce in 3 years

Increase in online sales in 2020

Star rating, up from 2.5

IKEA’s footprint is vast—over two billion people shop a range of 12,000 products in 500+ sales locations in 59 countries and online. But as digital becomes increasingly important—especially in the age of Covid—the retail behemoth needed to modernize and transform their business.

As their digital agency of record, Work & Co defined the vision of a future where technology holistically enhances the customer experience at every interaction. Of course, we didn’t stop there. We also helped bring it to life.

Our first challenge—creating IKEA’s first e-commerce-enabled mobile app—took just 6 months from concept to MVP. From there, we took on the entire multi-channel ecosystem of digital touchpoints, including the website, internal tools, and the stores.

The new experience led to greater efficiency, richer engagements, and incremental revenue.

Recognition & Awards

“It is a completely new experience. The app is combined with the store." Read more

"A bona-fide, full-featured shopping app." Read more

"The approach is sound and offers much to learn from." Read more

Shortlist, Design Week Awards, Best App Design. Read more

Winner, 6X Lovie Awards. Read more

Winner, 3X Platinum Awards. Read more

Finalist, FastCo Innovation by Design Awards, Data Design. Read more

4 Big Takeaways

Defining a vision for product and partnership.

Overhauling web & mobile commerce

A unifying design system

Redefining in-store touch points, bringing ikea into the “now”.

Already a worldwide leader in brick-and-mortar retail, IKEA’s leadership partnered with Work & Co to accelerate their digital transformation. Our team’s first task was to develop a cohesive and tech-savvy vision and strategy around which the global organization could align. We began a months-long process of research and brainstorming and problem solving.

From idea to execution

Once we’d identified effective solutions to the challenges, we drafted a new vision for the customer journey intricately detailed in animations and prototypes, which helped ensure all parties were aligned on the plan: aspirational and sophisticated, but also attainable. Together with IKEA, we established a strategy to work as partners with internal teams, sharing design and development labor, openly exchanging ideas and feedback, and even providing guidance on IKEA’s hiring strategies.

Overhauling web & mobile commerce

Personalized inspiration.

To bring IKEA’s famed catalog to life for the digitally native, the app leads with inspiration. Customers browse the app the same way they would IKEA’s showroom—imagining how products complement their home or aesthetic—but with technology enhancing the journey.

A new AI-powered API suggests images based on a customer’s interests and evolving taste. Our cross-platform CMS allows editors to create content once, then deploy them across both the app and IKEA.com. And to bring over 760 collections to life, our team of writers built new engaging copy that scales no matter the country.

Category-specific experiences

From mattresses to lightbulbs to kitchens and beyond, the variety of products IKEA offers are presented and sold in a myriad of ways. The flexible digital designs enable a shopping experience optimized by category and use. Inspiration galleries, planners, guides, and other content can easily be added to help shoppers find their perfect option, plus accessories and add-ons to complete the look. With around 250,000 SKUs per market, this aspect of our work was essential.

Ethical data usage

Industry-leading contextual digital tools raise the bar on data transparency and give customers control over how data is collected, stored, and used. Customers can choose if and how the company uses information—such as their IKEA browsing history, previous purchases, and product preferences—to inform product recommendations in its app, and eventually on its website. To aid explanation of these abstract concepts to users, we explored evolving the iconic IKEA assembly character as an approachable guide.

Consistency at scale

To address the challenge of keeping consistent design across all of the different touchpoints, we worked with IKEA to build a new design system. Skapa is a single source of truth for global button styles, iconography, interaction patterns, and motion libraries brought to life in one React Storybook component library. Components are strategically added and removed over time, meaning the design system is treated as a product that will never stop evolving, while simultaneously keeping the brand universally aligned.

Branding and tone of voice

From a custom icon set to branded price presentation and rigorous color guidelines, each component infuses the IKEA branding into our digital platforms. To complete our design system, we also established a new, digital-first tone of voice with dynamic writing guidelines. Now, writers, designers, motion designers, and developers have everything they need to produce new work across the digital ecosystem.

Integrated accessibility

By including best practices for accessibility into design components, we ensure our digital products are natively inclusive. Solutions are defined once, and repeated throughout development.

Global adoption

A design system is only successful if it’s used globally by an organization. That’s why we helped IKEA establish strategies for training tailored to user types and knowledge levels, advocating for adoption, maintenance and upkeep of components and documentation, and hiring a team dedicated to its management. These critical pieces helped to ensure long term success.

New ways to shop

Part of IKEA’s transformation includes the introduction of new store formats—spaces dedicated to browsing, planning, and ordering—in addition to the traditional locations. The new ecosystem Work & Co delivered integrates digital and physical across all stores in new ways, enhancing the experience for both shoppers and co-workers. New digital tools and features provide more relevant product browsing and interactions, personalized recommendations and shopping lists, and seamless checkout processes—all tailored to the shoppers’ preferences and needs.

Digital touchpoints are integrated to bridge the omni-channel experience. In-store features give users the ability to scan products, explore options and accessories, then skip the checkout line while in the physical store, reducing customer stress and simplifying the path to purchase.

We helped create Upptäcka, a replacement for the aging digital in-store installations. These new kiosks integrate with each other and the overall IKEA digital ecosystem, reducing one-off solutions. Upptäcka adapts to each store and location, making it the most contextually relevant digital touchpoint at IKEA.

Employee tools

Fixa is a task management app designed to digitize time-consuming paper-based processes, making co-workers more efficient and effective, freeing up time to focus on customers. Co-workers have called it “the best product IKEA has ever given them.”

Partner with us

Work & Co, part of Accenture Song, is trusted by the world’s leading companies to drive growth and bring innovative solutions to market. Together we can build and scale your core digital products.

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Este ensayo explora el significado de un guante solitario custodiado actualmente en el Museo de Brooklyn, en Nueva York, pero que fue hallado originalmente en un sitio costero entre Nasca y Paracas, Perú. La entrada del museo se lo asocia con la civilización Wari del Horizonte Medio. Se examina el material del guante, su construcción y sus componentes iconográficos, antes de plantear una serie de preguntas que surgen de estas observaciones y las posibles respuestas. ¿Cuál fue el uso original del guante? o ¿se lo utilizó en la cetrería costera? ¿Quién es la figura principal en la iconografía del guante?, ¿o se trata de un guerrero en su condición de un ave de rapiña o de una psitácida (una especie de loro o guacamayo)? ¿Cuál es la historia del uso de estas aves en las culturas costeñas? ¿Por qué las relaciones entre humanos y animales se reiteran como características clave de esta figura? Dada la parafernalia (túnica, tocado, armas) asociada con la figura principal del guante, parecería que se trata de una variante de la figura del Sacrificador, aunque carece de algunos atributos de este personaje. Algunas respuestas provisionales a estas preguntas se hallan en los mitos regionales y las prácticas contemporáneas de la cetrería. Abstract: This essay explores the significance of a solitary glove held in the Brooklyn Museum in New York, but found originally in a coastal site between Nasca and Paracas, in Peru. The museum entry for the glove associates it with the Middle Horizon civilisation of Wari. It explores the glove’s material and iconographic construction and components, and then a series of questions arising from these, and their possible replies. What was the original use of the glove? Was it used in coastal falconry? Does the main figure in the glove’s iconography deal with a birdman warrior, and is this associated with a bird of prey or else a psittacine (a kind of a parrot or macaw)? If so, what is the history of the use of these birds in coastal cultures? Why are human-animal relations reiterated as key features of this figure? Given the paraphernalia (tunic, headdress, weapons) associated with the main figure on the glove, this seems to deal with a variant of the Sacrificer, although he also lacks some of the main attributes of this personage. Some tentative answers to these questions are provided by regional myths, and contemporary falconry practices.

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Contingency is a critical component in the cost estimation process for any construction project. The contingency reserve considers potential costs related to risks and uncertainties associated with construction projects. It is usually assumed to damp any resulting uncertain monetary impact and to prevent project cost overrun. Many contingency calculation methods for construction projects proposed in literature ranged from simple percentage to complex mathematical methods. Deciding the optimum contingency method for a given project at a given phase represents the main challenge in cost estimation process. This study presents a comprehensive compilation of all contingency calculation methods and divided them into three main groups: deterministic, probabilistic, and modern mathematical methods which have been discussed in details. Appropriate method for estimating contingency amount depends on many criteria such as project peculiarity, complexity, ease of method used, and the accuracy level of the estimates. This study proposed a practical guidance approach for construction agencies to choose their appropriate cost contingency method. This research is expected to help agencies/owners in the budget development stage to allocate a contingency budget for their construction projects.

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Ikea case study

SWINBURNE UNIVERSITY OF TECHNOLOGY

“IKEA : Managing Cultural Diversity”

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

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.

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).

This is a preview of the whole essay

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.

• The IKEA WAY:  
• 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 ).

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

• ‘A Major Retailer’s Approach’, 2003, Society for Human Resource Management, November, vol.48, No.11, viewed 19 th  April 2006
• Briscoe, D and Schuler, R, 2004 ‘International Management: Policy and Practice for the global enterprise’, 2 nd  ed, Newyork, Routledge New York
• 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.
• Coombes, A 2006, These ‘Best Companies’ Work at Being Top Employers, Marketwatch , viewed 19 th  April 2006,
• “Effective organizational learning” 1997, Industrial and Commercial Training . Vol.29, Issue: 4;  pg. 109, 11 pgs, ProQuest, ID: 201822321, viewed 20 April 2006
• 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 19 th  April 2006
• Hodgetts, R M, Luthans, F  2003, ‘International Management : Culture, Strategy and behavior, 5 th  ed , McGraw-hill, New York
• Hodgetts, R M, Luthans, F, & Doh, J P  2006 ‘International Management : Culture, Strategy and behavior, 6 th  ed , McGraw-hill, New York
• ‘Ikea’s Innovative Human Resource Management Practices and Work Culture’, 2005, Center for Management Research , viewed 19 th  April 2006
• IKEA United States, ‘IKEA NAMED ONE OF FORTUNE’S 2005 “100 BEST COMPANIES TO WORK FOR”, press release, viewed 19 th  April 2006,
• 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.
• “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  
• Ridder, K 2004, ‘Ikea’s Unusual Benefits, Attitudes Scores Hit With Workers, Tribune Business News,  July 14, viewed 19 th  April 2006

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)

Sales for the IKEA Group for the financial year 2003 totaled 11.3 billion euros.

Source: Meisler, A 2004, “Success, Scandinavian Style”

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 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)

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.

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

Document Details

• Word Count 3792
• Subject Business Studies

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