IKEA: Managing Cultural Diversity

IKEA
• IKEA was founded by Ingvar Kamprad in Sweden.
• IKEA provides low price furniture all over the globe, being local.
• It is visited by 120 million visitors in 125 stores with distributing 35
million catalogs annually.
• Has good bonding with customers and always stay close to the
customers.
• Vertical integration of doing things differently.
• Key aspects of value chain –
a) Unique product design capabilities.
b) Unique sourcing.
c) Strong Logistics.
 Organizational culture-
IKEA(Incubator culture)
• Have less formal hierarchy, believes in self expression and
fulfillment.
Only three level of responsibility between store manager and worker.

• Follows Egalitarin approach.

It’s Egalitarin management approach is called “The IKEA way”.

• All employees are expected to have good bonding with each other.

• Pay scale of all employees is not much different.

• They follow the “Learning by doing” approach.

In what way international culture becomes
a challenge for IKEA ?
IKEA in Sweden

• Low uncertainty avoidance –Less level of formalization

• Low power distance-Less importance of hierarchy
• High individualism
• Task oriented
• Doing & achievement more important than being & ascription
• High emphasis on Equality

In Germany
• Lack of formality
• Adhere to precisely defined rules & regulations
• Require procedures & norms-provides security.
• Organized & prefer orders to be given
In USA

• American market known as the ‘Graveyard’ as a long list of

unfortunate ventures.
• As cost constraints they could not avail prime locations.
• Felt Swedes were uncomfortable in conflicting situations.
• Perceived IKEA as being more employee oriented.

In France
• Strong hierarchy system: Because of Ikea’s informal system,
employees did not take orders seriously
• Lacked in formal job descriptions & written procedures
• No status recognition
• French labour unions distrusted Swedish management style
because of their tendency to seek consensus
 Issues in front of IKEA
• Cultural differences and emphasis on being Swedish made IKEA too
complicated and difficult to adapt for Americans.

• IKEA attracts & selects people who value security, job enrichment &
benefits which are more generous than typical American employers.

• IKEA is considered to be more employee-oriented than average American

employers.

• IKEA attracts & selects people who value security, job enrichment &
benefits which are more generous than typical American employers.

• Different attitude of Swedish and American workers towards the

emotions on the workplaces.
 What type of organizational culture is most representative of IKEA:

Family, Eiffel Tower, Guided Missile or Incubator? Explain .

• INCUBATOR CULTURE

• A culture i.e. characterized by strong emphasis on equality & orientation

to the person

• Participants thrive on an intense emotional commitment to nature of

work

• Little formal structure

• All participants working towards same objective; motivation remains

highly intrinsic & intense
What are three things that IKEA had to learn in order to do business
effectively in the United States?

• Home furnishing in US is different from Europe in terms of size &

functions of furniture
• e.g. – Americans furnish their master bedrooms with king size beds,
whereas IKEA’s largest beds were five inches narrower
• Furniture were specially designed for the American market

• Americans look for convenience for which IKEA had to redesign its store
layouts, providing more directions & short cuts for people

• IKEA had to grand more autonomy to the American country

management to adapt in the US market
How well has the company been able to deal with the diversity issue? What
else does it still need to do?

• A formal communication platform was developed in France to spell things

out in facts & figures by comparing IKEA’s benefits with those of
competitors

• Formal training programs were developed in France

• IKEA redesigned its store layouts in US, providing more directions & short
cuts for people
•
• More autonomy was given to American country management to adapt in
the US market

• IKEA initiated an American style performance review procedure, which

required documentation of employees performance
What can be done for improvements ?

• Swedish style can’t be implemented globally, it should be more flexible to

local features

• Career ladder should be more opened for nationalities different from

Swedish

• “You can’t be in a hurry to move up the ladder” approach is not

acceptable across all international offices of IKEA. It de-motivates people.

• Special award system should be created for the prominent employees

• IKEA should offer enough opportunities for personal growth

• Personal inputs of employees shouldn’t be undervalued (work experience,

successfully implemented innovations and decisions offered by individual,
etc.)
 Thank you
Vijay Bhadoria 866