Evaluation Of Ikea Organizational Culture And Performance

IKEA is a Swedish-based group of a multinational institution that focuses on the design and marketing of furniture, home accessories and kitchen appliances. IKEA began in 1943 in Sweden by Ingvar Kamprad, and the firm remained the largest furniture distributor globally since 2008. The owner, Ingvar got enlisted by Forbes Magazine as one of the wealthiest globally with assets valued over $ 40 billion. IKEA, the company name, denotes Ingvar Kamprad, Elmtaryd, and Agunnaryd. IKEA deploys a modernist technique when designing furniture and appliances, as well as interior designs. Schein, (2013) stated that the firm uses eco-friendly products and methodologies when implementing their tasks. IKEA considers cost control to details, other than continuous product development and operational details, which enabled the firm to reduce its product and service prices by 2% to 3%. IKEA’s corporate attributes facilitated their global expansion back in 2010 to many nations. IKEA boasts of a corporate structure, presumed to let the firm alleviate beyond 1 billion pounds in tax remittance between 2009 and 2014. IKEA manages and overseas 424 stores strategically based in 52 nations, by the end of 2018. IKEA 2018’s fiscal year illustrated that 44. 6 billion USD worth of items got sold. Schein, (2013) added that the firm’s website reveals over 12,000 product range. IKEA boasted of 2. 1 billion visitors to their website in a period of one year alone, from 2015, September up to August 2016. IKEA is remarkably the largest wood consumer in the retail, accounting for 1%. INGKA Foundation owned most of IKEA’s factories and stores before the latter acquired them.

Vision and Business Idea

IKEA’s vision states that they intend to develop better life daily to a significant number of persons. The firm offers home furnishing items that are uniquely designed. Keyton, (2017) explained that the firm’s prices are relatively affordable to encourage as many potential buyers to acquire those products. IKEA’s vision traverses beyond home furnishing, as they also intend to improve the lives of everyone impacted by the firm.

Culture: Key Values

• Togetherness

IKEA’s culture advocates for togetherness. Keyton, (2017) added that the organization believes that when people come together objectively towards the same goals, they win together. A consolidated group yields more results compared to an individual effort from the stakeholders. The culture of togetherness addresses key challenges facing IKEA, as well as gives birth to potential business and growth opportunities both in the local and international market.

• Caring for the planet and people

IKEA always yearns to be a positive change advocate in the environment. According to Keyton, (2017), the firm deliberates on measures that protect and safeguard the environment leading to lasting impacts. IKEA considers the present and future generations when it comes to protection of the environment. The firm aims for renewable energy sources and making sure that most of their products are sustainably produced by 2020.

• Cost-consciousness

IKEA anticipates that their products and services ought to get affordable to as many people. The firm, therefore, always contemplates on production measures and techniques that make such products cheap to produce without interfering with the quality. IKEA combines sustainability, functionality with low price into one bundle when developing their commodities. IKEA gains competitive advantage by making that their products of high quality, but affordable. Most of their products are easy to fit and come with easy to follow user manuals which buyers spend little time and cost to set up once they purchase.

• Simplicity

IKEA follows Smaland heritage which is based on a rational and straightforward means of life. Keyton, (2017) stated that the firm advocates for being as real as possible. The firm ensures that no bureaucracy exists in its business activities. Simplicity makes complex tasks look easy, which makes it possible to cut on production costs and meet customer demands.

• Renew and improve

IKEA continually seeks new ways of meeting their customer demands. Each day is an opportunity to improve on the past. According to Schein, (2013), the firm seeks solutions to all challenges faced. Once the firm gets a solution to a challenge, it becomes an inspiration to face future challenges. Innovation makes the firm attain a competitive advantage in the market, even when other firms’ lower prices, they still maneuver.

• A difference with a meaning

IKEA does not want to perform their tasks in a conventional manner. According to Canaday (2018), the firm always questions the status quo and make sure that they find new methods of engaging in tasks. With research and development projects, the firm always tries out and experiments new methods in performing duties. Doing the same thing a different way not only creates the possibility of cost reduction but makes the production team innovate new products.

• Give and take responsibility

IKEA empowers its staff to take charge of their actions and the environment. Taking responsibility for its people enables the firm to grow and prosper. Through empowerment, IKEA wins the trust of its workers making them forward-looking and positive about the goals and achievement in the firm. The workers contribute towards making sure that all members of the company contribute towards its development.

• Leading by example

IKEA believes that leadership portends actions from those bestowed with responsibilities, rather than a position to manage others. Keyton, (2017) proposed that rather than focusing on experience and competence, the company dwells on the value that people bring into the firm. The leaders and managers in the firm are expected to practice what they preach by serving as an example to their followers. In the long term, the firm generates the best from their leaders and followers alike.

• People and Planet Positive

IKEA often prefers economizing on resources within their disposal, despite their value. The firm targets on methods that assures them on how to generate more products from relatively few resources. Keyton, (2017) explained that IKEA utilizes its raw materials responsibly to protect natural resources from depletion. IKEA plays a core role in improving the lives of community members they serve. The firm further engages in corporate social responsibility acts like assisting refugees through its IKEA Foundation. Through saving on products, IKEA reduces waste, saves on water, and energy.

Performance

Recent financial analysis reports illustrated that the firm’s profits fell by over a third, despite the firm’s efforts towards increasing its online presence. IKEA further expressed notable effort towards smaller stores within city centers. Pretax profits from the firm reduced by 36% in 2018 compared to a similar time in 2017. IKEA opened an additional twelve retail stores making them grow by 4. 7%, together with a 45% increment in online sales. The profit drop came at a time when IKEA invested 2. 8 billion pounds towards e-commerce, a majority of the funding utilized under distribution centers. Within their sustainability efforts, IKEA acquired forests in the United States and Latvia and wind farms located in Portugal and Finland. The firm further noted that it would reduce office jobs by 7,500 to enhance their online business activities, and centralize their operations. IKEA, which boasted of well over 160,000 staff working from different regions across the globe would cut their administrative staff within thirty nations within which it operates. The business transformation efforts yielded a negative impact on the financial outcome in 2018’s fiscal reports, but the three-year plan to transform the business remained on course. The plans would let the firm go and invest long term for the coming seventy-five years. IKEA’s growth plans target stores in city centers within their key target markets. Canaday, (2018) explained that the firm’s long-term goals include setting up traditional stores in Romania, China, India, and the United States. The stores and e-commerce business require well-equipped distribution centers which would be set alongside the stores to facilitate easy movement of goods and services to their customers.

Management/Leadership

In order to meet the dynamic business and market needs, desists from running its operations in line with a single leadership style. Instead, the firm utilizes a mix of leadership and management styles with the ultimate goal of beating tight deadlines, innovation and sustainability. The firm utilizes parts of a democratic leadership style which enable the staff to form part of the decision making. IKEA’s culture touched on empowerment, and the easiest way to motivate the staff involves taking up their opinions and recommendations. Democratic leadership suits IKEA in meeting its goals and objectives since the firm enjoys strong communication links between the managers and their followers. IKEA further makes use of laissez-faire leadership to enhance autonomy among their staff. Canaday, (2018) suggested that to succeed sometimes requires that staff are given a free environment to operate with minimal directives and guidelines. However, the firm takes caution towards keeping the staff motivated and incentivized to attain the firm’s goals. Consultative leadership also applies to the firm. Leading by example culture requires the managers to work alongside the followers. Leading by example requires constant consultation between the management and the staff before the manager leads by example. With regular incentives and rewards, IKEA keeps their staff motivated and aligned with its culture. Most importantly, IKEA implements a paternalistic leadership style, where the management takes up the perspectives and social needs of their staffs. Keyton, (2017) suggested that the firm acquires employees of all kinds, which boosts their performance and dedication towards the goals. IKEA assured the staff a comfortable working environment. The employees are further consulted on critical issues affecting the company.

Conclusion

Conclusively, the report reveals IKEA’s performance and culture as one of the leading suppliers of furniture products and appliances. The firm’s organizational culture is based on simplicity, empowerment and sustainable utilization of resources. Sustainability makes the firm engage in eco-friendly production like renewable energy sources. The firm further integrates different management and leadership styles to enhance productivity. Among the leadership styles include consultative, laissez-faire and paternalistic leadership.