L ET ’ S H AVE S OME S WEDISH F LAVOR AROUND THE W ORLD ! IKEA has been known ac
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LET’S HAVE SOME SWEDISH FLAVOR AROUND THE WORLD!
IKEA has been known across the world as the leader in the home furnishing industry. Established in 1943 in the small vil- lage of Agunnaryd in Sweden, IKEA Group has grown into a global retail brand with 131,000 coworkers in 41 countries gen- erating annual sales of more than 24.7 billion euro. IKEA has progressively expanded into international markets in the past 25 years. As of August 2011, there were IKEA stores in more than 38 countries, with 287 stores in 26 countries belonging to the IKEA Group. The top 5 selling countries by 2011 were Germany 15 percent; the United States 11 percent; France 10 percent; Italy 7 percent; and Sweden 6 percent. In 2011, the IKEA Group stores had 655 million visits.
In managing its international operations, IKEA’s manage- ment has largely followed the IKEA way along with its strong Swedish flavor. This is based on the belief that its way of man- aging people has universal appeal and thus can be accepted in most cultures. Regardless of nationalities, IKEA employ- ees prefer to have cooperative informal relations, a tolerant approach to others as well as being independent. In man- aging its international operation, IKEA employs Swedish expatriates all over the world. Their duties overseas are not just running the stores and distribution systems. Swedish managers in IKEA are expected to be the ambassadors of IKEA and Swedish values and therefore must educate their non-Swedish coworkers in such values. The main challenge for IKEA in its expatriation management is to find Swedish IKEA managers who are willing to be dispatched overseas for a long period of time. To overcome this problem, IKEA had to hire Swedish managers from outside IKEA.
In general, three main facets of Swedish culture include love of nature, individualism through self-development, and equality. Individualism in the Swedish sense is different from the American sense. U.S. individualism often involves the competitive thrust of corporate life, while Swedish individu- alism is connected to a person’s own self-development and time to himself or herself and sometimes can lead to insu- larity. Work centrality is not high, and there are cases where managers complain about employees’ unwillingness to work overtime. The value of equality in Swedish culture is expressed through a welfare system that provides the same service to everybody in health service, child benefits, maternity/paternity leave, pensions, and so on. High taxes serve to support these systems and play a role as a leveler of social inequalities. In corporate life, equality has been reflected in lower hierar- chies and participation in decision-making.
This particular Swedish character of equality is strongly represented in IKEA’s internal organization. Management style is informal, open, and caring. Hierarchy is relatively flat, with three levels of responsibility at store level between store manager and “coworkers” (employees or “associates”). Some other egalitarian approaches in the management practice of IKEA include decision-making by consensus; pragmatic prob- lem solving; titles that are not given on manager’s business cards; bureaucratic procedures and status barriers are dispar- aged; managers are expected to be close to coworkers, and not to take themselves too seriously.
While it was easy to translate IKEA’s strong Swedish fla- vor to the Netherlands, that was not the case with Germany, France, and the United States. Although IKEA has been in Germany for over two decades, the Swedish management is still perceived as unusual by Germans. Germans are precise, very disciplined, and formal. They readily take orders from their superiors. What the boss tells must be done exactly the way it was told. Everything must be put down in writing. Swedish management is also seen as not sufficiently assessing risks before taking action. Germans prefer formal procedures because administration provides them with security.
In France, there is a tendency to judge informality as a sign of weaknesses and indecision. Almost like Germans, French are accustomed to formal rules and strong hierarchy. IKEA’s French manager once stated: “Working here isn’t for everyone. It is difficult for someone over 35 because this place is different from the others in France. When you join IKEA, you enter another world: we do not behave like a normal French company. Status is not recognized, which can cause an identity problem: everyone is put on the same level—no one stands out, and you can get lost in the crowd. It is hard to explain what IKEA is, everyone will give a different answer, one shouldn’t freeze the system, it is flexible, it should stay that way.”
Recently, IKEA has frequently stated its desire to open stores in India—a culturally and economically very different country—as part of a wider expansion in emerging markets. In June 2012, IKEA was planning to invest up to 600 million euros ($757 million) in India as the first stage of a long-awaited move to the country. The company was asked to conform to a requirement by India’s government, that it locally source some of the supplies. As widely known, IKEA has its own way of handling the business across the world. Although the company stated that it could “live up to the guidelines” that require 30 percent of its supplies to be sourced locally, IKEA said it still would be a challenge in the long term as it would have to rely heavily on local personnel for procurement (buying) as well as selling. Some observers argue that IKEA’s future presence in India may bring challenges to the company from the perspective of cross-cultural management issues; while others are optimistic that IKEA’s venture in India will be smooth—both business-wise and culture-wise. Nevertheless, IKEA once again needs to address the issue of the extent to which its Swedish flavor should be stretched in order to con- tinue to grow in the global market.
Sources: Terence Jackson, “The Cross-Cultural Organization: The Multicultural Model,” Chapter 1 in International HRM: A Cross- Cultural Approach (Thousand Oaks, CA: SAGE Publications, 2002), pp. 176–196; P.C. Grol and C. Schoch, “IKEA: Culture as Competitive Advantage,” in G. Oddou and M. Mendenhall, eds., Cases in Interna- tional Organizational Behavior (Malden, MA: Blackwell, 1998); “Ikea in €600m India Push,” Financial Times, June 22, 2012; and IKEA 2011 Yearly Summary, www.ikea.com.
DISCUSSION QUESTIONS
1. Discuss IKEA’s problems in Germany and France from the perspective of cross-cultural management. Use Hofstede’s culture dimensions in your analysis.
2. Do you think IKEA should continue to emphasize its strong Swedish flavor when expanding internationally? To what extent do you think IKEA should maintain standardiza- tion versus adaptation in terms of sales team management?
3. As an international marketing consultant, what advice would you suggest to IKEA if it were to open new stores in your country? What are some particular aspects of culture to which they must pay more attention?
4. In terms of cultural issues, what is your prediction of IKEA’s future venture in India? What could be potential cultural problems in managing people in India?
Explanation / Answer
IKEA is one of the most enduring brands in terms of culture and adoption as availability of the market in the Germany is relatively bigger for IKEA, company has always been very progressive. IKEA is accused of using forced labour in Germany for its operation buy some of its supplier for manufacturing the furniture. This is specific event reduce the companies brand identity in Germany and directly reduce the overall effectiveness of operation. Company provided a report by them self that sum of their suppliers used prison forced labour two decades ago to manufacture it as product and company has shown ethical standards by revealing the specific factor involved in Operation. It further help many organisations to develop and auditing criteria as this approach was taken positively by many of the organisation for assessment of their back end operations.
For the product design iKEA should adopt local designing rather than focusing Swedish design in their furnitures. For international expansions IKEA can easily implement localising the products according to the availability of the culture as well as pre existing products in the market. Having an inspiration by the specific market segment and quietly assessing the choice of the custom I would be the most appropriate way of improving the overall availability of opportunities for the organisation to maintain competitive advantage and to stay profitable in the specific market segment.
If IKEA wants to open new doors in my country then they would have to understand the local culture as well as use the local able to produce their good as availability of traditional furniture is more likely to be sold rather than being focused on the western or new type of furnitures. Most of the part of my country prefers getting a furniture from the local brand stores rather than having expensive furniture from the brands like IKEA. Using cost differentiation technique and reducing the overall cost of the product would have the company to maintain high quality standard in generation of the profit and using local labour court also able to company to reduce the overall expenses in manufacturing as well as to improve the quality of the product by available raw material and Labour.
IKEA can have the operational structure in India but the operational structure should be directly based on providing cost effective furniture rather than focusing on innovative furniture with premium pricing. Even if the pricing is relatively not i s according to the western countries, it is relatively very high as compared to the local markets in India. Buy getting furniture at the adequate prices and competing with the local brands, iKEA can easily increase the level of revenue from the same market segment which would also provide positive impact on availability of other factors such as using joint venture as a tool for maintaining competitive advantage as well as to provide better services to the customers.
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