Ikea

IKEA is a furniture company founded by a Swedish billionaire – Ingvar Kamprad, who is a successful leader and a living legend of IKEA. He made a great contribution to the innovation and successes of IKEA as well as keeping it grow strongly: Just in 10 years, sales of IKEA tripled from over $ 4 billion in 1993 to more than $ 12 billion in 2003. Starting a new career with IKEA by small business in the village Agunnaryd Elmtary – where Kamprad lived, but finally he turned to selling furniture.

Since 1952, IKEA’s innovation has changed the furniture industry with the initiative “flat-pack method” for IKEA furniture products. 04 years later (1956), “the concept has almost completely codified” (Kamprad wrote). One of the great successes of Ingvar Kamprad is the shaping and maintaining of an IKEA culture closely linked to his native Sweden. This is a culture of solidarity (empathetically agreed by many people).

That culture aims at “making the daily life many people better”. This culture is strengthened and supported by IKEA through: •Employing co-workers (IKEA prefers the word “co-workers” to “employees”) who know how to support each other and have good spirit of teamwork; •Expecting co-workers to find innovative and better ways to do tasks in every aspect; •Respecting co-workers and their opinions; Setting goals for the whole company, co-workers and working tirelessly to achieve them; •Making cost become a part of everything they do, from improving the manufacturing process, shopping wisely, to traveling less expensively; •Avoiding complex solution – the simplicity is an important part of the IKEA culture;

Leadership by actions, so IKEA leaders are expected to embark in working when needed and create a better working environment; and •Believing that a diverse workforce helps strengthen the company as a whole. 2. Answering the questions . 1. Question 1: Discuss three elements of inputs in the Congruence Model that brought success to IKEA. Congruence model includes components to support a company’s operations: input, formal organization, informal organization, work, people, and output (Figure 11. 2 – Chapter 11, Theory and concepts of leadership). In this model, inputs are mixed into a process of interaction between work, people, formal organization and informal organization before becoming output. Inputs of the model include environment, resources and history.

The environment that impacts the company includes 10 elements (degree of technological change; new products/services necessary for competitiveness; Product/Service Lifecycle; market growth rate; Customers’ constantly changing expectations and requirements; competitive situation; Business and Market Globalization; applicability of the Product or Service; accessibility to information, the company’s impact on the environment). The company’s resources include 05 elements (Finance, Human; Facilities; Information, Time).

History – the establishment and operations of the company consists of people associated with the foundation of the Company and events associated with achievements of the company). In this article, I would like to discuss the elements of inputs a in the Congruence Model that made IKEA successful as follows: 2. 1. 1. History: IKEA was founded by Ingvar Kamprad – who was not only a successful founder and leader but also a living legend of IKEA. Stories and anecdotes about Kamprad and IKEA are still circulated among the furniture business people as well as and even other product businessmen in Sweden and all over the world.

Ingvar Kamprad was born on 26th March 1926 in Elmtaryd Agunnaryd, a poor village in Sweden. Right when very small, Kamprad heard of business and showed a talent for business. At age 5, Kamprad was known as a clever boy selling matchboxes to households in the village. It was the boy Ingvar Kamprad who helped berries pickers and fish men sell their products. At the age of 13-14, Ingvar Kamprad truly earned significant amount of money when he began turning to sell seeds to people in the region.

In 1943, when he was 17 years old, Ingvar Kamprad determined to start his own business by establishing a company. The name IKEA was born then. Over nearly 70-year history of formation and development, IKEA has become a giant multinational corporation. IKEA’s history of formation and development is also associated with many events and outstanding achievements. It was the initiative that to change the furniture industry in 1952 – the flat-pack method which lets customers freely choose, transport and assemble products on their own.

The initiative helped IKEA save transportation costs, traveling costs; especially with this business model, IKEA could make a significant cut of manpower and costs to solve customers’ questions or needs for repairing or switching goods. In 1953, Kamprad first held a private exhibition of IKEA furniture with more than 1,000 people lined up early to see the exhibition on the first day of exhibition. In summary, the business talent of legendary Ingvar Kamprad and many events associated with the outstanding achievements in history has brought great success to IKEA.

It can be said that history is the most prominent element of IKEA. 2. 1. 2. Resources: IKEA has a nearly 70 year history of formation and development, quite a long time for IKEA to experience and gradually evolve to become a strong group. At IKEA, the culture of cost and time saving has been associated with the style of each member, because they have built a sense of “cost as part of everything they do, from improving the production process, shopping wisely, to traveling less expensively” and to “avoiding complex solutions – the simplicity is an important part of IKEA culture”.

It is the time factor that brings success to IKEA. IKEA today is a giant with 174 wood furniture trading centers located in 31 different countries in 04 continents (http://vneconomy. vn). IKEA buildings are very noticeable – huge blue and yellow warehouses looking like big Swedish flags. It can be said that IKEA has been equipped with abundant resources and facilities, which also contribute to great success of IKEA today. After the event of 11th September, many people want to stay indoors and turn their homes into safe shelter.

Besides, the world economy with variety of difficulties also limits financial capacity of travelers, so they stay home and spend more on their families. These reasons contribute to the success of IKEA. IKEA revenue tripled in 10 years, from more than $ 4 billion in 1993 to $ 12 billion in 2003. The financial factor is increasingly strengthened and making great contribution to the success of IKEA. Most of IKEA’s success is thanks to Ingvar Kamprad. He was a great leader who has built the culture “that creates better daily life for many people”, “he values the interaction between people as the most important.

“Despite being retired, he still visits IKEA stores frequently to capture practical situation where the business really takes place. ” He has shaped methods of supporting the IKEA culture that he built: “Employing the co-workers who know to support each other and have good spirit of teamwork”; “Expecting the co-workers to find innovative and better ways to fulfill their tasks in every aspect”; ” Respecting co-workers and their opinions”; “setting goals for the whole organization and co-workers and working tirelessly to achieve them”; “a diverse workforce helps strengthen the company as a whole”…

At present, IKEA is hiring up to 76,000 employees (http://vneconomy. vn). The human factor helps IKEA have resources to create a value image and excellent business results. The success of IKEA was mentioned in a lot of newspaper articles and magazines about marketing, brand, PR. The philosophy for IKEA’s success in the past, at present and certainly in the future is evolved from the “bible” entitled “Testament of a Furniture Dealer” written by the father of IKEA – Ingvar Kamprad. The philosophy has been studied and learnt by leaders as well as employees of IKEA later.

Ask any employee of IKEA about the “Bible”, and then you will get distinct answers immediately about content of the “bible” from them. Perhaps no other companies give as much prominence to corporate philosophy as IKEA does. The “bible” was released in 1976 after years of concern and summarization by Kamprad and then its value is immutable. In summary, it is the powerful resources of financial elements, people, facilities, information and time as discussed above that have brought successes to IKEA. 2. 1. 3. Environment

IKEA successes have been gained thanks to such factors as innovative and distinctive style of design. Most products of IKEA furniture can fold back, thus saving transportation costs, minimizing damage during transportation, increasing the quantity of goods on the same warehouse area, and helping customers transport furniture more easily if they do not want to use the company’s transportation service. However, the underlying cause of this is so high competitive pressure from IKEA’s opponents on IKEA’s suppliers that they almost boycotted IKEA, forcing IKEA to manage by itself.

Sleek design, multi-functions, high quality and low price are factors that created a favorable environment for IKEA to reap success. Kamprad’s vision is also the driving force behind the success of IKEA. IKEA has recruited and trained designers on its own. Kamprad believes that the company exists not only to improve and develop the life but also to aim at the development of the people here. The store design in the principle of self-service and versatility, easy-assembling of furniture parts is not entirely for the purpose of control or cost savings, but it is also an opportunity for the Company staffs to show their creativity.

This idea was reinforced in the product promotion campaign as well as in catalogs of IKEA. IKEA has more advantages to reap success. Due to impacts the economic – political – social situation after the event of 11th September, many people want to stay indoors and turn their homes into safe shelter. Besides, the world economy with variety of difficulties also limits financial capacity of travelers, so they stay home and spend more on their families.

These reasons changed customers’ expectations and requirements and led them to wooden furniture products – IKEA’s strength. For customers’ more convenient reference to its products, IKEA released catalogs. Those catalogs are not only introductions to the offered products but also unique books that reveal ideas of wood furniture and interior decoration. Therefore, there has not been any “book” printed and read as much as IKEA catalog. Each year 118 million IKEA catalogs are printed and issued in 23 different languages. This is a recipe for success of IKEA.

Another recipe for success of IKEA is its business and market globalization strategy. IKEA has been unceasingly growing and becoming a multi-national corporation. IKEA is currently present in over 30 countries. Ingvar Kamprad’s IKEA development strategy is to continue to expand markets worldwide and to quickly occupy market shares in potential markets such as Eastern Europe and East Asia. In the past 5 years, the number of IKEA commercial center has doubled. Each year there are 285 million customers around the world coming to IKEA.

In addition, IKEA itself also achieves its own success through creating an attractive environment and support for employees. Kamprad believes in the importance of interaction between members of the company. He laid down as a policy the construction of a non-hierarchical and unbureaucratic organization where all IKEA employees are partners. IKEA usually holds weeks of no paperwork and during that time all managers will work at stores. He likes to talk and listen to “co-workers” to be able to understand his business, understand their ideas and contribution.

At IKEA, the word “co-workers” is preferred to “employee”. This illustrates the company’s culture of support and research orientation. IKEA encourages people to innovate and respects their viewpoints. In summary, the above discussion shows that Ingvar Kamprad and IKEA’s leaders have smartly applied three (03) elements of input (environment, resources and history) in the Congruence Model to help bring success to IKEA. 2. 2. Question 2: Consider four key elements of organizational culture as described by Schein author in Figure 11. .

Identify examples in IKEA’s organization contributing to such a strong corporate culture Corporate culture is extremely important because it creates the company character. To understand the corporate culture more thoroughly, let’s consider four key elements of organizational culture as illustrated by author Schein in Figure 11. 5 and identify examples of IKEA to prove those cultural elements: 2. 2. 1. Firstly, legend and story: These are stories and embellishment about the company and about its core value spreading over time.

At IKEA, we can hear stories about legendary Ingvar Kamprad and IKEA such as: story about a genius boy in business – Ingvar Kamprad who could do business at age 5 by selling match in his village; story about Kamprad’s constant innovation and search for new business ideas and the result was the birth of business models such as home delivery or flat-pack method; story about weeks of no paperwork to connect managers with employees; story about Ingvar Kamprad – a very frugal person, even when very rich (whenever returning to home village, he goes to the barber’s for 5 Euro like poor farmers or he still drives the old car Volvo and always refuses to use first class air tickets … ); story about Ingvar Kamprad with IKEA philosophy “Testament of a timber dealer” written by himself …

These stories, whether real or unreal, also had great influences on shaping and maintaining IKEA culture as well as IKEA leaders and staffs later. This helps IKEA maintain its unique corporate culture and methods to support the culture. To prove this, ask any employee of IKEA about “the bible” “Testament of a timber dealer” and then you will get distinct answers immediately about content of the “bible” from them because that is the culture of IKEA. 2. 2. 2. Symbols and artifacts:

Symbols and artifacts are recognizable things. They describe different aspects of culture. At IKEA, we can see this very clearly. It illustrates Kamprad’s distinguished feature of Swedish origin. It is the decoration of the shopping centers, buildings, huge warehouses with blue and yellow looking like big Swedish flags. IKEA products are named in Northern European style (Klippan, Pablo … ) – usually names easy to remember and impressive. Products are placed in ordinary warehouses, under the calm lights. These symbols and artifacts have been engraved on IKEA customers’ memory and keep the customers back to experience the culture of IKEA. 2. 2. 3. Rituals

It is repetitive events or actions that reflect important aspects of cultural background. An organization can hold interesting events on sale for best staffs and their spouse once every two years. This ritual is the indicator showing the importance of high sales and the employees who achieve high targets. Another form of ritual is honor ceremony for the retired. An imposing or a modest ceremony indicates how that organization respects its staffs. At IKEA, we can easily see the ceremony. It is the use of the term “co-worker” instead of “employee” for people closer together. It is also the starting point of the idea: weeks of no paperwork for managers to work at stores to get along with staffs.

IKEA also issues a number of very clear policies to support the culture: Hiring co-workers who can support each other and have good spirit of teamwork; Expecting co-workers to find innovative and better ways to do tasks in every aspect; Respecting co-workers and their opinions; Setting goals for the whole company, co-workers and working tirelessly to achieve them; Making cost become a part of everything they do, from improving the manufacturing process, shopping wisely, to traveling less expensively; Avoiding complex solution – the simplicity is an important part of the IKEA culture;

Leadership by actions, so IKEA leaders are expected to embark in working when needed and create a better working environment; and Believing that a diverse workforce helps strengthen the company as a whole. These rituals have contributed to maintaining and developing cultural IKEA so far. 2. 2. 4. Language: Language is related to professional terms, or characteristics of an organization and for some purposes associated with the culture. First, that nly some people know the language and some others do not can show us who belong to the culture while others do not. Second, language also shows us how people in a culture acknowledge other ones.