Ikea, the world's largest home furniture retailing company, was founded by Ingvar Kamprad. He built his business empire through developing a distinct corporate culture. The Ikean culture, which was directly linked to Scandinavian culture, valued simplicity and informality, frugality, humbleness, responsibility, and the constant will to renew.
Kamprad revolutionized the furniture retailing industry by targeting the younger middle classes offering furniture for the “first apartment”. Retailing operations were very successful because of customer friendly warehouses.
Ikea had grown so big in Sweden that to expand any further, it had to go international. Ikea expanded to the different European countries, the US, and Canada. This expansion program triggered some problems in the organization. The biggest of these problems is best summarized in the question “Should Ikea's culture run the business or should its business run the culture?” Due to the strict implementation of the Ikean culture that was Scandinavian in nature, the company had grown insensitive to the culture and demands of the local markets that they had expanded to.
Another problem is whether to follow the leadership style of Moberg which is to decentralize decision making or stick to the old Kamprad style of a very centralized organization.
A more formal organization will lessen the feeling of discrimination and avoid demoralization among foreign personnel because they will know just exactly where they are in the organization.
Having a distinct corporate culture is very important because it defines the company and has been the formula for its success and it should be maintained but this Ikean culture should not be imposed on the cultural preference of other countries. Decentralization is necessary because the company has grown so big to be handled by one man.
Case Facts
IKEA, the world's largest home furnishings retailer started out as a small business that participated in annual trade fairs and took orders from local Swedish folk. The company's founder, Ingvar Kamprad encountered many difficulties in starting the business as Swedish manufacturers and retailers of furniture conspired to prevent him from penetrating the market. When the Swedish manufacturers cartel would not sell furniture to IKEA, Kamprad was able to establish sources in Poland that enabled him to offer furniture at a more competitive price. In 1953, Kamprad opened IKEAs first warehouse in Almhult. By 1973, he had opened eight more warehouses and had a multi-million SKr business and the rest is history. IKEA has expanded globally reaching the whole of Europe, USA, and Australia.
Kamprad laid the foundation of his empire using his views on life. The “IKEAN Spirit” was founded on enthusiasm, a constant will to renew, cost consciousness, willingness to assume responsibility, and humbleness before the task. The organizational atmosphere was very informal, effort was made to veer away from status and convention. Simplicity was practiced at all levels but managers were expected to completely understand the store's operations. Having such a distinct corporate culture that had to be imposed, IKEA favored young employees. They did not hire people who had previously been in other corporate cultures nor did they favor people with high education, as this could be a barrier in absorbing and practicing the “IKEAN WAY”.
Cost-consciousness was practiced in all levels at IKEA to a point of being stingy. Creative solutions were very favored in the company as it was always on the look out for ways to cut costs through finding cheaper alternative materials. Cutting cost was a must to support the company's core competence, which are the low prices that they offer.
IKEA's strategy relied heavily on its wide product range that followed clear and detailed guidelines on range, quality, profile, and price. The centerpieces of the company's products were displayed in a catalog that was common to all stores. The catalog was a means to educate customers about the product line and concept. Another aspect of the company strategy is the retail operation. Customer friendly warehouses and showrooms were built and standard in-store display areas were developed specifically designed to cater to the company's needs.
As the Swedish market matured, IKEA had to go international to expand. They brought their company to neighboring European countries with core groups carrying out the expansion practicing the distinct company culture that was directly linked to the Scandinavian culture. Non- Scandinavians were encouraged to immerse themselves into everything that was Scandinavian in order to go places in the company that gave such high premium in implementing its culture in all aspects of the business. This posed problems for the company. The great question “Does the culture drive the business or does the business drive the culture” was asked. Non-Scandinavian employees felt that they were not favored and that their future was limited in the company. In imposing the IKEAN culture, the company had become insensitive to cultural differences such as different consumer needs and product design preferences
In the 1980's IKEA went through rapid expansion to the point were they were overextended. In expanding to Russia, many risks were taken. One of this was the large capital investment (SKr 500 million) that was made despite unstable political and economic factors. They also encountered difficulty in retaining the company's cultural values specially since there is a great difference in attitudes between Americans and Scandinavians.
