Purpose of the Research
The research aims at analyzing IKEA’s group organizational structure. The company is planning on a more innovative approach to global expansion. Some members of the leadership team insist on the formation of another organization chart to complement a new global approach. The research will depict the importance of the company retaining its present organizational structure.
Company Profile
IKEA Group came into existence in 1943 in Sweden. It was started by a teenage boy called Ingvar Kamprad. IKEA is a private organization owned by Stitching INGKA Foundation, a not-for-private foundation. Its headquarters is located in the Netherlands. The company makes and distributes furniture that can be assembled easily, gadgets to use in the kitchen, and household fittings. It is the largest furniture retailer worldwide. It operates worldwide with 423 stores operational in 52 countries. A large number of its stores are operated by INGKA, a property company run by the Stitching INGKA Foundation. IKEA’s vision is “To create a better everyday life for many people.”
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IKEA’s Organizational Structure .
IKEA has a unique organizational structure. That is because globally, several establishments run beneath the IKEA logo. It is divided into two major parts, franchising and operations. All its franchisees are self-governing from Inter IKEA Group while its operations are overseen and run by INGKA Group. Although both Inter IKEA Group and INGKA Group were founded by the same person, their ownership and leadership are not the same. The present organization structure was formed in 2016 due to a great reconstruction that was introduced. Its distribution and manufacturing activities were reassigned to the new Inter IKEA group to improve the franchise scheme and specify roles. It has a hierarchy structure due to the massive size of its operations with 423 stores in 52 countries with world-wide coverage (Bergin, 2016).
IKEA’s International Strategy
IKEA has an international strategy of a global expansion using a consistent business ideal. It aims at ensuring coherent structures and practices worldwide. However, some members of the leadership team want a more innovative approach to global expansion. Thus the Organization is likely to move its headquarters to bring the home and host countries closer (Klevas, 2005, p. 117). Some members within positions of power want another administrative structure to be formed to accommodate proposed global approach. Changing the Organization’s structure would be met with several challenges. The Organization would be faced by the task of reviewing its recruitment policies to meet the local cultures demands and labor laws. Thus, internationalization would mean the implementation of new ethnic organization policies. Ensuring company values consistency would also prove very difficult due to the difference in cultures. Therefore, the Organization would have to undergo a rapid change in its international culture resulting in a complete internalization of the organizational culture. Communication systems will have to be introduced to break geographical and cultural differences. The change would also be faced by resistance due to diverse cultures and fear of the unknown. To curb such resistance, IKEA would need to carry out training programs to make staff understand the need for change. The change would also require IKEA to reduce its organizational levels in order to form a flatter structure. The project would, therefore, be time-consuming.
IKEA’s current organization structure is somewhat hierarchical due to its massive operations (Jonnson et al., 2013, p. 343). The structure is usually vertical with levels clear from the top to the bottom. The Organization should maintain the structure as it is as it clarifies roles and improves the franchise method. The structure allows for flexibility of the Organization, facilitating adaptation to changes in the external international square. The structure facilitates the Organization’s strategic – implementation concepts. IKEA’s hierarchy offers enough space for managers to act with benevolence. Members are also given a chance to communicate effectively. The structure facilitates proper flow of authority as each individual is well informed on who to report to. Interdepartmental loyalty is also promoted. The hiring of skill-specific managers is easy, and there is a clear path for success. The chart below illustrates IKEA’s current Organization Structure.
Figure 1 https://www.researchgate.net/figure/The-organizational-structure-of-IKEA-Source-wwwikea-groupikeacom_fig1_228118841
Figure 2 below is a chart showing IKEA’s flow of authority
Figure 2 https://courses.lumenlearning.com/suny-osintrobus/chapter/building-organizational-structures/
IKEA Operational Processes, Culture, and Leadership
IKEA has a unique process analysis and operational strategy (Baraldi, 2008, p. 104). They have had impeccable success in all of their decisions. Though it started in Sweden, it later expanded its operations to other countries. IKEA maintained the same policies and strategies in all the other countries it expanded to. However, this could face market resistance as people’s cultures differ. It currently has its operations in 52 countries with over 423 stores. Its staff and inventory management have been ranked among the best worldwide. It has its own production company. IKEA’s current profit margin and sales turnover have gone down due to the cost of raw materials and operational costs going up. However, it is way above its competitors. The Organization is currently cutting on power costs by using power lamps, thus saving on electricity. IKEA’s return service is very slow, and sometimes they refuse to take back the goods customers purchased. In return, its trustworthiness and benevolence are affected, and this could pose a danger in the attainment of its international strategy. IKEA needs to be more considerate of its quality management approach. IKEA maintains a cost leadership business strategy. Thus, it attracts employees with intangible benefits that are substantially incorporated into its organizational culture. It has a culture based on simplicity and high informality. The Organization emphasizes the value of teamwork. It also embraces diversity among its employees. About 54% of its employees are women (Perrot, 2015, p. 47). It stresses the need to appreciate differences among its employees as it enhances creativity, thus business growth. Ikea embraces leadership by example, a style based on its founder words, “If there is such a thing as good leadership, it is to give a good example.” For IKEA to maintain its goodwill, it should come up with a system that allows its customers to at least return goods they were not satisfied by for compensation. Putting in place a strategy for identifying genuine cases will help alleviate the problem. The Organization should also work at reviewing its policies and procedures when entering a new market to accommodate the different cultures of the host countries.
Analysis and Recommendations
Going by the research, IKEA has encountered a problem dealing with clients who return goods after purchase. The Organization does not have laid down policies for dealing with such issues. It is recommendable that it comes up with a clear strategy of how such issues will be dealt with to avoid losing its credibility. I would also recommend provisions be made for reviewing of its policies and procedures when entering new markets.
IKEA operations are built on effective costing and undertakings to develop nations. Thus, it faces a lot of pressure from its external stakeholders. It has received criticism from NGOs in particular. In Indonesia and Russia, it was criticized for dealing with wood from questionable forests. It has also been accused of child labor. There is also the possibility of being criticized on its waste disposal. To be able to understand its stake holder’s position, I would need to understand and analyze its corporate social responsibility strategy. I would determine where they source their raw materials, how they dispose of their waste and their employees.
References
Baraldi, E. (2008) ‘Strategy in Industrial Networks: Experiences from IKEA.” California Management Review, Vol 4, 104.
Bergin, t. (2016) “IKEA finalizing its biggest overhaul in decades.”
Jonsson, p., Rudberg, M. & Holmberg, S. (2013) “Centralized Supply Chain Planning at IKEA: Supply Chain Management” An International Journal Vol 3, 343.
Klevas, J. (2005) “Organization of packaging Resources at a Product-Developing Company” International Journal of Physical Distribution & Logistics Management Vol 2, 117.
Perrott, B. (2015) “Building the Sustainable Organization: an Integrated Approach” Journal of Business strategy Vol 1, 47.
