A critical examination of how the success of IKEA is supported by its organisational culture.

1. A critical examination of how the success of IKEA is supported by its organisational culture. Presentation by: Mona E Thorvaldsen Kate Mulvana Joan Kawalewale Jodie Evans Tom A Trosterud

2. Agenda • About IKEA • History – Key Developments • Organisational culture • Cultural web • Tools of analysis • Conclusions

3. About IKEA • Global furnishing brand • Founded by Ingvar Kamprad • Brand name • Unique organisational culture & leadership style • Kamprad’s Philosophy • Franchisees • Market position & share

4. History of IKEA • 1943 – Founded: Individual sales • 1945 – First Advertisement • 1951 – New product ranges & catalogue • 1953 – Furniture exhibition • 1958 – First IKEA store • 1963 - Expansion into Norway • 1980’s – USA & Eastern European markets • 1997 – Internet

5. “Maintaining a strong IKEA culture is one of the most crucial factors behind the continued success of the IKEA concept” Ingvar Kamprad

6. Organisational culture • Shared norms, beliefs and values • Leads to collective behaviour • Segmentation of the organisational culture using the cultural web

7. Stories Symbols Routines and rituals The Paradigm Power Structures Control System Organisational structures Cultural Web

8. Stories Symbols Power Structures Routines and rituals The Paradigm Organisational structures Control System Routines • Company customs • Production processes • Distribution

9. Stories Symbols Power Structures Routines and rituals The Paradigm Organisational structures Control System Rituals • Rites of passage • Rites of enhancement • Rites of integration • Rites of renewal

10. Stories Symbols Power Structures Routines and rituals The Paradigm Organisational structures Control System Stories • Embedded in organisation • Reminder of organisational values • The IKEA stories • Entail Kamprads philosophy and accomplishments

11. Stories Symbols Power Structures Routines and rituals The Paradigm Organisational structures Control System Symbols • Symbols include acts, objects and Logo’s • IKEA’s symbolic action – simplicity • IKEA Logo – Scandinavian heritage

12. Stories Symbols Power Structures Routines and rituals The Paradigm Organisational structures Control System Power structures • Inverted pyramid • No barriers • Customer needs and preferences

13. Stories Symbols Power Structures Routines and rituals The Paradigm Organisational structures Control System Organisational structure • Flat structure • Informality • Open communication

14. Stories Symbols Power Structures Routines and rituals The Paradigm Organisational structures Control System Control systems • Emphasis on a reward system • “Big thank you” event

15. Stories Symbols Power Structures Routines and rituals The Paradigm Organisational structures Control System Paradigm • Strong corporate culture • Swedish heritage • Simplicity tradition • Functional quality products

16. Performance-enhancing cultures • Goal alignment • High levels of employee motivation • Better ability to learn from the past “Fit” theory (Lorsch, 1976)

17. IKEA Strategy Bowman’s Strategy Clock • ‘Hybrid’ strategy • Low price • Differentiation DIFFERENTIATION High Differentiation IKEA Focus Differentiation Hybrid Low Price Low Price/Added value Low High PRICE

18. How does IKEA’s culture support production and distribution? • Emphasis on minimising costs • Flat packaging - frugal beginnings • Economies of scale • Large scale organisation • Highly standardised products

19. How does IKEA’s culture support brand image? The brand reflects: • A strong focus on low cost and functionality • Scandinavian style and values • Poor customer service and long queues

20. How does IKEA’s culture effect other aspects of success? • Learning from experience • Better knowledge transfer • Globalisation • National cultural differences

21. Hofstede’s Cultural Dimensions Small Power Distance/ Collectivist Large Power Distance/ Collectivist Mexico Individualism Index Japan Spain Germany France Sweden Small Power Distance/ Individualist Large Power Distance/ Individualist USA Power Distance Index (Source: Adapted from Harris & Moran, 2000)

22. How does IKEA’s culture effect other aspects of success? • Learning from experience • Better knowledge transfer • Globalisation • National cultural differences • Low cost = large scale retail • Planning permission

23. Conclusion • Strong consistent culture • Link between culture and performance • Synergy between culture and strategy • Causality?

24. References • Allen, S. (2005) Ingvar Kamprad – IKEA founder and one of the world’s richest men [Internet]. Available from: <http://entrepreneurs.about.com/cs/famousentrepreneur/p/ingvarkamprad.htm> [Accessed 12th April 2005]. • Brown, A. (1998) Organisational Culture, 2nd edition. Prentice Hall, Harlow pp.240-241. • Cardwell, D. (2005) Red Hook resident group sues to block an IKEA store. New York Times 154 (53122) Cabinet Maker • Chandler, A. D. (1990) Response to the contributors to the review colloquium on scale and scope Business History Review 64 (4) pp.736-758. • Edvardsson, B. and Enquist, B. (2002) The Ikea Saga: how service culture drives service strategy. The Service Industries Journal. 22 (4) pp.153-186. • Guardian Newspaper. (June 2004) The miracle of Älmhult. [Internet]. Available from: http://www.guardian.co.uk/g2/story/0,3604,1240462,00.html. [Accessed 10th April 2005]. • Harris, P. R. and Moran, R. T. (2000) Managing Cultural Differences, 5th ed. Gulf Publishing Company, Houston, TX. pp.2-311. • IKEA, (2005) IKEA [Internet], Available from: <http://jobsat.ikea.co.uk/uk/work_intro.asp> [Accessed 16 April 2005]. • Johnson, G., Scholes, K. & Whittington, R. (2005) Exploring Corporate Strategy – Text and Cases. 7th ed. Prentice Hall, Harlow. • Kling, K. and Gateman, I. (2003) IKEA CEO Anders Dahlvig on international growth and IKEA’s unique corporate culture and brand identity. Academy of Management Executive. Vol. 17 (1) pp.31-37. • Kotter, J. P. and Heskett, J. L. (1992) Corporate culture and performance. The Free Press, New York. • Magonelly, L. (2002) How Ikea designs its sexy price tags. Business 2.0. (10) [Internet], Available from: Ebsco host [Accessed 20 April 2005]. • Mintel (2004) Furniture Retail – UK – August 2004 [Internet], Available from: <http://reports.mintel.com/mintel/searchexec/> [Accessed 16 April 2005]. • Normann, R. and Ramirez, R. (1993) From value chain to value constellation: designing interactive strategy. Harvard Business Review, July-August pp.65-77. • Porter, M. (1985) Competitive Advantage: Creating and Sustaining Superior Performance. The Free Press, New York. • Rowe, S. (2005) Judge flattens Ikea’s challenge. Estates Gazette, 508, p.28, Available from: Ebsco Host[1] [Accessed 16 April 2005]. • Quick MBA. Strategic Management. Porter’s Five Forces: a model for industrial development. [Internet] Available from <http://www.quickmba.com/strategy/porter.shtml> [Accessed 20th April 2005]. • Sancovich, A. (2002) The IKEA Philosophy [Internet]. Available from: <http://www.johnson.cornell.edu/leadership/casestudies/IKEA.pdf> [Accessed 2nd April 2005].